Cash Transfers and the Labor Market

Tiago Cavalcanti and Márcio Corrêa

Revista Brasileira de Economia - RBE, 2010, vol. 64, issue 2

Abstract: This paper studies the efects of cash transfers to the poor on the labor market. We investigate this issue by building a matching model of the labor market with endoge- nous job destruction in which agents can be in three states: employed, unemployed, or out of the labor force (home production). Workers are heterogenous in their labor market productivity. An idiosyncratic productivity shock arrives at constant instan- taneous rate. Depending on this shock, workers might want to leave the labor market and workers out of the labor force might decide to look for a job. We introduce cash transfers to all agents with income below some threshold level. We found two quali- tative results: (i) The size of cash transfers has a negative e®ect on the employment rate, but an ambiguous e®ect on the unemployment rate; and (ii) the coverage of this welfare program has a positive e®ect on the employment rate, and an ambiguous e®ect on the unemployment rate. We also provide some numerical simulations.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://periodicos.fgv.br/rbe/article/view/1480 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:64:y:2010:i:2:a:1480

Access Statistics for this article

Revista Brasileira de Economia - RBE is currently edited by Ricardo Cavalcanti

More articles in Revista Brasileira de Economia - RBE from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().