Regional Disparities in Agricultural Transformation, Growth and Poverty Reduction: Brazil in a historical perspective

Abstract: This paper aims to improve the understanding of economic development in Brazil since the 1950s by studying the relationship between structural transformation and poverty reduction at the state-level. Results from a modified shift-share analysis and analysis of an indicator of agricultural transformation suggest that structural transformation is a rather heterogeneous process within the country, highlighting the importance of a regional perspective. In addition, to a large extent, success is path dependent. Initially richer and more productive states were found to also be at the top of the ranking 60 years later. Furthermore, the sectoral composition of economic growth affects poverty reduction. Growth elasticities of poverty reduction change over time, as the structural transformation takes place. States with higher growth elasticity of poverty from non-agriculture were also the ones with presence of a more dynamic agricultural sector. This analysis of the case of Brazil and its states echoes the findings of other studies and supports the idea that a successful structural transformation leads the way to economic development.