Working Paper: CEPR ID: DP16286
Authors: Francois Gerard; Joana Naritomi; Joana Silva
Abstract: Cash transfers have been adopted worldwide and credited with significant reductions in poverty. However, their economy-wide effects continue to spark heated debates, particularly due to potential adverse effects on the labor market. This paper studies the impact of a flagship government-run program – Bolsa Família in Brazil – on local economies in a context where such concerns are particularly strong, as eligibility is means-tested. We find that an expansion of the program positively affected local economic activity using variation in the size of the reform across municipalities. The results are consistent with cash transfers stimulating local demand, despite means testing. These economy-wide effects substantially increase the marginal value of public funds of the reform, raising it above the value of a non-distortionary transfer.
Keywords: cash transfers; labor markets; local job multiplier; Brazil
JEL Codes: D31; I38; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased cash transfers (F35) | local formal employment (J46) |
| increased cash transfers (F35) | total payroll for formal private-sector employees (J39) |
| increased cash transfers (F35) | multiplier effects in the local economy (F41) |
| multiplier effects in the local economy (F41) | local formal employment (J46) |
| increased cash transfers (F35) | potential negative effects on formal labor supply among beneficiaries (H31) |
| local formal employment (J46) | total payroll for formal private-sector employees (J39) |