This article decomposes changes in rural poverty into growth and income inequality components for 1992, 1998, and 2005. The article also decomposes changes in the Gini. Rural poverty fell by 16 percentage points in this period. Unlike for the country as a whole, the poverty decline between 1998 and 2005 was not solely due to a reduction in inequality. Income growth explained 43% of the decline, and was largely attributable to growth in social security transfers. The reduction in income inequality in 1998-2005 was due to a decline in the inequality of earned income and of "other" sources of income. This residual category includes conditional cash transfers via the Bolsa Familia program. Given constraints on transfers, pro-poor growth in earnings is likely to be necessary for rural poverty and inequality to continue to decline in tandem.
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