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GTAP Resource #1691

"The Doha Round, Poverty and Regional Inequality in Brazil"
by Ferreira-Filho, Joaquim Bento and Mark Horridge

1. Objective
This paper addresses the potential effects of the Doha round of trade negotiations upon poverty and income distribution in Brazil, using an applied general equilibrium (AGE) and micro-simulation model of Brazil tailored for income distribution and poverty analysis. The model has also a regional breakdown, allowing the assessment of the associated issue of regional inequality.
2. Methodology
An AGE model of Brazil linked to a micro-simulation model is used for the analysis. In the AGE model, the Representative Household hypothesis was replaced by a very detailed representation of households. The model distinguishes 10 different labour types, and has 270 different household expenditure patterns. Income can originate from 41 different production activities (which produce 52 commodities), located in 27 different regions inside the country. The AGE model communicates to a micro-simulation model that draws information from the Brazilian Household Survey (PNAD, 2001). After preparation, the database has 112,055 Brazilian households and 263,938 adults.
Economic activity in Brazil, a large country, is spread unevenly across the territory. Manufacturing industries are concentrated in the South-East region, while agriculture, although more evenly distributed geographically, is the main source of income of the Center-West states. Poverty, on the other hand, is a pervasive phenomenon in the country, which has one of the worse income distributions in the world. The poorest states in Brazil (defined based on the share of population below the poverty line) are concentrated in the North-Eastern states. Poverty and income distribution indices are computed over the entire sample of households and persons, before and after the policy shocks.
3. Results
Model results shows that even important trade policy shocks, such as those applied in this study, do not generate dramatic changes in the structure of poverty and income distribution in the Brazilian economy. The simulated effects on poverty and income distribution are positive, but rather small. They are, however, concentrated in the poorest households.
The study also suggests that the beneficial effects would arise from the income earning changes, and not from the fall in the consumption bundle prices. This result is highly correlated to the Agriculture and agricultural-related industries, which have their activity levels increased in all simulations. The bulk of the effects can be attributed to the liberalization by other countries, rather than to changes in Brazil’s tariff structure.
The study emphasizes the need to approach poverty by the household (rather the personal) dimension, by tracking changes in the labour market from individual workers to households. In the PNAD 2001 data used here, the head-of-household income accounts for about 65 percent of aggregated household income in Brazil. Using head-of-household income as a proxy for household income may poorly predict the effect of policy changes.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2005 Conference Paper
Status: Published
By/In: Presented at the 8th Annual Conference on Global Economic Analysis, Lübeck, Germany
Date: 2005
Created: Ferreira-Filho, J. (4/25/2005)
Updated: Batta, G. (6/21/2005)
Visits: 2,509
No keywords have been specified.

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