Working Paper 26, International Poverty Centre, UNDP

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Abstract

From a methodological point of view, this paper makes two contributions to the literature. One contribution is the proposal of a new measure of pro-poor growth. This new measure provides the linkage between growth rates in mean income and in income inequality. In this context, growth is defined as pro-poor (or anti-poor) if there is a gain (or loss) in the growth rate due to a decrease (or increase) in inequality. The other contribution is a decomposition methodology that explores linkages between three dimensions: growth patterns, labour market performances, and social policies. Through the decomposition analysis, growth in per capita income is explained in terms of four labour market components: the employment rate, hours of work, the labour force participation rate, and productivity. We also assess the contribution of different non-labour income sources to growth patterns. The proposed methodologies are then applied to the Brazilian National Household Survey (PNAD) covering the period 1995-2004. This paper analyzes the evolution of Brazilian social indicators based on per capita income, exploring links with adverse labour market performance and social policy change, with particular emphasis on the expansion of targeted cash transfers and on devising more pro-poor social security benefits.