Poverty Reduction in Brazil: what is behind the decline during the 2000s?

Abstract: Following a macroeconomic stabilization and consistent economic growth during the 2000s, Brazil experienced a continuous decrease on poverty incidence for the first time in its contemporary history. While the literature emphasizes the importance of economic growth alongside social development to fight poverty, the Brazilian experience also displays strong government action through expanding social coverage targeted to the poor. Considering a scenario where all factors are observed simultaneously, this study aims to shed light on the poverty dynamics during Luiz Inácio Lula da Silva’s presidential term. Specifically, this study explores which factor has contributed the most for poverty reduction: the sectoral composition of growth, the public spending or the general improvement in the socioeconomic context. The findings suggest that inequality reduction alongside the increase in human capital attainment were the most important factors behind poverty decline followed by economic growth, especially through the tertiary sector. Government expenditures played a marginal role through education and health while federal cash transfers did not provide any significant effect.