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INCOME LEVELS AND DISTRIBUTION

The years of the so-called "economic miracle" in Brazil (1968-1973), in addition to presenting high growth rates of per capita GIP, were also characterized by an increasingly inequitable income distribution pattern. The underlying strategy was to "increase the size of the cake before distributing it." In recent years, a number of researchers have studied the changes in Brazilian income distribution.

Denslow and Tyler [6] analysed changes in income concentration in Brazil between 1970 and 1980, using "economically active persons" (EAP) as the unit of analysis and demographic censuses as the data source, and found that high levels of income inequality were maintained during the period, with an increase in the degree of inequality in the agricultural sector. The inequality between sectors, on the other hand, declined, mainly because of the increase in income levels of EAP in agriculture.

This description of the pattern of income distribution for 19701980 was supported in a subsequent study by Hoffman and Kageyama [11], also using EAP as the unit of analysis, Although the methodological procedures for measuring inequality indices were distinct, the results obtained were essentially the same. For example, the average total income in 1970 was 1.67 units (minimum wages in terms of their August 1982 values), whereas in 1980 it increased to 2.93 units. The Gini index, however, increased from 0.561 in 1970 to 0.592 in 1980, indicating an increase in the degree of inequality. Average income in agriculture doubled from 0.81 units in 1970 to 1.60 units in 1980, whereas the corresponding Gini indices were 0.415 and 0.545. The urban sector showed an increase in average income from 2.23 units (1970) to 3.40 units (1980), with corresponding Gini indices of 0.548 and 0.580. As can be seen, the agricultural sector presented the highest upward movement in average income (98 per cent) between 1970 and 1980, although this implied an increase in income inequality (30.8 per cent) in the same period.

The distribution of income among regions was also analysed (using the EAP criterion) in the same study. The results demonstrate that in all regions the degree of inequality increased during 1970-1980, although the income disparities between the regions were reduced. The indices for average income (in units) for the five regions considered were: for the North, 1.18 (1970) and 2.22 (1980); for the North-east, 0.82 and 1.50 respectively; for the South-east, 2.06 and 3.44; for the South, 1.31 and 2.58; and for the Midwest, 1.33 and 2.78. The smaller growth of average income in the South-east region (the most developed one) was the major factor determining a reduction in the income inequality among regions as measured by the Gini index. These indices for the five regions were: for the North, 0.528 (1970) and 0.586 (1980); for the North-east, 0.581 and 0.635; for the Southeast, 0.579 and 0.593; for the South, 0.592 and 0.616; for the Midwest, 0.554 and 0.626. Hence, between 1970 and 1980 the concentration indices were stabilized around a value of approximately 0.60.

With respect to the evolution of income inequalities within regions, the study found that in all regions the income inequalities in the agricultural sector were more accentuated between 1970 and 1980. In addition, this was the only sector in which an increase occurred in the inequality between regions. These results are consistent with those reported in another study by Hoffman and Kageyama [12], which indicated that indices of agricultural modernization tend to be associated with higher indices of income inequality.

When "income between families'' (IBF) is used as the unit of analysis, instead of EAP, the main characteristics of income-distribution changes between 1970 and 1980 are as follows: (a) There was a substantial increase in average income levels, which benefited the most developed region (the South-east) least, thus contributing to a reduction in interregional inequalities. (b) For the country as a whole, the degree of inequality decreased (Gini index of 0.608 for 1970 and 0.597 for 1980), although this can be attributed to a reduction of inequality in the South-east region. (c) Income inequality increased in frontier regions such as the Midwest. (d) The North-east had the lowest level and the highest inequality of income. (The apparent inconsistency between a higher income inequality in 1980 according to the EAP criterion and a lower inequality according to the IBF criterion is due to an increase in the number of people with earned income per family during the period considered. See Hoffman and Kageyama [11], pp. 829-834, for a formal demonstration of this effect.)

Hoffman [10] analysed income distribution for the recessionary period 1981-1983. The unit of analysis was IBF, which permits a comparison with the results for 1970-1980 discussed above. The study showed a stable degree of inequality in the distribution of income for the country as a whole. The Gini indices for this period were: 1981 = 0.584, 1982 = 0.587, 1983 = 0.589, compared to 0.597 for 1980. The percentage of total income accrued to the lowest 50 per cent group remained stable around 13 per cent, that of the 10 per cent richest group around 46 per cent, and that of the 5 per cent richest group around 33 per cent. Among the regions, the North-east and Midwest showed the highest degree of inequality as measured by the Gini index and the distribution of total income among different income groups. Nevertheless, there were no significant changes in the degree of inequality for all regions over the period considered.

Despite the fact that income inequality remained practically stable between 1980 and 1983, a drastic reduction occurred in the level of average family income in real terms during these recessionary years. For the country as a whole, average family income fell 21 per cent in real terms, from 4.83 units in 1980 (minimum wages in terms of their August 1980 values) to 3.82 units in 1983. The largest drop in average family income occurred in the South-east region (25 per cent), followed by the South (21 per cent) and the North-east and Midwest (15 per cent). This pattern is consistent with the hypothesis that an economic recession, such as the one that occurred in 1981-1933, affects the industrial sector (negatively) more directly in those regions with higher levels of economic activity (the South-east and South). Also, the decline in average family income is consistent with the drop in per capita GIP between 1980 and 1983 (11 per cent).

With income inequality remaining constant during 19801983, a drop in average family income would result in higher levels of poverty. Estimates by Hoffman indicated an increase in poverty, as measured by the poverty indices utilized. This increase occurred for both the country as a whole and the four regions analyzed. In general, the increase in poverty levels during this period was more accentuated between 1982 and 1983, with the more industrialized regions being more directly affected.

NOTES

1. If an alternative concept of the public-sector deficit- that of public sector borrowing requirements - is used, the percentages will be considerably higher. See Batista [3] for further details.

2. For additional analysis of this process, see Bresser Pereira and Nakano [4] and Vellutini [26].

3. OECD, The OECD Member Countries, 1982, quoted by Rosetti 1201.

4. This was possibly attributable to a small surplus in the trade balance (US$484 million), which had up to then presented a deficit.

5. For instance, between 1975 and 1980 the average annual growth rate of production was 6.02 per cent. Of this total, 1.78 per cent was due to growth rates of land productivity, 3.50 per cent to increases in cultivated area, and 0.74 per cent to labour productivity.

6. Data are from the Central Bank of Brazil and include loans from government and commercial banks.

7. Fundação Getuli Vargas, Conjuntura Economica. States considered were São Paulo, Paraná, and Rio Grande do Sul.

8. Data from Anuários Estatisticos e Levantamentos Sistemáticos da Produção Agrícola.

9. Anuários Estatisticos.

10. The growth rate computed here refers to the coefficient of the time variable in a regression with the index as the dependent variable. Hence, it is not strictly comparable to the average annual growth rates presented earlier. In addition, the food-crop category includes only rice, beans, corn, cassava, and potatoes.

11. The cost of calories was obtained by dividing the value of domestic production in real terms (1962 = 100) by the (intrinsic) number of calories supplied by the food crops considered - rice, beans, cassava, potatoes, and wheat.

12. The producer price index is a Laspeyres type (1977 = 100), with an updating process for the base year that takes into account changes in relative prices.

13. These indices are a simple Laspeyres type without the updating mechanism for the base year incorporated into the indices presented earlier. As such, they are not comparable with the previous ones. The price index for export crops includes cotton, peanuts, soybeans, cocoa, tobacco, coffee, and oranges. If coffee is excluded, the indices are considerably higher for the 1977-1984 period.

14. The theoretical issues associated with commodity price stabilization from a welfare standpoint are discussed in Vellutini 1251, and analysis of price instability in the context of Brazilian agriculture is presented in Homem de Melo [13, 15]. Aspects related to technological differences among different sectors of agriculture are discussed in Homem de Melo [14].

15. The results were obtained from a regional analysis of 23 states. Note that despite the fact that the modernization process has contributed to increases in income levels and reductions in absolute poverty, modernization has favoured a higher relative income share accruing to high-income social groups.

16. Note that, because of the increase in income sent abroad during this period, GNP declined more than GIP. Estimates by Serra [23] indicate that per capita income dropped 13 per cent between 1980 and 1984, returning to its 1976 level. The decline in average standard of living, however, was 16.5 per cent, because of a deterioration in the terms of trade and an increase in income sent abroad (factor payments).

17. The poverty indices used were the proportion of poor families, the ratio of income insufficiency, Sen's poverty index, and income insufficiency as a percentage of total income. A description of these indices is presented in Hoffman [9].

REFERENCES

Full references for Boletins Mensais, Relatórios Anuais, Conjuntura Econômica, Anuário Estatistico do Brasil, Levantamento Sistemático da Produção Agricola, Departamento Intersindicai de Estudos Socio-econômicos, Federaçâo das indústrias do Estado de São Paulo, Economic Outlook, Fundaçâo Instituto de Pesquisas Econômicos, all of which were data sources for this article, are available from the author at the following address: Professor R. de A. S. Vellutini, São Paulo School of Management, Getulio Vargas Foundation, Av. Nore de Julho 2029, 01313 São Paulo, SP, Brazil.

1. E. L. Bacha, ''Choques externos e perspective de crescimento: O caso do Brasil 1973/89," Pesquisa e Planejamento Econômico, 14: 583-622 (1984).

2. J. R. M. Barros, "Agriculture e energia," in J. Sayad, ed., Economia agricola: Ensaios (Instituto de Pesquisas Econômicas, São Paulo, 1982).

3. P. N. Batista, Jr., ''Dots diagnósticos equivocados da questão fiscal no Brasil," Revista de Economia Politica, 5: 16-38 (1985).

4. L. C. Bresser Pereira and Y. Nakano, Recessão e inflação (Editora Brasiliense, São Paulo, 1984).

5. D. D. Carneiro, "O terceiro choque: E possivel evitar-se a recessão?'' in P. Arida, ed., Divida externa, recessão e ajuste estrutural: O Brasil diante da crise (Paz e Terra, Rio de Janeiro, 1983).

6. D. Densiow and W. Tyler, "Perspectives sobre pobreza e desigualdade de renda no Brasil," Pesquisa e Planejamento Econômico, 13: 863-904 (1983).

7. G. L. Dias and J. R. M. Barros, "Fundamentos pare uma nova política agrícola," Analise e Pesquisa, 26: 1-39 (1983).

8. J. E. Floyd, "The Effects of Farm Price Supports on the Returns to Land and Labor in Agriculture," Journal of Political Economy, 73: 148-158 (1965).

9. R. Hoffman, "A pobreza no Brasil," Anais do IV Encontro Brasileiro de Econometria, São Paulo, 1984.

10. R. Hoffman, "Distribuiçâo da renda e pobreza entre as famílias no Brasil, de 1980 a 1983," Revista de Economia Politica, 5: 50-60 (1985).

11. R. Hoffman and A. Kageyama, "Distribuição da renda no Brasil entre famílias e entre pessoas, em 1970 e 1980," Anais do XII Encontro Nacional de Economia, ANPEC, 1984.

12. R. Hoffman and A. Kageyama, "Modernizaçâo da agricultura e distribuição de renda no Brasil," Conferência Latinoamericana de Economia Agrícola, Piracicaba (SP), 1984.

13. F. B. Homem de Melo, "Padrôes de instabilidade entre culturas da agriculture brasileira," Pesquisa e Planejamento Econômico, 9: 819-844 (1979).

14. F. B. Homem de Melo, "Inovacões tecnológicas e efeitos distributivos: O cave de uma economia semi-aberta," Revista Brasileira de Economia, 36: 429-443 (1982).

15. F. B. Homem de Melo, "Instabilidade da renda e establização de preços agricolas," Pesquisa e Planejamento Econômico, 13: 829-862 (1983).

16. F. B. Homem de Melo, Prioridade agricola: Sucesso ou fracasso?, (FlPE/Pioneira, São Paulo, 1985).

17. M. R. Lopes, "The Mobilization of Resources from Agriculture: A Policy Analysis for Brazil," Ph.D. dissertation (Purdue University, West Lafayette, Ind., USA, 1977).

18. C. Martone, A expansão do estado empresário (Camera de Estudos e Debates Econômicos [CEDES], São Paulo, 1982).

19. C. Martone, "A demanda de moeda e a queda de liquidez real," Informacões FIPE, vol. 45, no. 1 (1984).

20. J. P. Rosetti, Economia brasileira (Editora Atlas, São Paulo, 1984).

21. J. Sayad, "Notes sobre a agriculture no Curto-Prazo," in J. Sayad, ed., Economia agrícola: Ensaios (Instituto de Pesquisas Econômicas, São Paulo, 1982).

22. G. E. Schuh, "The Exchange Rate and U.S. Agriculture," American Journal of Agricultural Economics, 56: 1-13 (1974).

23. J. Serra, "A crise econômica e o flagelo do desemprego," Revista de Economia Politica, 4: 5-25 (1984).

24. S. Turnovsky, Macroeconomic Theory (Cambridge University Press, Cambridge, 1981 ).

25. R. de A. S. Vellutini, "Theoretical and Empirical Issues in Commodity Price Stabilization: A Review," Revista Brasileira de Economia (in press).

26. R. de A. S. Vellutini, "Politica administrative de controle de inflação: Alguns comentários," Revista de Economia Politica, 5: 132-136 (1985).

27. R. de A. S. , "An Economic Analysis of Agricultural Policy Trade-offs in São Paulo, Brasil," Ph.D. dissertation (Cornell University, Ithaca, N.Y., USA, 1985).

28. C. von Doellinger, "O déficit público no Brasil e sues conseqüências," symposium paper, Rio de Janeiro, 1982.

Selected data for Brazil, 1970-1985

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