of low quality and low-income-generating capacity. In addition to the lack of a reliable water supply, these small farmers lack modern production technology, basic infrastructure to store harvests to take advantage of cyclical price fluctuations, and organized marketing facilities. Family income is therefore highly variable and there is little opportunity for saving. Since 1993, poverty in rural areas has been reduced by an impressive 13 percentage points, to 62 percent, and in urban areas by 18 percentage points, to 30 percent in 1999. This seems to suggest that the Real Plan and state policies have benefited urban areas slightly more than rural areas.

Among the most vulnerable groups in Paraíba are landless farmers, informal workers on the urban periphery, and young parents. The landless farmers in the semiarid Sertão earn a very low and irregular income. They have very few assets, including education, and are exposed to droughts, and therefore they are at high risk of poverty and vulnerability because they have little or no protection. The informal urban sector workers earn a low and irregular income, own very few assets, and have no insurance against poverty. They face risks in the form of unemployment, crime, violence, and overall economic downturns. Young parents with low income, low level of education, and few assets may also suffer poor health. Their children receive low-quality education, and the parents have no access to kindergartens for the youngest offspring. Such young parents face a high probability of becoming unemployed, and have no access to employment benefits or other social benefits. These three groups are all vulnerable and at considerable risk of poverty. A basic, efficient, and well-targeted social safety net could be important to insure these people against the risk of poverty. A social safety net could also guarantee a basic level of consumption for those not able to benefit from opportunities created by growth and social investments (World Bank 2001).

# **2.2 Demography**

Demographic factors have direct and indirect impacts on prices and poverty. As the size and age composition of the population changes, the relative size of labor force and the number of dependents also change, modifying the dependency ratio of families, and therefore their level of poverty. This is the direct effect of demographic changes. It captures the effect that demographic changes have on quantities: number of children, size of the labor force, and the number of elderly persons. These changes in quantities, however, will, in general, influence prices in the economy. In particular, changes in the rate of growth of the population and in the age structure may have important impacts on labor supplies and on savings. As a consequence, demographic changes may have considerable impact on the level of wages and on interest rates. Since these prices are important determinants of family income, they are bound to have a profound influence on the level of poverty. These are the indirect impacts of demographic changes on poverty, since they occur through the indirect effects of demographic changes on the level of labor supply, savings, wages, and interest rates.

Demographic changes in a given Brazilian state are influenced by federal, state, and municipality development policies and public sector investments, along with other economic and social variables, for example, economic conditions inside and outside the state and municipality, migration in and out of the state, fertility and mortality rates, and 13