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GTAP Resource #2612

by Ferreira-Filho, Joaquim Bento and Mark Horridge

This paper addresses the potential effects of world agricultural trade liberalization on poverty and regional income distribution in Brazil, using an inter-regional applied general equilibrium (AGE) and micro-simulation model of Brazil tailored for income distribution and poverty analysis. The representative household hypothesis was replaced by a detailed representation of households. The model distinguishes 10 different labor 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 in the country. The AGE model communicates to a micro-simulation model that has 112,055 Brazilian households and 263,938 adults.
Poverty and income distribution indices are computed over the entire sample of households and persons, before and after the policy shocks. The simulated trade liberalization scenario has positive impacts on poverty in Brazil. The trade liberalization scenario causes agriculture to expand considerably, with positive effects on poverty. This highlights the importance that agriculture still has for the poorest in Brazil. The regional implications of this fact are that the states which concentrate the bulk of the manufacturing activities in Brazil, Sao Paulo and Rio de Janeiro, tend to show an increase in the number of poor households.
Another important point arising from this analysis is the positive impact on inequality, which is found to be more significant than the one observed on the headcount ratio. This inequality improvement would be equivalent, in terms of poverty reduction, to a significant rate of economic growth. The higher fall in the poverty gap is shown to occur mainly on the poorest household groups, suggesting that the poorest among the poor would benefit more from the global trade liberalization scenario.

Resource Details (Export Citation) GTAP Keywords
Category: 2008 Conference Paper
Status: Published
By/In: Presented at the 11th Annual Conference on Global Economic Analysis, Helsinki, Finland
Date: 2008
Created: Ferreira-Filho, J. (4/2/2008)
Updated: Ferreira-Filho, J. (4/2/2008)
Visits: 2,535
- Economic analysis of poverty
- South America

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