The Macroeconomic Effects of Cash Transfers: Evidence from Brazil

Arthur Galego Mendes, Wataru Miyamoto, Thuy Lan Nguyen, Steven Michael Pennings and Leo Feler

No 10652, Policy Research Working Paper Series from The World Bank

Abstract: This paper provides new evidence on the macroeconomic impact of cash transfers in developing countries. Using a Bartik-style identification strategy, the paper documents that Brazil’s Bolsa Familia transfer program leads to a large and persistent increase in relative state-level GDP, formal employment, and informal employment. A state receiving 1% of GDP in extra transfers grows 2.2ppts faster in the first year, with R$100,000 of extra transfers generating five formal-equivalent jobs, half of which are informal. Consistent with a demand-side mechanism, the effects are concentrated in non-tradable sectors. However, an open-economy New Keynesian model only partially captures the high multipliers estimated.

Date: 2023-12-19
New Economics Papers: this item is included in nep-dge and nep-iue
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