Policies to Spur Growth and Poverty Alleviation in Peru and Latin America

Marcelo Neri Center for Social Policies/FGV and EPGE/FGV

Lima July, 2015

Public Policies Prospective Agenda Productivity

Savings Early Childhood & Youth

Immigration Evaluation

Conditional Cash Transfers Upgrades

Use of International References (MDGs, now SDGs)

10

Per c

apita

fam

ily In

com

e (U

$)

15 5 0 Population %

Benefits variable across families: Poorer get higher benefits

Poverty Gap

Poverty Line

Extreme Poverty Line Federal BF US$ 1,25 PPP day

US$ 2 PPP day Local Level

MDG 1 – Extreme Poverty

Income Complementation

Add Forces & Divide Labor to Multiply Results and Make a Difference

Social Federalism 3.0 (Country, State and City Levels)

Permanent Income Estimate: using Administrative Records (CadÚnico) info: Education & Labor all HH members, Housing & Public Services coverage, other

benefits etc... Identifies who is chronically poor, and not who says is poor

0.00

0.20

0.40

0.60

0.80

1.00

0.00 1.00

Cum

ulat

ive

Inco

me

Cumulative Population

Labor Social Security Other Incomes

BPC Bolsa Família Total per capita Income Source: PNAD/IBGE

BPC ( Poverty Relief Elderly & Disable)

Other incomes

Bolsa Família (CCT)

Labor

Social Security

Total per capita Income

Equality: The concentration curve of the Bolsa Família differs from other sources of income = Each R$ generates more Equality

Bolsa Família Impact on Inequality

Extreme poverty rate by age and the benefits from Bolsa Família Program (%)

0

2

4

6

8

10

12

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80

Without Bolsa Família With Bolsa Família from 2011

Source: V National Report on the Millennium Development Goals.

Inovations in Conditionalities:

• Mothers Key Role: Active Search of Students Without Mother

• Parents Engagement (School Meetings on Saturdays) (means)

- Transmit importance of education & Compensate inter-generational gap

• Early Childhood Education - Evaluate cognitive & non cognitive impacts - Supply: Poor Kids are First in Line (means)

• Incentives to Students Performance (ends) - Profficiency Performance Premium Primary Education Bi-Monthly tests

Change - Alignment Incentives (Students, Parents & Teachers) - Rio State (Youth Savings Incentive Mechanisms)

Constructs on top of Bolsa Família & Local Social Services structures

Channels to Overcome Poverty (Means Approach)

OVERCOMING POVERTY

PRODUCTIVE INCLUSION

INTERNAL

INFRASTRUCTURE (HOUSEHOLD)

CONDITIONALITIES DEMAND FOR EDUCATION

(Alignment of Incentives)

MONETARY TRANSFERS

CASH IN THE HAND OF MOTHERS

Social Federalism

FINANCIAL EDUCATION, CONSUMER PROTECTION

CREDIT, INSURANCE

AND SAVINGS

INCOME GENERATION Productivity F(K, L, H)

EXTERNAL

INFRASTRUCTURE

TRANSPORTATION

Supply of HEALTH (+Doctors) SCHOOLS

LEVERAGE OPPORTUNITIES AND

SMOOTH SHOCKS Markets Ct+i= Ct...

DIRECT EFFECT

WELL-BEING U()

DIRECT EFFECT

FAMILY BUDGET Y

Microcredit & Vocational Education

SUPPLY OF PUBLIC SERVICES

HOUSING

SEWAGE (OBA)

Prosperity (Growth) Growth in mean income and consumption (not only GDP/National Accounts but also look at Household Surveys data and PIT).

Sustainability (Assets)

Ability to maintain the standards of living

achieved. Stocks of human,

environmental, physical , cultural

and social assets.

Equality Looking at the distribution among individuals and social groups of income flows, stocks of assets and rights.

Sensibility (Perceptions)

The last dimension is subjective, based on

people’s perception about the country,

the public services and life quality.

Inclusive Sustainable Development? (Ends Results)

Brazil Social: References & Links (Marcelo Neri)

Middle Class: http://epge.fgv.br/pt/pesquisa/ensaio-economico/75251 http://www.cps.fgv.br/cps/livroncm/ & http://www.sae.gov.br/site/?p=22297 Social Transformations (portuguese – recent study) www.compaso.com.br/docs/Neri_TransformacoesSociaisAteJulho2014.pdf Social Tensions: http://www.compaso.com.br/docs/Social_tension_final.pdf Shared Prosperity: http://www.compaso.com.br/docs/PP_SharedProsperity_Final_PNAD2013.pdf Pro Poor Growth: http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2011/pdf/5PP_KakwaniNeriSonsdarticle.pdf Deprivation: http://www.compaso.com.br/docs/PP_inequality_relative_deprivation_and_social_class_Final.pdf Brasil em Desenvolvimento: http://www.sae.gov.br/imprensa/noticia/livro-do-ipea-coeditado-por-neri-aponta-caminhos-para-sustentar-desenvolvimento/

Bolsa Família Book http://www.sae.gov.br/documentos/brazil-as-an-exporter-of-social-technologies/ Executive Summary: http://www.ipea.gov.br/portal/images/stories/PDFs/140321_pbf_sumex_ingles.pdf World Without Poverty https://www.wwp.org.br/en Human Development Map - Data Brazilian Cities http://www.atlasbrasil.org.br/2013/en/ http://www.ipea.gov.br/portal/index.php?option=com_content&view=article&id=24037 http://epge.fgv.br/pt/pesquisa/ensaio-economico/75252 Report on MDGs http://www.sae.gov.br/site/?p=23258 Social Targets: http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2010/20100512/PDF/BES_MetasSociais_NeriXerez_Teoria.pdf BRICS: http://www.ipea.gov.br/forumbrics/en/ Brazilian Microdata & Data http://www.econ.puc-rio.br/datazoom/ www.ibge.gov.br http://www.ipeadata.gov.br/

Thank you!

Leaks

Government

Income from

Factors

Indirect Effects

Imports of goods and services

Indirect Taxes

Direct Effect

Direct Taxes

Social Accounting Matrix and the Circular Flow of Income obtained with the expansion of a cash transfer

Production

Family income

Transfer Capital

Account

Rest of the World

Prosperity

Source: Neri, Vaz e Ferreira (2013) from the MCS of 2009

Bolsa Família Program (BFP) Continuous Cash Benefit (BPC) Unemployment Insurance (SegDesem) Wage bonus

Private sector pensions (RGPS) Public servants’ pensions (RPPS) Severance Fund Formal Employment (FGTS)

Prosperity

GROSS DOMESTIC PRODUCT

Multipliers

1.78

1.19

1.06

1.06

0.53

0.52

0.39

BFP

BPC Unemployment

Insurance

Wage bonus

RPPS

RGPS

FGTS

0 2.70

Total

Multiplier Effects of social transfers on:

Continuous Cash Benefit

(BPC) (2)

Brazil (2009)

Sources: (1) Ministério da Previdência Social. Anuário Estatístico da Previdência Social 2010. Brasília: MPS/Dataprev, 2011; (2) Secretaria de Avaliação e Gestão da Informação (SAGI/MDS). (3) Matriz de informação social.; Secretaria de Gestão Pública (SEGEP/MPOG). (4) Ministério do Trabalho e Emprego. Caixa Econômica Federal. Demonstrações Contábeis do FGTS

0.4%

6.1%

4.1%

0.2%

1.7%

0.6%

Government social transfers

Bolsa Família

Program (BFP) (2)

Private sector pensions

(RGPS) (1)

Public servants’ pensions (RPPS) (3)

Wage bonus (4)

Fundo de Garantia por

Tempo de Serviço

(FGTS) (6)

Unemployment Insurance (4)

0.6%

0

1

2

3

4

5

6

7

Social Assistance Social Insurance Other Transfers

Relative (% of GDP)

Fiscal Sustainability

Happiness: Social Transfers and Changes in Life Satisfaction

Past X Present Happiness

Total Social Security Unemployment Insurance Bolsa Família

1

0

2

3

6

10

4

5

9

8

7 5.96 6.25

5.41 5.28

7.04 6.99 6.19

6.86

“The Bolsa Família beneficiaries were those with lowest grade of past happiness (5 years before), reflecting the higher poverty among the program beneficiaries” “Present happiness is closer between beneficiaries and non-beneficiaries”

In the ranking made from Gallup among 129 countries going from Denmark (7.3) to Angola (2.6), Bolsa Família beneficiaries were between Pakistan and Paraguay and the non-beneficiaries (6.1) were between England and U.S (in 2006) Source: SIPS/IPEA October 2012

Increase in Present Life Satisfaction compared to Past Life Satisfaction

14.42%

Total Social Security Unemployment Insurance Bolsa Família

10%

0%

20%

30%

60%

40%

50%

“The Bolsa Família beneficiaries showed the biggest jump of happiness compared with five years before (29.9% vs. 18.1% of the total

population) leading to more equity in the present life satisfaction”

29.92%

11.84% 18.12%

“Comparing people with the same income today (in adittion to gender, age, marital status), receiving the Bolsa Família is associated with gains in present life satisfaction of 0.41 points compared to past life satisfaction*.”

Source: SIPS/IPEA October 2012 *Vis a vis non-beneficiaries, does not imply causality

Happiness: Social Transfers and Chances in Life Satisfaction

Brazil Social: References & Links (Marcelo Neri)

Middle Class: http://epge.fgv.br/pt/pesquisa/ensaio-economico/75251 http://www.cps.fgv.br/cps/livroncm/ & http://www.sae.gov.br/site/?p=22297 Social Transformations (portuguese – recent study) www.compaso.com.br/docs/Neri_TransformacoesSociaisAteJulho2014.pdf Social Tensions: http://www.compaso.com.br/docs/Social_tension_final.pdf Shared Prosperity: http://www.compaso.com.br/docs/PP_SharedProsperity_Final_PNAD2013.pdf Pro Poor Growth: http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2011/pdf/5PP_KakwaniNeriSonsdarticle.pdf Deprivation: http://www.compaso.com.br/docs/PP_inequality_relative_deprivation_and_social_class_Final.pdf Brasil em Desenvolvimento: http://www.sae.gov.br/imprensa/noticia/livro-do-ipea-coeditado-por-neri-aponta-caminhos-para-sustentar-desenvolvimento/

Bolsa Família Book http://www.sae.gov.br/documentos/brazil-as-an-exporter-of-social-technologies/ Executive Summary: http://www.ipea.gov.br/portal/images/stories/PDFs/140321_pbf_sumex_ingles.pdf World Without Poverty https://www.wwp.org.br/en Human Development Map - Data Brazilian Cities http://www.atlasbrasil.org.br/2013/en/ http://www.ipea.gov.br/portal/index.php?option=com_content&view=article&id=24037 http://epge.fgv.br/pt/pesquisa/ensaio-economico/75252 Report on MDGs http://www.sae.gov.br/site/?p=23258 Social Targets: http://www.cps.fgv.br/cps/pesquisas/Politicas_sociais_alunos/2010/20100512/PDF/BES_MetasSociais_NeriXerez_Teoria.pdf BRICS: http://www.ipea.gov.br/forumbrics/en/ Brazilian Microdata & Data http://www.econ.puc-rio.br/datazoom/ www.ibge.gov.br http://www.ipeadata.gov.br/

Thank you!