Antipoverty transfers and inclusive growth in Brazil

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Antipoverty transfers and inclusive growth
Armando Barrientos, Dario Debowicz, and Ingrid Woolard
Inequality, inclusion and infrastructure in Brazil, LSE Workshop, September 2014

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Inclusive growth is the distinctive feature of Brazil’s recent performance.
What is the relative contribution of growth and redistribution? Expansion of income transfers to low income households, especially Bolsa Família, leading to poverty and inequality reduction How and why antipoverty income transfers contribute to inclusive growth?

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Three main points
1. Considerable attention has been paid to Bolsa Família (BF) as the flagship social assistance programme in Brazil, but it is important to consider all antipoverty transfers, especially the two non-contributory pensions: Previdência Social Rural (PSR) and Beneficio de Prestação Continuada (BPC); and it is important to pay attention to the conceptual and normative frameworks underlying them
2. The contribution of social assistance to inclusive growth in Brazil is explained by its focus on human capital and ‘productivism’
3. There is a large literature on the (mean) impact of these programmes, but less is known about the distribution of their outcomes  analysis of the distribution of Bolsa Família outcomes across municipalities in Brazil

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Figure 1. Evolution of social assistance components and programmes in Brazil
Previdência Social Rural [A] 1988 Benefício de Prestação Continuada [B] Constitution Bolsa Escola [C] Municipal Federal
Bolsa Família [C] PETI (Child Labour) [C] BrasilCarinhoso 4 other ccts 1988 1991 1995 1996 2001 2003 2012
Three routes to inclusion in Brazil: [A] Preferential inclusion of rural informal workers into the private sector social insurance fund (supported by government subsidies and commonly described as semi-contributory). [B] ‘Canonical’ social assistance for older and disabled people in households with per capita household income below 1/4 of minimum wage. Additional components: BPC na Escola, BPC Trabalho [C] Human development conditional income transfers: Bolsa Escola began in a few municipalities in 1995; then spread to other municipalities with federal government counterpart funding in 1997; becoming a federal programme in 2001. Together with other income transfer programmes from separate Ministries it was unified under Bolsa Familia in 2003. Brasil Carinhoso provides a guaranteed minimum income floor at the extreme poverty line in 2012. Number of Transfers/Public Subsidy in 2010: [A] 7.8m /1.4%GDP [B] 4.2 m/ 0.7%GDP [C] 14 m/ 0.6% GDP

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Expansion of antipoverty transfers
Note: PSR is Previdência Social Rural; RMV is Renda Mensal Vitalícia a non-contributory pension programme replaced by the Benefício de Prestação Continuada or BPC in 1996. BF is Bolsa Família. The Figure shows the stock of transfers in December of each year, except for 2013 which reports the numbers in the last month available. Data Source: IPEA and MDS data available online at http://www.ipeadata.gov.br/ and http://www.mds.gov.br/relcrys/bpc/indice.htm .
0246810121416 199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013millions of transfers Number of social assistance transfers PSRRMVBPCBF

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Table 1. Social Assistance in Brazil: main programmes. Values are for July 2014 (US$ 2013 PPP 1= RS$1.61)
PSR
BPC
BF
Eligibility
Long-term rural informal workers (>15 years)
Disabled/Aged ≥ 65 in households with per capita income ≤ ¼ MW
Households with per capita income ≤ R$77 (US$48) and households with children with per capita income ≤ R$154 (US$96)
Monthly benefits
Old age pension is one minimum wage R$724 (US$450)
One minimum wage R$724 (US$450)
Basic transfers=R$77 (US$48).
Variable transfer=R$35 (US$22) per child (0-15) up to five; R$ 42 (US$26) for each youth (16-17) up to two; R$35 (US$22) if expectant mothers; R$35 (US$22) if children 0-6 months.
Households with per capita income > R$77 and ≤ R$154 receive child transfers only
From 2012, the Beneficio de Superação da Extrema Pobreza provides a ‘top up’ to households with children 0-15 with per capita incomes below R$77 after transfers
Reach
7.8 m. beneficiaries
4.2 m. beneficiaries
14 m. households
Budget%GDP
1.4
0.7
0.6
Agencies responsible
Regime Geral de Previdência Social
Ministério de Previdência Social
Ministério de Desenvolvimento Social
Ministério de Previdência Social
Ministério de Desenvolvimento Social
Caixa Econômica Federal
Source: Barrientos (2013a), updated to July 2014.

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In sum:
Three parallel inclusion strategies in Brazil, but Bolsa Família becomes the flagship programme
Therefore focus on human capital and ‘productivist’ in the sense of complementing productive employment
Planned consolidation of BF and BPC under the MDS (SNAS)
PSR expected to ‘wither’
Rapid expansion in coverage especially since 2003 – covering roughly 24 million households
Rise in the value of transfers:
PSR and BPC due to the rise in the real value of the minimum wage;
and discretionary adjustment in the value of the components of BPC, but also additional transfers – ‘income guarantee’

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Outcomes
PSR
Early study by Delgado and Cardoso [2000] tracked impact on poverty and livelihoods; while Barbosa [2010] reported large first order effects on poverty and extreme poverty; but drop in labour force participation (-8%) an hours [Carvalho 2008]; effects extend to pensioner households, school enrolments in particular
BPC
First order effects on household poverty [Barrientos and Mase 2013]; and reduction in child labour and labour force participation of pensioners 2-3% [Kassouf et al 2011]

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BF
Impact evaluation data [de Brauw, Gilligan et al 2012] show impact along a range of household variables: children’s nutrition; school attendance [4pps] larger for girls and in the Northeast; delayed entry into the labour market by 1 year
Impacts on poverty and inequality are based on PNAD data, again first order effects poverty. BF accounts for 2pp of 1999-2009 reduction in headcount poverty from 26% to 14%; and 1.6pp of a reduction in extreme poverty from 9.9% to 4.8%) [Soares et al 2010]. BF accounts for 16% of a 10% decline in the Gini, and BPC for a further 14%.
Labour supply: several studies but the broad conclusion is that effects on adult labour force participation are marginal [Oliveira and Soares 2012]; reduction in child labour

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In sum
Transfer programme outcomes show a transmission belt to inclusive growth:
Improvements in household income which reduce poverty while complementary to employment
Improvements in household productive capacity, including investment in human capital
Targeted on low income groups
Studies focused on mean outcomes, but what about the distribution of outcomes?

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What is the distribution of outcomes across municipalities?
Several studies on Brazil’s antipoverty programmes suggest underlying heterogeneity in outcomes
Quantile regression approach applied to a panel of municipalities with the aim of estimating the distribution of Bolsa Família outcomes:
Estimate conditional quantile regressions as:
( | ) Σ (1’)

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Data:
Use survey data from PNAD 2003-9; aggregate variables at the municipality level, e.g. outcome variables such as labour force participation and school attendance; and covariates capturing individual and household characteristics including BF participation  panel with 1911 observations (possible bias towards larger metropolitan municipalities).
Table 2. Summary statistics on labour supply, school attendance and Bolsa Família incidence
Labour supply (%)
Female school attendance (%)
Male school attendance (%)
Bolsa Família incidence (%)
Un-weighted mean 2003-2005
76.7
95.8
95.1
14.0
76.8
97.0
96.4
17.3
76.8
96.5
95.9
15.9
Quantile
.1
68.3
90.1
90.0
1.9
.25
72.7
94.4
93.7
5.2
.5
77.0
97.4
96.7
12.0
.75
81.0
100.0
100.0
23.8
.9
85.0
100.0
100.0
36.9
Source: Author’s elaboration based on PNAD 2003-2009 aggregated at municipal level.

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Labour supply outcomes associated with BF not significant
Figure 3. The distribution of Bolsa Família effects on adult labour force participation rate across quantiles of a panel of municipalities 2003-2009 Source: Authors’ quantile regression panel data and OLS regressions. For quantile regressions, point estimates and bootstrapped confidence intervals at 90% and 95% are included. All specifications include all regressors, including per capita income, adult school level, employment structure, household head characteristics, other individual characteristics, dwelling characteristics, geographical area, as well as unobservable accounting characteristics. The sample size is 1,911 self- representative municipal observations given by 7 observations for each of 273 self-representative municipalities. -.10.1.2Change 0.1.2.3.4.5.6.7.8.91QuantilesOLS PD

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School attendance outcomes associated with BF positive and significant up to the 0.5 quantile;
effect is small for a municipality at the global maximum 8pp increase in BF incidence needed for a 1pp increase in school attendance rate
Figure 4. The distribution of Bolsa Familia effects on school attendance rates of girls 6-15 years old across quantiles of a panel of municipalities 2003-2009 Source: Authors’ quantile regression panel data and OLS regressions. For quantile regressions, point estimates and bootstrapped confidence intervals at 90% and 95% are included. All specifications include all regressors, including per capita income, adult school level, employment structure, household head characteristics, other individual characteristics, dwelling characteristics, geographical area, as well as unobservable accounting characteristics. The sample size is 1,911 self- representative municipal observations given by 7 observations for each of 273 self-representative municipalities. 0.1.2.3Change 0.1.2.3.4.5.6.7.8.91Quantiles PD OLS

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The results suggest that there might be a second transmission belt from antipoverty transfers, Bolsa Família, to inclusive growth:
Bolsa Família show stronger school attendance outcomes for girls for municipalities with lower school attendance rates, therefore reducing differential outcomes across municipalities
The distribution of Bolsa Familia outcomes for girls’ school attendance is skewed towards municipalities with poorer rates.
Important to keep in mind that our conditional quantile regression model has not been applied to estimate the effects of antipoverty transfer programmes before, and is therefore untested

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Conclusions
The 1988 Constitution led to the emergence of social assistance in Brazil as a means to address exclusion. Three strategies:
A. Preferential inclusion of informal workers into social insurance scheme (supported by government subsidies/semi-contributory)
B. ‘Canonical’ social assistance for disabled and aged in households in extreme poverty
C. Human development conditional income guarantee
Over time, all three strategies developed an institutional basis and grew in coverage, but Bolsa Família becomes the flagship programme
Why have antipoverty transfers in Brazil have contributed to inclusive growth?
…because of a strong focus on human capital and a productivist orientation
How?
by facilitating an improvement in (mean) outcomes of lower income groups
by improving the distribution of outcomes across municipalities (Bolsa Família)

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0.550.381.290.092.353.512.37.116.40.93Beneficio de Prestaçao ContinuadaBolsa FamiliaPrivate Sector Social Insurance Fund (RGPS) RuralPrivate Sector Social Insurance Fund (RGPS) UrbanPublic Sector Social Insurance Funds (RPPS) Brazil's social protection: Financing requirement and transfers 2008/9number of transfers (millions) 2009Financing requirement (%GDP) 2008Own calculations from data in Mesquita [2010]

Antipoverty transfers and inclusive growth in Brazil

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