Poverty Reduction In Brazil : A case study of whether growth has been pro poor

Abstract: This thesis will focus on how growth in GDP has been allocated among the people in Brazil, during the years of 1976 and 2003. Moreover poverty and inequalities are investigated along with poverty reduction, thus if growth has been pro poor will be presented. The study analyse if growth has benefited the poorest part of the population in Brazil. In addition the regional differences – the southeast and the northeast – are analyzed separately in order to see if there is any difference in the two regions in the agricultural and the industrial sector respectively. This is done to see if there is any correlation between growth and poverty reduction. We used a theory by Arthur Lewis who developed a two sector model where only two sectors existed the agricultural and industrial the so called “Lewis organizational dualism”. This model was later to be modified by Gunnar Myrdal and Nicholas Kaldor, who blamed the current situation of every society on “historical accident” where, because of an upward spiral of cumulative causation, urban areas grew and regions in the periphery stagnated. We used data that was collected from Instituto de Pesquisa Econômica Aplicada (IPEA; Institute of Applied Economic Research) between the periods 1976 – 2003. We found that the income in the poorest part of the population seemed to grow at a much slower past that of the rich. Moreover, measured as by the headcount index – the share of the population that lives under $2 per day – has been reduced over time in total Brazil, but not in the agricultural sector in either region. Surprisingly industrial growth has only been beneficial for the poor in the northern part of the country. Therefore the conclusion is that poverty has not been pro poor in either relative or absolute terms.