1. Micro-macro linkage
  2. Taxes and benefits
Download icon

Cash transfer policies, taxation and the fall in inequality in Brazil an integrated microsimulation-CGE analysis

  1. Samir Cury  Is a corresponding author
  2. Euclides Pedrozo  Is a corresponding author
  3. Allexandro Mori Coelho  Is a corresponding author
  1. Fundação Getúlio Vargas (EAESP/FGV), Brazil
  2. Fundação Getulio Vargas (EESP/FGV) and Universidade Paulista, Brazil
  3. Centro Universitário Álvares Penteado (FECAP), Brazil
Research article
Volume 9(1) Spring 2016
Cite this article as: S. Cury, E. Pedrozo, A. Mori Coelho; 2016; Cash transfer policies, taxation and the fall in inequality in Brazil an integrated microsimulation-CGE analysis; International Journal of Microsimulation; 9(1); 55-85. doi: 10.34196/ijm.00128
1 figure and 13 tables

Figures

Figure 1
Download asset Open asset
MS–CGE integration.

Tables

Table 1
Employed and unemployed reweighing for L1 to L5 work factors.
Facto Description of the worker PNAD occupational condition (in 1,000 persons) Unemployment CGE model data (in 1,000 persons) Unemployment rate Reweighing
Employed Unemployed Total Employed Unemployed Total Employed Unemployed
L1 Unskilled informal 12,890 1,567 14,457 10.8% 11,714 1,418 13,132 10.8% 0.9088 0.9052
L2 Skilled informal 5,694 952 6,646 14.3% 5,264 878 6,143 14.3% 0.9245 0.9226
L3 Formal with low skill 13,923 1,349 15,272 8.8% 12,274 1,184 13,458 8.8% 0.8815 0.8782
L4 Formal with average skill 9,208 854 10,062 8.5% 8,331 774 9,105 8.5% 0.9048 0.9062
L5 Formal with ligh skill 2,211 95 2,306 4.1% 2,063 88 2,152 4.1% 0.9334 0.9238
TOTALS 43,926 4,817 48,734 9.9% 39,647 8,537 87,788 9.7%

  1. Source: PNAD 2003, CGE model data base.

Table 2
Elasticities – Marginal effects for grouping demographics.
Variable J + 1 (Men) J = 2 (Women with children) J = 3 (Women)
Elasticity S.E. Elasticity S.E. Elasticity S.E.
Wage elasticity (log w) −0.0230 (0.0506) +0.0328 ** (0.0070) +0.1168 ** (0.0047)
Income elasticity (log B) −0.0009 (0.0010) −0.0128 ** (0.0014) −0.0082 ** (0.0008)
Income elasticity (log Q) −0.0026 ** (0.0002) −0.0041 ** (0.0006) −0.0028 ** (0.0004)

  1. Note:** significant at 1%; * significant at 5%.

  2. Source: Authors’ estimates.

Table 3
Integration of CGE-MS model for non-labor income (Base 2003).
Household Income Source Procedure in the Microsimulation (PNAD 2003)
Self Employed Income CGE results variations of these income sources are applied to the microsimulation model vectors.24
Interest, Dividends and Others and House Rental CGE results variation of these income flows individualized to the 8 household categories in the model are applied to the microsimulation model vectors.25
Retiree and Pension Public Benefits The same vector values as in the microsimulation base year model.
Retiree and Pension Private Benefits The same vector values as in the microsimulation base year model.
Donation received The same vector values as in the microsimulation base year model.

  1. Note: For each family, the above sources are deflated by a family specific price index (after simulation).26.

  2. Source: Authors’ elaboration.

Table 4
Total benefits by CGE household category and changes between 2003 and 2005 (R$ thousands).
2003 2005 2005–2003
Households Bolsa Família BPC Bolsa Família BPC Total Increase Share of Benefits in Total Household Income
F1 777,344 675,171 1,829,805 1,418,757 1,796,048 4.31%
F2 35,269 19,741 88,412 255,354 288,755 3.01%
F3 616,145 302,187 1,250,466 410,307 742,439 5.05%
F4 810,877 2,203,557 1,861,258 4,346,372 3,193,196 2.32%
F5 131,450 653,335 276,218 336,645 −171,922 −0.11%
F6 319,388 653,445 647,264 757,034 431,464 1.09%
F7 336,965 575,066 635,454 288,837 12,259 0.00%
F8 157,558 50,428 282,481 25,328 99,823 0.04%
Total 3,185,000 5,132,934 6,871,361 7,838,638 6,392,065 0.57%

  1. Source: Author’s elaboration based on data from the federal budget and SAM (2003).

Table 5
Programs’ tax sources in 2005 (R$ thousands).
Brazil Tax Source Value Composition Equivalent tax in the CGE model
Contribuição para Financiamento da Seguridade Social (COFINS: budget code 153) 7,570,121 51.46% “COFINS” tax and its value added reform
Contribuição Provisória sobre Movimentação Financeira (CPMF: budget code 155) 5,265,907 35.80% Direct taxes on firms and households
Outros Impostos Diretos (Income Tax and other directed taxes) 993,630 6.75% Direct taxes on firms and households
Impostos sobre Produtos (Mix of Indirect Taxes) 445,959 3.03% Indirect taxes on Revenue
Contribuição Social sobre o Lucro das Pessoas Jurídicas (CSLL: budget code 151) 418,667 2.85% Direct taxes on firms and households
Operações de Credito Externas – Em Moeda (budget code 148) 15,713 0.11%
Total 14,710,000 100.00%

  1. Source: Authors’ elaboration.

Table 6
Macroeconomic indicators (percentage change)*.
Macroeconomics indicators SIMU A (%) SIMU B (%)
GDP –0.02 –0.46
Consumption 0.50 –0.35
Investment –1.42 –1.04
Public Sector Deficit +17.87 +7.38
Exports (**) –0.84
Imports (**) –1.07
Employment –0.11 –0.48
Price Index 0.13 0.65

  1. Note:

  2. (*)

    Real percentage change from the CGE base year.

  3. (**)

    Lower than 0.01%. Source: Authors’ elaboration.

Table 7
Change in employment from the base-year (%).
L1 L2 L3 L4 L5 L6 L7
SIMU A – 0.13 – 0.14 – 0.17 – 0.06 – 0.06 0,00 0,00
SIMU B – 0.85 – 0.47 – 0.47 – 0.28 – 0.23 0,00 0,00

  1. Note: L1-unskilled informal; L2-skilled informal; L3-low-skilled formal; L4-average-skilled formal; L5- high-skilled formal; L6- low-skilled public servants; L7- high-skilled public servants.

  2. Source: Authors’ elaboration.

Table 8
Change in the average real wage from the base-year (%).
L1 L2 L3 L4 L5 L6 L7
SIMU A + 0,32 – 0,12 – 0,04 – 0,07 – 0,09 – 0,04 – 0,01
SIMU B – 1,77 – 0.96 – 1,52 – 0,90 – 1,61 – 1,66 – 1,62

  1. Note: L1-unskilled informal; L2-skilled informal; L3-low-skilled formal; L4-average-skilled formal; L5- high-skilled formal; L6- low-skilled public servants; L7- high-skilled public servants.

  2. Source: Authors’ elaboration.

Table 9
Changes in real payroll from the base-year (%).
L1 L2 L3 L4 L5 L6 L7
SIMU A + 0,19 – 0,25 – 0,21 – 0,13 – 0,14 – 0,04 – 0,01
SIMU B –2.62 –1.43 –1.99 –1.18 –1.84 –1.66 –1.62

  1. Note: L1-unskilled informal; L2-skilled informal; L3-low-skilled formal; L4-average-skilled formal; L5- high-skilled formal; L6- low-skilled public servants; L7- high-skilled public servants.

  2. Source: Authors’ elaboration.

Table 10
Differences between first and last SIMU B rounds – selected variables (%).
wage L1 wage L2 wage L3 wage L4 wage L5 pindex GDP
First round simu B – 2,16 – 1,39 – 1,76 – 1,29 – 1,93 0.56 – 0.41
Last round simu B – 1,77 – 0.96 – 1,52 – 0,90 – 1,61 0,65 – 0,46

  1. Source: Authors’ elaboration.

Table 11
Inequality indicators from household per capita income (base year 2003).
Inequality Indicators Base Year SIMU A SIMU B
Original Results** Change Results** Change
Gini Index 0.5930 0.5908 – 0.37% 0.5902 – 0.48%
Theil-T Index 0.7213 0.7163 – 0.69% 0.7161 – 0.72%

  1. Source: from the CGE-MS integration model. (base year: 2003 PNAD survey).

Table 12
Change in household income from the base-year (%).
Average household income Original SIMU A SIMU B
Values (R$) Values (R$) °Change Values (R$) Change
National average 432.36 431.59 −0.18% 428.84 −0.81%
Household 1 (F1) 43.88 45.89 4.58% 45.76 4.28%
Household 2 (F2) 70.20 74.90 6.70% 74.89 6.69%
Household 3 (F3) 46.87 47.89 2.17% 47.78 1.94%
Household 4 (F4) 166.42 168.19 1.06% 167.67 0.75%
Household 5 (F5) 303.65 302.57 –0.36% 301.23 –0.80%
Household 6 (F6) 191.94 192.31 0.19% 191.76 –0.09%
Household 7 (F7) 696.64 693.84 –0.40% 689.33 –1.05%
Household 8 (F8) 3,015.14 2,998.08 –0.57% 2,972.50 –1.41%

  1. Note: F1 – poor urban households headed by active individuals; F2 – poor urban households headed by non-active individuals; F3 – poor rural households; F4 – urban households with low average income; F5 – urban households with medium income; F6 – rural households with medium income; F7 – households with high average income; F8 – households with high income.

  2. Source: Authors’ elaboration.

Table 13
Poverty indicators – PNAD 2003.
Poverty Indicators Base year SIMU A SIMU B
Results* Results Change Results Change
Poverty Line (Line = R$ 143,70)
P0 0.3299 0.3256 –1.29% 0.3271 –0.84%
P1 0.1599 0.1579 –1.26% 0.1593 –0.38%
P2 0.1061 0.1047 –1.28% 0.1060 –0.08%
Extreme Poverty Lines (Line = R$ 71,84)
P0 0.1485 0.1473 –0.83% 0.1485 0.01%
P1 0.0777 0.0766 –1.38% 0.0778 0.18%
P2 0.0578 0.0569 –1.52% 0.0580 0.40%

  1. Source: Authors’ elaboration.

Download links

A two-part list of links to download the article, or parts of the article, in various formats.

Downloads (link to download the article as PDF)

Download citations (links to download the citations from this article in formats compatible with various reference manager tools)

Open citations (links to open the citations from this article in various online reference manager services)