Welfare, inequality, and resource depletion: A reassessment of Brazilian economic growth, 1965–1993

• Main Author: Torras, Mariano
• Language: ENG
• Published: ScholarWorks@UMass Amherst 2000
• Subjects: Economics|Welfare
• Online Access: https://scholarworks.umass.edu/dissertations/AAI9960794

The use of GDP growth as an indicator of national progress has many critics. Ahluwalia and Chenery noted that GDP growth places greater weight on the income growth of richer income groups, and proposed distribution-neutral and pro-poor alternatives. More recently, studies by the World Resources Institute and others have questioned the sustainability of GDP growth and have introduced natural resource modifications to national income accounting. To date, no studies have undertaken both types of revisions concurrently, creating a revised sustainable development measure based on GDP but corrected for both distributional bias and resource depletion. This dissertation adjusts GDP growth for both concerns, developing an indicator that reflects both the social and the environmental changes that often accompany rapid GDP growth. This sustainable development framework is applied to the case of Brazil, a country that has, in addition to experiencing rapid economic growth in recent decades, suffered massive deforestation and worsened income inequality. First, the Brazilian income accounts are adjusted for the marketable value loss associated with depletion in the mineral, commercial wood, and soil accounts. Next, the estimated value of non-marketable—e.g., indirect, option, and existence—benefits lost as a consequence of Amazonian deforestation are deducted from the revised accounts. Finally, annual growth in the adjusted indicator is compared to growth under the distribution-neutral and pro-poor weighting schemes, following Ahluwalia and Chenery. The three weighting schemes—denoted GDP, equal, and poverty weights—are also applied to the allocation of social cost associated with resource depletion, generating nine possible outcomes. The results of this dissertation cast doubt on the proposition that rapid economic growth in Brazil has resulted in comparable welfare gains. Moreover, the evidence presented illustrates the often unsustainable nature of rapid GDP growth phases. The chief policy implication is that Brazil should discontinue—or at least severely curtail—the regressive and resource-intensive economic policies it has followed in recent decades, in the interest of welfare improvement not only for the poorer groups in society, but for future generations of Brazilians as well.