ECONOMIC GROWTH, INCOME CONCENTRATION AND THEIR EFFECTS ON POVERTY IN BRAZIL

Transcription

1 ECONOMIC GROWTH, INCOME CONCENTRATION AND THEIR EFFECTS ON POVERTY IN BRAZIL Emerson Marinho 1 Jair Araujo 2 Absrac From daa abou he Brailian saes from 1995 o 2009, he impac of variaions of economic growh and income inequal on pover in Brail are here analed in an aemp o evaluae he Bourguignon hpohesis (2002) which saes ha he more unequal a counr is, he less efficien s economic growh will be for pover reducion. In order o verif such effecs, is necessar o esimae pover elasicies relaed o income and inequal. Besides, wo dnamic economeric models are specified and hese models are hen esimaed b he Generalied Mehod of Momens for Ssems (Ssem GMM) which was developed b Arellano-Bond (1991), Arellano-Bover (1995) and Blundell & Bond (1998). The esimaed resuls of he models lead o he conclusion ha income increase s effeciveness for pover reducion is lesser when he inial developmen level is low. The same happens when he inial inequal index is high. Thus, regions of low inial developmen level and/or high inial inequal are less predisposed o pover reducion hrough income growh. Therefore, high inequal and low inial developmen level in he major of Brailian saes do hinder pover reducion b income growh. Ke Words: Economic growh, Pover and Inequal. Resumo A parir de dados em painel para os esados brasileiros no período , analisa-se o impaco de variações do crescimeno econômico e da desigualdade de renda sobre as alerações da pobrea no Brasil, buscando avaliar a hipóese de Bourguignon (2002) de que quano mais desigual o país menor será a efeividade do crescimeno econômico em reduir a pobrea. Para verificar esses efeos esimam-se as elasicidades da pobrea em relação à renda e à desigualdade. Para isso, especificam-se dois modelos economéricos dinâmicos que são esimado pelo Méodo dos Momenos Generaliadosisema (MMG-sisema) desenvolvido por Arellano-Bond (1991), Arellano-Bover(1995) e Blundell e Bond (1998). Os resulados esimados dos modelos permem concluir que o aumeno da renda sobre a redução da pobrea é menor quando o nível inicial de desenvolvimeno é baixo. O mesmo se dá quando o índice inicial de desigualdade é alo. Assim sendo, regiões com baixo nível inicial de desenvolvimeno e/ou ala desigualdade inicial apresenam condições menos propícias à redução da pobrea aravés do crescimeno da renda. Porano, elevada desigualdade e o baixo nível de desenvolvimeno inicial da maioria dos esados brasileiros são empecilhos para a reversão do quadro de pobrea via crescimeno da renda. Palavras chaves: Crescimeno econômico, Pobrea e Desigualdade. 1 Professor do Programa de Pós-Graduação em Economia (CAEN)/UFC. emarinho@ufc.br 2 Professor do Programa de Pós-Graduação em Economia Rural (MAER)/UFC jairandrade@ufc.br.

2 1 INTRODUCTION The developmen policies in various counries have as heir main goal, he increase of heir populaions well-being. Cerainl, amongs heir man goals, pover reducion is prioried, due o he fac ha despe hese economies increasing capac of generaing wealh, pover has been proving o be a persisen phenomenon. According o Rocha (2006) even in successful cases of economic growh, is eviden ha he expansion of producion of an econom doesn necessaril benefs all of s individuals. I is so in rich counries ha are unable o eradicae remaining pover areas or in developing counries where economic expansion causes social inequalies o grow. The relaion beween income and inequal changes on pover reducion is a recurren opic due o he fac ha in man counries, pover issues have no e been equaed as a resul of economic growh. For insance, Cline (2004) while suding various counries in he 1990 s concluded ha in man economies, here was pover reducion due o economic growh. However, some counries ha did no have significan economic growh managed o reduce pover. Thus, economic growh alone is no able o explain pover aleraions. Therefore, income inequal now ges he spoligh as a pover reducion facor. Chen and Wang (2001) invesigaed pover and inequal in 1990 s. The break down pover variaion due o economic growh and changes in inequal. The conclude ha economic growh benefed he rich more specificall, and verified ha onl he median income of he riches 20% did grow more han he median income. The poin o he imporance of income inequal for pover reducion. Barros e Mendonça (2001), for example, verified ha in Brail, he incidence of pover is higher han in oher counries which have a per capa income similar o Brail s per capa. In heir sud he conclude ha income inequal is he cause of he relaive inefficienc of economic growh for pover reducion, ha is, he effec of economic growh on pover reducion is lesser in Brail han is in counries which have he same income level as Brail. If an variaion of pover is due o eher income redisribuion or economic growh (or boh causes), becomes imporan o assess he effec of each facor on pover variaion. Recen sudies have ried o explain which facors influence income-pover elasic and inequal-pover. For insance, Ravallion e Chen (1997) esimaed ha for a developing counries sample, pover income elasic (measured b he number of people of income below pover line of a dollar a da) found an elasic of -3, ha is, for each 1% of increase in median income here is a 3% reducion of he proporion of individuals whose income is below he pover line. However, here are counries ha manage o aler heir inner pover whou showing significan economic growh raes. Bourguignon (2002) esimaed he income-pover elasic for a group of counries b approximaing income disribuion b log-normal disribuion. He showed ha he bigger he median income is, and lower he concenraion is, he wider is elasic. Regarding he empiric naional evidence, Marinho and Soares (2003) esimaed ha median income elasic on he Brailian saes pover from 1985 o The concluded ha he bigger median income is, he bigger s corresponding elasic absolue value is. Moreover, he also concluded ha he bigger a concenraion is, he smaller s absolue value will be. The bigges income-pover elasicies happened in he saes of São Paulo and Rio de Janeiro. In anoher sud abou Brail, Hoffmann (2004) applied anoher mehodolog and esimaed he same elasicies and compared hem wh he resuls reached b Marinho and 2

3 3 Soares (2003). Hoffman verified ha he wo esimaes showed ver similar variaion paerns. Salvao e al., (2007) invesigaed he relaion beween growh, pover and inequal using daa from Brailian municipalies and such sud measures pover elasicies in relaion o economic growh and he income inequal variaion rae. Besides, he sud group ess he exisence of an nonlinear ineracion beween growh and inial inequal, aiming o evaluae he hpohesis ha saes ha he bigger he inequal, he lower is he efficac of growh for pover reducion. The found ha among he major regions of Brail, he bigges growh elasic of pover reducion was verified in he Souheas region. Of he saes involved, São Paulo ges he spoligh. The sud also showed a negaive correlaion beween he Modulus of Elasic and he inial inequal, ha is, he bigger he inial inequal, he smaller he reducion of pover caused b economic growh. Tha reinforces he Bourgignon (2002) hpohesis. The resuls also show ha here is a negaive correlaion beween redisribuion elasic and inial inequal. However, hese issues have no e been compleel elucidaed. According o Barreo (2005) here is no e a consensus abou he relaions beween pover, growh and inequal. Therefore, is exremel imporan o deermine he effecs each of hese facors exer on pover. The measuring of hese elasicies is essenial in order o aid growh and income redisribuion policies, once pover reducion is influenced boh b aleraions in economic growh as well as inequal reducions, as Cline (2004) saes. Under such erms, he goal of his paper is o anale he impacs of boh economic growh variaions and income inequal variaions on pover aleraions in Brail. If assumed ha growh alone is no enough o explain aleraions of pover, income inequal becomes a complemenar facor for such explanaion, b assessing he hpohesis ha he more unequal a counr is, he less efficienc economic growh will have in reducing pover (Bourguignon (2002). In order o verif such effecs, we mus esimae pover elasicies in relaion o income and inequal. These laer ones are esimaed b a dnamic economeric model for daa on a panel, developed b Arellano-Bond (1991), Arellano-Bover (1995) and Blundel- Bond (1998). On he panel, he analsis uns will be he Brailian saes and he period of ime, from 1995 unil The aricle comprises six addional secions besides his inroducion. The second secion brings a general review of naional and inernaional leraure abou he riangular relaion beween pover, economic growh and inequal, besides briefl recapulaing he Brailian inequal hisor. The hird secion heoreicall defines he income-pover and he inequal-pover elasicies. Then, he fourh secion anales he daabase. The fifh secion shows he economeric model, s esimaion mehods and resul analsis. For las, conclusions are commened in he sevenh secion. 2 THE TRIANGULAR RELATION BETWEEN POVERTY, ECONOMIC GROWTH AND INEQUALITY. This secion brings a review of he leraure abou he riangular relaion beween pover, economic growh and income inequal. The ineracion beween hese hree variables creaes he necessar condions for deermining a wha magnude, income growh or inequal reducion produce an impac for pover reducion. Borguignon (2002) describes wha he calls The pover-inequal-growh riangle. He spos a relaion beween hese hree variables. His aricle adops a log-normal income disribuion and explains pover changes as resul of wo facors: a) The Growh Effec: happens via a proporional change in all income decils, bu here isn necessaril a change in he relaive income. b) The Disribuive Effec: when a change in relaive income disribuion occurs.

4 4 Thus, one can show ha changes in pover ma occur from economic growh (characeried b median income growh) as well as income inequal improvemen. Graph 1 Decomposion of Pover Variable Due To Economic Growh and Income Disribuion. Growh effec Disribuion effec Final disribuion Growh effec on pover Inial disribuion Dens (share of populaion) Disribuion effec on pover Pover Line Income ($ a da, logarhmic scala) Source: Borguignon (2002) The curves on Graph 1 show he income disribuion densies in which he laer is represened on he horional axis on a logarhmic scale. The displacemen from he inial disribuion o he final disribuion happens via an inermediae sep, which is he horional ranslaion of he inial disribuion ino curve (I). This change represens an equall proporional increase of all incomes in a cerain populaion, which comes from The Growh Effec. The change happens due o a displacemen of income disribuion dens o he righ. Considering as he pover lines, we can verif ha here has been a decline of he number of poor individuals. Such decline of he proporion of poor individuals is caused exclusivel b he Growh Effec. Bu he movemen of curve (I) for he final disribuion happens when he median income is kep consan and he relaive income disribuion is alered (ha means Disribuion Effec) Thus, whou changing he median income of he populaion, he pover level fell. Tha is a resul of income inequal fall. Tha is income concenraion reducion caused a diminishmen of he number of individuals whose income was below he pover line. Such relaion was named b Borguignon (2004) as The Pover-Inequal-Growh Triangle. Since hen, numerous sudies were developed in order o idenif and measure he exising relaion beween he impacs of growh and income inequal on pover reducion. 2.1 Pover versus Economic Growh Man naional and inernaional empiric works analed he relaions beween economic growh and pover. There seems o be a consensus among researchers on he assumpion ha in order o sud pover reducion, wo facors are fundamenal: average growh rae and income inequal inial level. For insance, Kraa (2004) conduced he decomposion of pover variance in order o verif he imporance of economic growh for pover reducion. For his, he used a sample of developing counries during he 80 s and he 90 s. His analsis concluded ha he variaion of pover levels is due o median income increase, and herefore, policies ha promoe economic growh would be decisive for he well-being of he poores individuals.

5 The relaion beween growh and pover reducion can be measured hrough incomeelasic or growh-elasic. If his elasic is high, economic-growh public policies ha figh pover are more efficien. Oherwise, if elasic is low, pover-reducion sraegies should combine economic growh plus some pe of income redisribuion. Ravallion and Chen (1997) esimaed income-pover and inequal-pover elasicies of 45 counries. The resuls showed ha in counries of low inequal, if income level increases b 1%, pover reducion increases b 4,3%. In counries where inequal is high, pover reducion would increase b onl 0,6%. The researchers concluded ha growh has lle effec on pover. On he oher hand, if inequal ends o diminish due o growh, he effec on pover reducion will be more significan. In anoher sud, Ravallion (2001) verified ha growh elasic of pover is much higher in counries ha combined growh wh some inequal reducion. This shows ha he esimaion mehodolog for pover-growh elasic mus be conrolled b he incomeredisribuion componen. For insance, Ravallion (2005) esimaed he Pro-Poor Growh Rae for China and India, regarding he 1990 s and found ou ha changes in income disribuion were acuall derimenal o he poor in hese counries. These individuals income growh rae was lower han he oal ordinar income growh rae in ha analed period. This resul reproduced a growh incidence curve c wh posive slan for he higher income levels. On he oher hand, he Pro-Poor Growh rae esimae was posive, indicaing a decrease in absolue pover. Chen and Wang (2001) sudied he relaion beween pover, income and inequal in 1990 s China. The concluded ha despe he fac ha pover go reduced b economic growh, income concenraion acuall promoed pover increase. The researchers also verified ha he median income increase benefed more relaivel he rich, ha is, onl he median income of he 20% riches increased more han he oal median income. Therefore, became eviden ha income concenraion reduced he effec of growh on pover. Sewar (2000) esimaed ha a 1% GNP growh promoed 0,21% of pover reducion in Zambia while he same variaion promoes a 3,4% pover reducion in Malasia. The difference beween hese pover reducions is due o specific income inequal differences hese regions have. In he same vein, Deininger and Squire (1996) analing he relaion beween economic growh s poenial effec for reducing inequal in a sample comprised of various counries. The found ha differen inequal levels have disinc implicaions on economic growh and hese levels are negaivel relaed o pover. Using a sample of 84 counries beween 1996 and 2000, Son (2004) showed ha in 95% of he cases, economic growh conribued o pover reducion. In he remaining cases, eher he growh rae was negaive or was no possible o draw an conclusion due o ambigu found in he sample. The leraure in Brail has shown some works on he same opic. Hoffmann (1995) spoed pover reducion in he 1970 s wh high income increase rae and relaive inequal sagnaion. In he 1980 s here was pover and inequal increases wh ou-of-conrol inflaion. In a laer sud, Hoffmann (2005) found ha a 1% increase of he per capa household income in Brail led o a 0,84% reducion of poor individuals proporion and ha he absolue value of his elasic grows along wh income and decreases as inequal ges higher. Marinho and Soares (2003), using daa from 26 Brailian saes, from 1985 o 1999, applied a mehodological procedure ha allowed for decomposing he variaion in pover due o he change in median income and also caused b changes in income concenraion. The resuls show ha in all Norhern region saes, he effec of income concenraion surpassed 5

6 6 he income effec. This wa, income growh had a sraegic imporance in fighing pover. According o he auhors, he higher he median income, he higher absolue elasic value and he higher he concenraion, he smaller he absolue elasic value. Manso, Barreo and Tebaldi (2005), using daa from PNAD (Brail s Naional Household Sampling Research) he ried o elucidae he relaions beween income growh, pover reducion and he disribuive profile of richness. In ha sud, he auhors deepened he undersanding of Brail s regional inequal problem hrough an evaluaion of he impac of economic growh on pover. Their analses made possible o isolae he effecs of economic growh and of income inequal on pover reducion in each region of Brail. The resuls show ha he growh componens of average income growh and of income disribuion are sufficien o explain a big par of he variaions of pover levels beween Brailian saes. The resuls so far shown, somehow reinforce he evidences ha pover-fighing policies hrough growh are more efficien when accompanied b income redisribuion. 2.2 Pover versus Inequal This subsecion invesigaes in he leraure on he subjec, he exising relaion beween pover and inequal. On general erms, man auhors sae ha he proporion of poor individuals in a given region lowers when an economic growh polic is combined wh income redisribuion. Income inequal is an imporan aspec in pover debaes. Pover is a world issue ha afflics modern socie and has been analed in various sudies. I endures despe he growing maerial wealh amassmen in he world. Pover s exension and seriousness are shown b he number of poor individuals in all counries. For cerain, inequal and pover walk hand in hand. Ravallion (2005) observed ha for a group of developing counries, a nonlinear relaion beween growh-pover elasic and he inequal level in he inial period. The auhor saes ha economic growh will have lle effec on he poor, in case is no able o reduce inequal. He esimaes a 1% growh will reduce pover b 4,3% in counries wh low income inequal. However, in counries wh high income inequal, he ver same 1% growh rae will bring onl a meager reducion b 0,6% of he poor proporion. Therefore, one of he facors ha influence he pover reducion rae, given he same level of growh rae, is he change in income disribuion. This is also verified b Da and Ravallion (1992) who measured how pover variaion is explained b he growh income disribuion effecs. So, models ha aim o esimae pover reducion s growh elasic mus incorporae he income inequal variaion as an explanaor variable, so ha growh elasic will no incorporae income disribuion changes. According o Bourguignon (2004), income inequal reducion is insrumenal for pover reducion and economic growh migh no be so necessar. Similar resuls were found for Brail b Barros, Henriques and Mendonça (2001). These auhors sae ha income disribuion inequal is he reason wh economic growh is relaivel less efficien han could be for pover reducion, ha is, he effec of growh on pover reducion is weaker in Brail han in oher counries ha reached he same income level as Brail s. In Brail here have been some works ha aim for plausible explanaions linking pover, growh and inequal. According o Rocha (2006), despe he endurance of pover hrough decades, was onl afer solving he inflaion problem ha social problems became priories such as inequal diminishmen. This fac, in a cerain wa, sas wh sudies on he pover-growh-inequal riangle had been scanil produced in he pas. For Barreo (2005), pover reducion can be aained in a fas wa when a counr in growh has a less uneven income disribuion. Therefore, he implemenaion of public

7 7 policies for inequal reducion, besides solving he problem self, migh also indirecl help wh oher economic policies goals such as increasing growh and reducing pover. Generall, leraure shows ha significan indexes of pover reducion are he resul of economic growh plus policies ha figh income inequal. These wo effecs conribue o elevae he median income of he poores individuals and herefore, he do reduce pover. Table 1 Brail s Pover Index from 1995 o 2009 Years P 0 Years P , , , , , , , , , , , , , ,5 Difference: -15,20 Source: produced b he auhors using PNAD (Naional Household Sampling Research) daa. For insance, Rocha (2006) saes ha he proporion of poor individuals in Brail had a wo-percenage-poin reducion from 2001 o According o his auhor, his reducion which ook place in he earl ears of ha decade was due o man facors whose impac differs in each region of he counr. Among hese facors are welfare benef expansion and disribuive changes in work income. According o he auhor, he persisence of pover in Brail is mosl due o he exising inequal. She saes ha pover can be reduced eher b income growh or b beer income disribuion. However, here is a consensus ha income inequal reducion mus be emphasied once income growh whou inequal reducion migh mean he posponemen of pover eradicaion for a fuure era. The significan fall of pover levels in Brail from 1995 o 2009 is shown b he daa of Table 1. The proporion of poor individuals (P 0 ) was 38,70% in 1995 and dropped o 23,50% in 2009, which mean a 15,20 percenage poin reducion. Therefore, analing his indicaor one can see a significan pover reducion in Brail from 1995 o Growh versus inequal The relaion named economic growh versus inequal has been analed in leraure ha considers he exising causalies beween hese variables. Man issues associaed o hese variables are like he one regarding how inequal is generaed and how inequal reproduces self as ime goes b or he issue regarding how inequal and economic developmen process are inerrelaed. For Dini (2005), here is a double causal relaion beween hese variables. The hpohesis b Kunes (1955) saes ha he Invered U is he saring poin of his posulae. Firsl, inequal would increase in he onse of economic growh, when econom shifs from rural owards indusrialiaion (a ransfer from a less producive secor ino a more producive one). Laer on, inequal would diminish when mos of he workforce ge acive in he indusrial secor.

8 8 Therefore, he developmen polic can be explained b economic growh and inequal reducion would ensue. Wh higher and beer-disribued income, he pover issue would be solved. According o Barreo (2005), man sudies anale he impac of inequal on economic growh. Some models show ha inequal can eher harm growh or simulae growh. For example, Alesina and Rodrik (1994) sae ha he causal beween growh and inequal is based on hree facs: (a) governmen expendure and redisribuive ax polic would be negaivel relaed due o heir harming effecs on capal accumulaion; (b) ax raes would end o be proporional o income and he advanages of public expendures would be equall offered o all ciens, which implies ha expendure and ax levels would be inversel relaed o income; (c) he overall ax load given b he governmen could be he one chosen b he median voer, which implies less capal accumulaion which leads o lesser growh. Sill under he assumpion ha inequal harms growh, we have he Sewar posulae (2000), which sas: (a) high inequal causes polical insabil, uncerain and smaller invesmens and smaller growh; (b) high inequal is likel o lead o populis ax redisribuion policies which are acuall effecs of disinceniviaion and small growh; (c) higher inequal has an effec of he wealhier laers of socie, who will hen reques special ax reamen, which leads o an excess of invesmens on cerain areas and growh reducion. Besides, here are hose who believe ha inequal simulaes economic growh, and Bourguinon (1981) saes ha he propens o save mone is differen beween he rich and he poor. Tha is, he rich end o save more han he poor, which causes a endenc for higher invesmen levels in economies where inequal is higher which in heor brings faser growh. Opposing ha, here are auhors like Barro (2000) and Lope (2004), who do no believe in he exisence of an relaion beween inequal and economic growh and who found ou ha invesmen levels do no significanl depend on inequal. Table2 Main Feaures of he per capa Income Disribuion in Brail from 1995 o Years Gini Income Perc/ ,601 23,7 27,4 67,0 520,6 19, ,602 24,2 29,3 74,9 529,7 19, ,602 24,2 28,7 72,3 529,0 19, ,601 23,6 27,5 67,2 534,5 19, ,595 22,7 26,2 63,2 504,4 19, ,597 22,9 26,9 68,4 511,9 19, ,590 21,9 24,7 59,2 511,9 19, ,585 21,1 24,3 59,4 481,9 20, ,575 19,5 22,0 51,7 497,9 18, ,572 19,2 21,3 49,7 528,4 17, ,560 18,3 20,4 47,5 577,5 15, ,550 17,7 20,2 49,0 592,5 14, ,540 16,8 18,9 44,0 622,6 12, ,540 16,3 18,6 43,8 637,4 12,2 Source: Socie & Labor Sud Insue IETS. Foonoe: The pover line of R$ 196 was used for 2009, and he INPC (Brail s Naional Consumer Price Index) was applied for deflaion.

9 9 Some informaion abou income inequal in Brail ranging from 1995 o 2000 are shown in Table 2. These daa are from The Gini index, he raio beween income owned b he riches 10% and he poores 40% (40-10+), he raion beween income owned b he riches 20% and he poores20% (20-20+), he raio income owned b he riches 10% and he poores 10% (10-10+), he acual per capa household income and he percenage of poor individuals/pover line (Perc/). I is verifiable in his able ha income owned b he riches 10% in Brail, in 1995 was 23,7 imes he income owned b he poores 40%. In 2009, he rich earned 16,3 imes wha all poor individuals earned. Also worh noicing, are he indicaors (10-10+) and (20-20+) ha show a marked reducion during ha period. (especiall he firs indicaor ha wen from 67 o 43,8). The per capa household income grew approximael 22,5%. The las column shows ha he poor individuals/pover line reached a sabil level around 19%. These daa show ha income inequal in Brail has declined in recen ears, which corroboraes he resuls found b Neri (2006), Barros e al (2007) and Hoffmann (2007). In he same direcion, Manso, Barreo and Tebaldi (2005) showed ha income inequal significanl dropped afer The Real Plan. From 1995 o 2004, here was a 2,71% reducion of he Gini index. 3 INCOME AND POVERTY INEQUALITY ELASTICITY The deerminaion of pover-income elasic and pover-inequal elasic aim o anale he impac of growh variaions and income inequal variaions on pover aleraions. Such mehodolog was iniall proposed b Bourguignon (2002). He follows he classical definion proposed b Foser, Greer and Thorbecke (1984) ha measures pover b he proporion of poor individuals. Tha is, he proporion of people whose per capa income is lower han he pover line expressed as given b: H Pr( ) F ( ) where, F (), is he income disribuion funcion. Therefore, he proporion of populaion in ime whose income is lower han he absolue pover, is equal o he probabil ha income will be lower han he pover ' line. This wa, he proporion of poor individuals beween wo periods of ime and will be: H H ' H F '( ) F ( ).Assuming ha he income disribuion curve is log-normal, Bourguignon (2002) defines he displacemen of he original curve as shown on Graph 1 for he final disribuion curve in erms of pover variaion as follows: H H ' H [ F ( ' ) F ( )] [ F ' ( ' ) F The firs expression beween brackes represens he growh effec, wh consan relaive income disribuion F. The second expression beween brackes represens he inequal effec, as an aleraion in relaive income occurs if income is kep consan. Under hese erms, pover variaion is affeced b wo effecs. Firsl, due o income growh and secondl, due o income disribuion inequal. According o Epaulard (2003) he relaive variaion of pover coming from income growh and from he redisribuion effec can be decomposed as: dh H d H dg. d d G d In erms of elasic: dh H d H H H dg G d d G d G. Term (.) corresponds o accumulaed disribuion of he sandard normal, and is he sandard deviaion of he where he Gini coefficien is defined as, 2 / 2 1 ( ' )]

10 10 income logarhm. So, Epaulard (2003) showed ha pover-income elasicies, H inequal-pover elasic,, are defined as: H G, and he H H 1 log( / ) / / 2 0 H log( / ) / / 2 and H H 1 log(/ )/ /2 log(/ )/ /2 G log(/ )/ /2 0 H Besides, he auhor poins ou ha he pover-income elasic ( H ) and he inequal-pover elasic ( G H ) decrease in absolue erms wh he raio of pover line and median income ( / ) and wh he sandard deviaion of he income logarhm ( ). Poverincome elasic is alwas eher posive or null. On he oher hand, pover-inequal elasic can be more or less han ero 3. Therefore, he effec of income disribuion change on pover reducion is a funcion of income growh level and inequal degree. Tha is, aleraions of pover can derive eher from economic growh (characeried b median income growh) or from income inequal drop. However, when he combinaion of hese wo facors occurs, pover reducion should be even more prominen. 4 DATABASE The daa used for he esimaes of economeric models described in he nex secion were aken from he PNADs (Brail s Naional Household Sampling Research and published b IBGE (The Brailian Insue Of Geograph And Saisics). The sample is of Brailian saes in he period from 1995 o The per capa household income variable is calculaed b dividing he oal income of a household b s number of members. Then, an arhmeic average of he variable is calculaed, and ha is how he median income of each sae of he sample is obained. A negaive relaion beween such variable and pover is expeced. In his aricle, households whose per capa income is insufficien o saisf heir basic needs are caegoried as poor. So, he absolue pover indicaor is here he proporion of poor individuals (P 0 ). In order o define such indicaor, he chosen pover line was ha of half minimum wage. The pover indicaor P 0 is defined as, P 0 q/ n, where n is he oal number of individuals and q is he number of individuals whose per capa household income i lies below pover line. The inequal measure used here is he Gini coefficien ha was calculaed based on he per capa household income given b he PNAD surves. This indicaor is ofen used o express he degree of income inequal ha can be associaed o he Loren curve. The curve is defined b he group of poins from incomes ordered in an increasing sequence, his wa showing he accumulaed proporion of individuals and he accumulaed proporion of income. The curve is used o calculae he Gini coefficiens for each sae in he period from 1995 o Regarding wha was discussed in he previous secion, he relaion beween he Gini coefficien and pover ma be posive, ha is, he bigger he inequal, he bigger will be he pover. I is worh reminding, ha all monear variables were used for real values of 2009, using Brail s INPC (Naional Index of Consumer Prices) of According o Epaulard (2003) he pover-inequal elasic will have a posive mark unless a counr happens o have a ver low median income. This elasic will be posive when 1 2 exp 2. 4 There was no PNAD in To fill he gap, he arhmeic averages of variables of 1999 and 2001were used insead. The older daa abou he Norhern region were no used in he sample due o unavailabil of daa abou rural areas before 2004.

11 11 5 ECONOMETRIC MODEL The economeric specificaion of he model is based on economic growh s conribuion and income disribuion variaions for pover aleraions. Besides, is acceped as a hpohesis, he supposion ha saes ha curren pover variaion ends o perpeuae self and/or ends o influence he performance of his variaion in he fuure 5. Taking his ino accoun, he relaion beween pover variaion and s deerminans is hen invesigaed hrough a dnamic panel regression model, defined b he following formula 6 : ln[ P 3 ] 0, ] 0 1 ln[ P0, 1] 2 ln[ Y ] ln[ Gini (1) The variables of model (1) are defined his wa: lnp0, lnp0; lnp0; 1 represens he poor individuals proporion variaion beween wo periods of ime; ln Y ln Y ln Y 1 is he per capa median household income variaion, lngini lngini lngini 1, represens he income concenraion variaion as measured b he Gini Coefficien; i are individuals unobservable aleaor effecs and represens aleaor disurbances. The variables of model (1) are defined in a naural logarhm in which i represens he sae and he period of P0 ime. Due o ha, parameers 2 and 3 are, respecivel, he income-pover elasicies, P, and he inequal-pover elasic 0. Please noice ha hese elasicies do no var G along ime. An expansion of model (1), shown in Kalwij and Verschoor (2004), makes possible for income and pover inequal elasicies o var in ime and depend on inverse inial developmen level (pover line divided b inial per capa household income) and on he inial inequal level 7. When hese variables are included in model (1) is he opporun o evaluae he hpohesis ha sas he bigger he inial inequal, he lesser he effeciveness of growh for pover reducion (he Bourguignon hpohesis). Such model is dnamicall described like his: ln[ P 0, ] 0 ln[ P 1 0, 1 ] ln[ 2 ] ln[ ] ln[ G 3 i 0 ] ln[ 4 ] ln[ Z i 0 ] ln[ Gini 5 ] ln[ Gini 6 ] ln[ Gini i 0 ] ln[ Gini 7 ] ln[ Z i 0 ] 8 ln[ G i 0 ] 9 ln[ Z i 0 ] i where, besides variables ln[ P ], ln[ ], ln[ Gini ] ha follow he same previousl described formulaions, we see ln[ ]ln[ G i 0] and ln[ ]ln[ ] represening, respecivel, i0 he ineracions beween per capa median household income variaions and he inial Gini index of sae i ( G i0 ) an he inverse of he inial developmen level (pover line divided i0 b inial per capa household income). Likewise, variables ln[ Gini ]ln[ G i 0 ] and (2) 5 Ribas e al (2006) found evidence of pover persisence in Brail. 6 This model can be seen in Bourguignon (2002) and Kalwij and Verschoor (2004). However, hese auhors do no consider ha pover migh have a dnamic behavior. 7 Kalwij and Verschoor (2004) also did no consider he dnamic behavior ha pover has in ime.

12 12 ln[ Gini ]ln[ ] represen, respecivel, he ineracions beween he Gini inequal index i0 and he inial inequal index of sae i and he inverse of he inial developmen level. The hpoheses adoped in hese models are E[ i ] E[ ] E[ i ] 0 and E[ is] 0 for i=1,2,...,n e s. Addionall, here is a sandard hpohesis which is relaive o he inial condions ln P : E[ ln P 1 ] 0 o i=1,2,...,n e =1,2,...,T (AHN e SCHMIDT, 1995). Thus, he specificaion of model (2) akes ino accoun ha he inequal elasic and he per capa median household income elasic depend on he inial inequal and on he raio beween pover line and inial per capa median household income. Naurall, 2 and 5 coefficiens are no longer respecivel inerpreed as incomeelasic and inequal-elasic. In order o calculae such elasicies, is necessar o consider he ineracion erms. So, he income-pover elasic and he inequal-pover elasic are now respecivel defined as: P ln[ G io ] 4 ln[ ] ( 3) P0 G ln[ G 5 6 io ] 7 ln[ Now becomes noiceable ha income-pover elasic and inequal-pover elasic do var in ime. Tradional esimaion echniques are inadequae for models (1) and (2) due o wo major economeric problems. Firsl, here is he presence of non-observable effecs on individuals,, paired wh he lagged dependen variable ln P k, 1, on he righ side of i hose equaions. In his case, oming he individual fixed effecs in he dnamic model will urn he ordinar leas square esimaors (OLS) biased and inconsisen. For insance, due o he probable posive correlaion beween he lagged dependen variable and he fixed effecs, he esimae of coefficien 1is biased upwards. On he oher hand, according o esimaor WITHIN GROUPS which correcs for he presence of fixed effecs, an 1 esimae is generaed wh a downward bias, in panels of small emporal dimension. (JUDSON and OWEN, 1999). In order o fix hese problems, Arellano-Bond (1991) recommends he Modified General Mehod of Momens esimaor (Modified-GMM). Such mehod eliminaes fixed effecs hrough he firs difference of he equaions. So, for models (1) and (2), respecivel: ]] [ ln[ P0, ]] 1 [ ln[ P0, 1 ]] 2 [ ln[ Y ]] 3 [ln[ Gini (5) [ ln[ P ]] [ ln[ P ]] [ ln[ ]] [ ln[ ]ln[ G ]] [ ln[ 0, [ ln[ Gini 5 9 [ln[ i0 0 ]] 1 0, 1 ]] [ ln[ Gini 6 2 ]ln[ G i0 i0 i 0 ] ]] [ ln[ Gini 7 3 i0 ]ln[ i0 (4) 4 ]] [ln[ G 8 ]ln[ where, for an w variable, ln[ w ] ln[ w ] ln[ w 1 ]. B he making of equaions (5) and (6), ln[ P ]] and are correlaed and herefore, Ordinar Leas Squares [ 0, 1 i0 ]] i0 ]] (6)

13 13 esimaors for heir coefficiens will be biased and inconsisen. In his case, is necessar o use insrumenal variables for [ ln[ P 0, 1 ]]. The se of hpoheses adoped in equaions (1) and (2) impl ha condions of momens E[ [ ln P0, s ] ] 0, for =3,4,...T e s 2, are valid. Based on hese momens, Arellano and Bond (1991) sugges he use of ln[ P0, s ], for =3,4,...T and s 2, as insrumens for equaions (5) and (6). Regarding he oher explanaor variables, we have hree possible suaions. An explanaor variable x can be caegoried as (i) sricl exogenous, if is no correlaed o pas, presen or fuure erms of error, (ii) weakl exogenous, if is correlaed onl o pas values of he erm of error, and (iii) endogenous, if is correlaed o pas, presen and fuure erms of error. In he second case, he values of x lagged in one or more periods are valid insrumens for he esimaion of equaions (5) and (6). In he las case, hough, he values of x lagged in wo or more periods are valid insrumens for he esimaions for hese same equaions. On he oher hand, Arellano and Bover (1995) and Blundell and Bond (1998) sae ha hese insrumens are weak when dependen variables and explanaor variables show srong persisence and/or relaive variance of fixed effecs happens o increase. Tha will produce an inconsisen and biased modified GMM esimaor for panels wh small T. This wa, he abovemenioned auhors sugges as a means o ease his bias and imprecision problem, he esimaion of a ssem which respecivel combines he se of level equaions (equaions (1) and (2) ) and he differeniaion equaions (equaions (5) and(6)). Then Ssem GMM or he Ssem Generalied Mehod of Momens is applied. For equaions of difference, he se of insrumens is he same as abovemenioned. For level regression, he righ insrumens are he lagged differences of he respecive variables. For example, if is assumed ha he differences of he explanaor variables are no correlaed wh he individual fixed effecs or (for =3,4,...T) and E[ [ ln P0, i2 ] i ] 0, for i = 1,2,3,...,N, hen he explanaor variables in differences and [ ln P k, 1 ], if he are exogenous or weakl exogenous, he are valid insrumens for level equaions. The same happens if he are endogenous, bu he insrumens become hen explanaor variables in he lagged differences of a period and [ ln P k, 1 ]. Finall, as a wa o es he robusness and consisenc of he model, Arellano and Bond (1991) sugges wo pes of es. Hansen and Sargan ha respecivel es, if he insrumens ha were used and he insrumens ha were addionall required b he Ssem GMM valid. For las, he Arellano e Bond (1991) elasic ess will verif if he error shows firs-order serial correlaion and if shows second-order correlaion. Regarding he consisenc of he esimaors, is expeced ha shows firs-order correlaion while he series will no be in second-order auocorrelaion. I is worh emphasiing ha he Ssem GMM esimaes abou o be shown in he nex secion are resuls of he esimaion which esimaor was correced b he Windmeijer Mehod (2005) ha is so o avoid underesimaion of he rue variances in a fine sample b he respecive esimaor. The esimaor used was he one proposed b Arellano and Bond (1991) in wo seps. On he firs sage, is supposed ha he erms of error are independen and homoscedasic in he saes and along he ime. On he second sage, residues obained on he firs sage are used in he creaion of a consisen esimae of he variance-covariance marix, and b consequence leaving aside he independence hpohesis and he homoscedaic. The second sage esimaor is asmpoicall more efficien when compared o he firs sage esimaor.

14 14 6 RESULTS OF THE ECONOMETRIC MODEL In his secion, he esimaion resuls of model parameers (1) and (2) are shown. The will be used for he calculaion of income-pover elasic and inequal-pover elasic. The esimaed resuls of model (1) b OLS, WITHIN GROUPS and Ssem GMM mehods are here in Table 3. In his able, he esimaed coefficien value of he ln[ P 1 ] variable in column [c] b he Ssem GMM mehod is respecivel beween he values of he esimaed coefficien values of his same variable (columns [a] and [b]) b he OLS and WITHIN GROUPS mehods. So, ssem GMM eases he esimaion bias problem because on he righ side of he equaion (1) here is he lagged dependen variable of a period beond he presence of unobservable fixed effecs. Please noice on column [c] he saisical significance of he esimaed coefficien of ln[ P 0, 1 ] which confirms he inial hpohesis ha saes ha pover variaion has a persisence feaure. Table 3 Resuls of Regression Models for ln[ P 1] - Model 1 OLS [a] WITHIN GROUPS [b] Ssem GMM [c] ln[ P0, 1 ] 0,1840 (0,0672) Coef. p-value Coef. p-value Coef. p-value 0,00 0,1529 (0,0686) 0,02 0,1139 (0,0239) -0,7654 0,00-0,7886 0,00-0,6899 0,00 ln[ ] (0,0651) (0,0658) (0,0507) 0,8785 0,00 0,9046 0,00 0,7799 0,02 ln[ Gini ] (0,1451) (0,1464) (0,1385) Cons. -0,0079 0,11-0,0080 0,10-0,0114 0,00 (0,0049) (0,0050) (0,0007) F(3,269)=53,11 Prob>F=0,0000 R 2 = 0,37 F(3, 249)= 53,21 Prob>F=0,0000 F(2, 20)= 124,30 Prob>F=0,0000 Number of obs: 273 Number of obs: 273 Number of groups: 21 0,00 Number of obs: 273 Number of groups: 21 Number of insrum.: 17 H 0 : Absence of Auocorrelaion in Value-p firs-order residues 0,001 H 0 : Absence of Auocorrelaion in Value-p second-order residues 0,101 Hansen Tes Prob > chi2 0,288 Sargan Tes Prob > chi2 0,262 Obs.: (i) The values in parenheses are he sandard deviaions as correced b he Windmeijer (2005) mehod; (ii) The values for he Hansen es are he p-values for he null hpohesis ha he insrumens are valid and (iii) The values for he Sargan Tes are he p- values for he valid of he addional insrumens which are required b he Ssem GMM mehod (iii) The explanaor variables in lagged differences as well as [ ln[ P 0, 1]] and 1-period lagged [ ln[ ]] were used as insrumens in he Ssem GMM. Source: resuls obained b he auhors. The esimaed resuls of he pover income-elasic and inequal-elasic parameers were, respecivel, equal o 0,68 and 0,78, according o values on column [c]. Hence, a 1% increase in he per capa income, causes a 0,68% decrease in he poor individuals proporion. On he oher hand, he 1% increase in he income inequal index causes an increase b 0,78% in pover. I is worh emphasiing, ha hese elasicies

15 15 esimaed signs coincide wh he heoreical elasic signs which were shown in Secion 3. Besides, he corroborae he resuls shown on inernaional aricles such as Kalwij and Verchoor (2004), Bourguignon (2004) and ha b Marinho and Soares (2003), Hoffmann (2004) and Sanos (2008) for Brail. Therefore, policies ha aim owards inequal reducion are more effecive in he figh agains pover han policies exclusivel designed o improve median income growh. The esimaed resuls of he equaion (2) parameers can be seen in Table 4 as follows. Once again, he esimaed parameer of he ln[ P 1 ] variable is, respecivel, beween he esimaed values of his same variable (columns [a] and [b]) ha were obained b he WITHIN GROUPS and he OLS mehods. However, his parameer if esimaed b he ssem GMM, does no show saisical significance. Among he isolaed facors ha subsaniall conribue o pover increase, some can be named in an increasing order. The ineracion beween income variaion and he inverse level of developmen; he inial income inequal; he ineracion beween income variaion and inial income inequal; he income inequal of he presen period. See on column [c] he posive and significan values of his variable in Table 4. The ineracion erm beween income variaion and inverse developmen level shows a posive esimaed coefficien and saisicall significan, and so is he ineracion beween income variaion and he inial inequal level, according o values seen on column [c]. Once he isolaed effec of median income on pover is negaive, he effec of an income increase on pover reducion is lesser when he inial developmen level is low. The same happens when he inial inequal level is high. Thus, one can sae ha in regions of low inial developmen level and/or high inial inequal, he condions for pover reducion hrough income increase are less favorable. One can also conclude ha he high inequal and he low inial developmen level of mos Brailian saes are impedimens o he reversal of pover hrough income growh. Bu he esimaed coefficien on column [c], of he ineracion beween inequal variaion and he inverse of he inial developmen level is negaive and saisicall significan. The same happens o he ineracion beween inequal variaion and s inial level. Soon enough, he effec of inequal variaion on pover reducion will be lesser when he inial developmen level is low or when he inial inequal level is high. In oher words, pover reducion as a consequence of income inequal reducion can be less effecive if a region has low inial developmen level and/or high inial inequal level. Therefore, low inial developmen level and high inial income inequal in Brail are impedimens o pover reducion, regardless he means used o achieve such reducion. Be hrough economic growh, be hrough income inequal reducion. The esimaion of he coefficien of he inial inverse developmen level shows a posive relaion and is also saisicall significan wh he poor individuals proporion (values on column [c]). Under hese erms, he bigger he inverse of he inial developmen level, he bigger he incidence of pover. Tha is, he lower he inial per capa household income, he bigger he incidence of pover. The las lines in Table 4 show he Arellano and Bond es resuls (1991) for he firsorder and second-order auocorrelaion of he residues and hose b Hansen and Sargan for he valid of he insrumens. According o he p-values on column [c], he Arellano and Bond ess show ha he null hpohesis of absence of firs-order correlaion can be rejeced and hen he exisence of second-order auocorrelaion of he residues can be acceped. The p- Values of he Hansen Tes and of he Sargan Tes allow for he accepance of he hpoheses ha he insrumens used for he esimaion of models are valid.

16 16 Table 4 Resuls of Regression Models for ln[ P 0, ] - Model 2 O.L.S. [a] WITHIN GROUPS [b] Ssem GMM [c] ln P 0,1463 0, 1 (0,0676) ln[ Y ln[ Y ]ln[ G i 0 ] ln[ Y ]ln[ ] ] i0 Coef. p-value Coef. p-value Coef. p-value 0,03 0,0425 (0,0720) 0,55 0,1301 (0,0711) 0,08-0,3675 0,01-0,4137 0,00-1,0806 0,00 (0,1485) (0,1516) (0,2936) 0,4371 0,09 0,5238 0,05 1,6851 0,00 (0,2629) (0,2687) (0,5050) 1,064 0,02 1,0820 0,05 1,1565 0,00 (0,4832) (0,4801) (0,3860) ln[ Gini ] 0,4209 0,22 0,4865 0,16 3,4064 0,00 (0,3479) (0,3507) (0,8328) ln[ Gini ]ln[ G i 0 ] ln[ Gini ]ln[ ] i0-0,3783 0,53-0,5010 0,41-5,6068 0,00 (2,6100) (0,6166) (1,4515) -2,998-3,0703-1,2865 (0,8709) 0,00 (0,8771) 0,00 (0,6120) 0,05 ln[ G i0 ] 0,1283 1,1980 0,25 (0,1121) (0,5580) 0,04-0,0931-0,2159 0,2876 ln[ ] (0,0377) 0,01 (0,0479) 0,00 (0,6176) i0 0,00 Cons. 0,0851 0,19 0,0491 0,00 0,7001 0,03 (0,0650) (0,1344) (0,3002) F(9,63)=21,93 Prob>F=0,0000 R2= 0,43 F(8, 244)= 26,63 Prob>F=0,0000 F(8, 20)= 16,24 Prob>F=0,0000 Number of obs: 273 Number of obs: 273 Number of groups: 21 Number of obs: 273 Number of groups: 21 Number of insrum.: 17 H 0 : Absence of Auocorrelaion in he firsorder p-value residues 0,002 H 0 : Absence of Auocorrelaion in h p-value second-order residues 0,829 Hansen Tes Prob > chi2 0,360 Sargan Tes Prob > chi2 0,269 Obs.: (i) The values in parenheses are sandard deviaions correced b he Windmeijer mehod (2005); (ii) The values for he Hansen Tes are he p-values for he Null Hpohesis ha insrumens are valid and (iii) The values for he Sargan Tes are he p-values for he valid of he addional insrumens required b he Ssem GMM mehod. (iii) The explanaor variables in lagged differences were used as insrumens in he Ssem GMM and also [ ln[ P 0, 1]] and ln[ G i 0 ] lagged of a period. Source: resuls obained b he auhors. 6.1 Pover-income and Pover-inequal elasicies in Brailian saes. The pover-income and pover-inequal elasicies for he Brailian saes were calculaed according o expressions (3) and (4). The esimaed parameers of hese wo expressions were goen via he esimaion of model (2), once his model happens o be he

17 17 mos suable for deermining hose elasicies, for his model considers he feaures of income disribuion, inequal level and inial developmen. Table 5 shows hose elasicies as a median for Brailian saes and Brailian regions for he period from 1995 o As one could expec, according o he heoreical elasic signs of income-pover and inequal-pover as shown in Secion 3, he firs is negaive and he laer is posive in all Brailian saes and regions. Tha means he increase in median income and he reducion of income inequal led o a diminuion of he proporion of poor individuals. Table 5 Median Elasicies of pover-income and inequal-income in he Brailian saes and regions. STATES MA PI CE RN PB PE AL SE BA NORTHEAST Pover-income Elasic Pover-inequal Elasic STATES MG ES RJ SP SOUTHEAST Pover-income Elasic Pover-inequal Elasic STATES PR SC RS SOUTH Pover-income Elasic Pover-inequal Elasic STATES MS MT GO DF MIDWEST Pover-income Elasic Pover-inequal Elasic Source: resuls obained b he auhors. However, analing he values of hese elasicies in Table 5, becomes eviden ha he impac of income inequal on pover is bigger han he median income growh. The ver same evidences were also found b Kakwani (1990) and b Marinho and Soares (2003). In regional erms, he absolue value of he pover-income elasic in he norheas region is lesser han in all oher regions. Tha is, such resul corroboraes he heoreical hpohesis ha pover-income elasic is lesser in economies of lower median income. In richer regions, he effec of median income growh is considerabl sronger on pover reducion. These resuls corroborae hose b Marinho and Soares (2003) and Hoffmann (2004). Therefore, less developed regions like he Brailian norheas do have greaer difficul in reducing pover hrough income growh. In he same vein, pover-inequal elasic in he norheas region is also lesser han hose of oher regions, bu wh an impac of inequal on pover bigger han he median income growh. Generall, hese resuls show he improved effeciveness of inequal reducion in he figh agains pover in Brail. 7 FINAL CONSIDERATIONS This aricle aims o esimae he elasicies of pover in relaion o income and in relaion o inequal in Brail in order o anale he deerminers for pover reducion. More specificall, aemps o anale wheher an pover variaion is a consequence of income redisribuion or economic growh (or a consequence of a combinaion of boh facors).the aricle ries o esablish and beer undersand he imporance of each of hese wo effecs on pover variaion. The resuls of he esimaion of he firs model show ha pover-income and pover-inequal elasicies were, respecivel -0,68 and 0,77. Tha is, increase b 1% of

18 18 he per capa income beges a 0,68% decrease in he proporion of poor individuals. On he oher hand, a 1% increase in he income inequal index leads o a 0,77% increase in pover. I is worh menioning ha hese resuls corroborae oher inernaional aricles such as Kalwij and Verchoor (2004), Bourguignon (2004) and he one b Marinho and Soares (2003), Hoffmann (2004) and Sanos (2008) for Brail. The converge on he fac ha inequal reducion policies are more effecive han median income growh policies when comes o fighing pover The esimaed resuls of he second model which allows for elasicies o var along ime, showed ha he facors ha conribue o pover expansion are in an increasing order: he ineracion beween income variaion and inverse inial developmen level, he inial income inequal and he presen-period income inequal. The impac of income growh on pover reducion is lesser when he inial developmen level is low. The same happens when he inial inequal index is high. Hence, he conclusion ha region of low inial developmen level and/or high inial inequal level have less favorable condions for pover reducion hrough income growh. Furhermore, here is he conclusion ha high inial inequal and low inial developmen level of mos Brailian saes are obsacles for a reversion of pover hrough income growh. The effec of inequal variaion on pover reducion is lesser when he inial developmen level is low or when he inial inequal level is high. Therefore, he figh agains pover hrough he reducion of income inequal in Brailian regions and saes of low inial developmen level and/or high inial inequal level, ma no achieve he expeced effecs. Thus, he low inial developmen level and he high inial income inequal level in Brail anagonie pover reducion, regardless of he means applied o accomplish such reducion. Be hrough economic growh, be hrough he lessening of income inequal. In erms of pover-income as well as pover-inequal elasicies, has been observed ha he impac of income inequal on pover is bigger han he median income growh. These same evidences were found b Kakwani (1990) and b Marinho and Soares (2003). In regional erms, he absolue value of pover-income in he norheas is lesser han in all he oher Brailian regions. Tha is, his resul confirms he heoreical hpohesis ha pover-income elasic is lesser in economies of smaller median income. In richer regions, he effec of median income growh is more effecive on pover reducion. The resuls obained in his aricle corroborae he resuls found b Marinho and Soares (2003) and b Hoffmann (2004). In sum, less-developed regions like he Brailian norheas show greaer difficul in reducing pover hrough income growh. Likewise, pover-inequal elasic in he norheas region is also lesser han hose of oher regions, bu wh an impac of inequal on pover bigger han ha brough abou b median income growh. In a nushell, hese resuls show he improved effeciveness of inequal reducion in he figh agains pover in Brail. BIBLIOGRAPHY ALESINA A.; RODRIK, D. Disribuive policies and economic growh. Quarel Journal of Economics, v.109, n.2, p , ma AHN, S. C.; SCHIMDT, P. Efficien esimaion of models for dnamic panel daa. Journal of Economerics, v. 68, p. 5-28, ARELLANO, M.; BOVER, O. Anoher look a he insrumenal-variable esimaion of errorcomponens model. Journal of Economerics. v. 68, p , 1995.

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