What Caused Poverty Reduction in Brazil During the 2000s: Sectoral Growth or Public Expenditures

OASIS N° 31, Forthcoming

29 Pages Posted: 2 Dec 2019

See all articles by Igor Martins

Igor Martins

Lund University - Department of Economic History

Andrés Palacio Chaverra

Lund University - School of Economics and Management; Universidad Externado de Colombia

Date Written: November 13, 2019

Abstract

We ask what caused poverty to decline in Brazil during the first decade of the 21st century. Our contribution lies in the introduction of a structural change perspective to assess the evolution of poverty by considering the sectoral impact of growth and the social policies at the federal, state and municipal level. By struc-tural change we mean the recomposition of output and employment over time. We run a first difference model to estimate the effects of mean income per capita by sector and of disaggregated public expenditures, without any attempts to infer causality. We confirm previous findings in the literature that the service sector rather than agriculture contributes the most to the sustained poverty reduction. Strikingly, the public administration is the leading sub-sector. We also find that state and municipal expenditures in human capital contribute more to poverty reduction than federal expenditures associated with conditional cash transfer pro-grams; investment in infrastructure does not seem to contribute to poverty reduction. In short, we conclude that the payoffs of decentralized policies associated with human capital can be seen in the short run and therefore raise the bar for politicians to maintain and care for these policies. Furthermore, the public service sector, which is one of the main employers in today´s economy, must find ways to innovate and improve productivity if poverty reduction is to be sustainable in the long run.

Keywords: poverty; structural change; decentralization; social policies

Suggested Citation

Martins, Igor and Palacio Chaverra, Andrés, What Caused Poverty Reduction in Brazil During the 2000s: Sectoral Growth or Public Expenditures (November 13, 2019). OASIS N° 31, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3486506

Igor Martins

Lund University - Department of Economic History ( email )

Sweden

Andrés Palacio Chaverra (Contact Author)

Lund University - School of Economics and Management ( email )

Tycho Brahes väg 1,
S-220 07 Lund, 223 63
Sweden

Universidad Externado de Colombia ( email )

Calle 12 # 1-17 este
Calle 12 0 83
Bogota D.C, Cundinamarca 3456
Colombia

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