** Bolsa Família and the Economy (A Look on Final Goals)

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1 Accumulated variation of extreme poverty (p.p.) 12/05/2017 ** Bolsa Família and the Economy (A Look on Final Goals) Marcelo Neri Extreme Poverty Cumulative REDISTRIBUTION Effect Accumulated variation in the incidence of extreme poverty (p.p) function only of Inequality Change - Brazil, 1992/ "Since 2001 there is a tendency of poverty reduction. From 2003 onwards there is a net negative effect. The effect grows in 2012 despite the stability of the Gini" Source: microdata of PNAD/IBGE 1

2 Effect on Gini (%) 12/05/2017 Determinants of the Variations in the Income Distribution What is the most effective combination of policies in terms of Welfare? Bolsa Família Others Effect Social Security Labor Rural, Impact of Bolsa Família Even without taking into account the small size of the Bolsa Família, it dominates the impact of other programs and is stable Other Incomes Social Security Bolsa Família Years Source: microdata of PNAD/IBGE 2

3 Which source of income explains the growth and the fall of inequality from 2002 to 2012? Deconstruction in the Changes in Income Sources of Income Fall of Gini (Social Benefit) Growth in Average Wage (Fiscal Cost) Social Benefit per Spent Fiscal R$ Relative Contribution (%) Labor Bolsa Família Social Security above Minimum Social Security = Minimum Wage Other sources of income Benefício de Prestação Continuada () Δ 100 Source: microdata from PNAD/IBGE 1.07 Every additional R$ spent with Bolsa Família impacts inequality 369% e 86% more than in Social Security and, respectively. Multiplier Effects * of social transfers on: FINAL COMSUMPTION Families Bolsa Família Program () Continuous Cash Benefit () (SegDesem) Private sector pensions () Public servants pensions () Fundo de Garantia por Tempo de Serviço () * The multiplier effect assumes the existence of idle capacity 3

4 Multiplier Effects * of social transfers on Families Consumption: Effect: As we have seen in 10 years of existence of the Bolsa Família, every real spent on it impacted inequality more than any other public program. Due to Bolsa Familia s greater capacity to reach the poorest that consume most of their income, the spin provided by each real transferred through it in families consumption is higher, 2.4 against 1.34 of unemployment insurance and 0.65 of social insurance. I.e, the program brings more equality and with it growth in consumption. * The multiplier effect assumes the existence of idle capacity Multiplier Effects of social transfers on: GROSS AVAILABLE INCOME Families Wage Bonus Wage Bonus Bolsa Família Program () Continuous Cash Benefit () (SegDesem) Private sector pensions () Public servants pensions () Fundo de Garantia por Tempo de Serviço () 4

5 Multiplier Effects of social transfers on: GROSS DOMESTIC PRODUCT Bolsa Família Program () Continuous Cash Benefit () (SegDesem) Private sector pensions () Public servants pensions () Fundo de Garantia por Tempo de Serviço () Fiscal Sustainability Targeted benefits/gdp (%) In Brazil, the Bolsa Família and the spend, together, about 1% of GDP. In Europe, most countries spend more than that. In 2012, the american federal government disbursed U$315 billion about 2% of its GDP in these programs. Ireland France United Kingdom Netherlands Germany Malta Spain Portugal Slovenia Austria Switzerland Hungary Italy Norway Denmark Sweden Bulgaria Luxembourg Lithuania Latvia Estonia Source: OIT. World Social Security Report 2010/11: Providing coverage in times of crisis and beyond. Genebra: OIT,