# Appendix. Results of the Fiscal Analysis Based on Pensions as Government Transfers

In the Pensions and Government Transfers (PGT) scenario, market income is considered the “pre-fiscal” income. Market income includes factor income, self-consumption, and the imputed value for the use of own housing and does not consider pensions as part of this income and does not subtract social security contributions. As shown in Appendix Table A.1, column 2, contributory pensions are higher in relation to pre-tax income for the PGT scenario, around 14.6%. Besides, social contributions are sizable but smaller than pensions (about 13% of market revenue).

In addition, the payment of social contributions by the poorest 40% ranked by market income only reaches 3% of the total social contributions. At the same time, the first income quintile absorbs almost 37% of the total contributory pensions. That combination of pensions and contributions reduces inequality, and the Gini falls by 3 points, as seen in columns 2 and 3. Despite being relatively large, this effect is much smaller than the net effect of direct transfers, which, as seen in Appendix Table A.2, reduce inequality by almost 6 points (see column 4 of Appendix Table A.1). The Gini coefficient, without the effects of fiscal policy in this scenario, is 0.616.

Regarding poverty reduction, the net effect on pensions and social contributions produces a decrease of around four percentage points. However, considering that although some people have a market income below the poverty line, this is because they are people outside the labor market who obtain practically all their resources from these pensions. In other words, rather than being poor, they are outside the labor market because they have the means provided by pensions.

**Table A.1: Main results under the PGT scenario**

||**Brazil 2019**|**Market**<br>**Income**|**Market Income +**<br>**Pensions**|**Disposable**<br>**Income**|**Consumable**<br>**Income**|**Final**<br>**Income**|
|---|---|---|---|---|---|---|
||**Gini**|0.616|0.585|0.521|0.521|0.429|
|**Inequality**|**Theil Index**|0.745|0.674|0.533|0.533|0.376|
||**90/10**|1185.218|39.345|12.886|12.709|5.597|
||**Headcount Index**|24.2%|18.4%|10.5%|13.3%||
|_National Extreme PL_|**Poverty Gap**|17.7%|12.2%|4.6%|5.7%||
||**Squared Poverty Gap**|15.4%|10.1%|2.5%|3.2%||
||**Headcount Index**|36.7%|32.8%|26.0%|32.2%||
|_National Moderate PL_|**Poverty Gap**|24.3%|19.1%|11.5%|14.4%||
||**Squared Poverty Gap**|19.9%|14.5%|6.9%|8.6%||

Source: authors’ estimations based on surveys PNAD-C, POF, and PNS, and admin data from the Ministry of Finance, Ministry of Health, and Government Open Data Portal.

Appendix Table A.2 shows results on the size, the concentration coefficient, the Kakwani coefficient, and the marginal contributions to inequality and poverty. Concerning market income from the PGT analysis, the contributions of contributory pensions are pro-poor (see the negative concentration coefficient in the third column). Their marginal contribution to inequality reduction is almost 3 Gini points. In comparison, its marginal contribution to poverty reduction in terms of the national line is nearly 7 points. In this case, some people have meager incomes close to zero and depend exclusively on contributory pensions. In the case of social security contributions, they are generally neutral, although the sum of all contributions has a slightly progressive effect. In this case, the original income distribution starts from a Gini of 0.61. The 46