How effective are different social policies in Brazil? A simulation experiment

Jens Arnold () and Matheus Bueno

No 1662, OECD Economics Department Working Papers from OECD Publishing

Abstract: Brazil spends around 15% of GDP on different social benefits, but within these expenditures, different benefits have different social impacts. While the small conditional cash transfer programme Bolsa Família is well-targeted to the poor and has a strong diminishing effect on inequality, pension benefits largely reach those with above-median incomes. Over many years, and as a result of different indexation mechanisms, the real value of pension benefits has increased rapidly, while conditional cash transfers have struggled to keep pace with inflation. This paper presents a simulation experiment using household data to demonstrate the significant potential that changes in the annual benefit indexation mechanism of social security benefits could have had for reducing inequality. Maintaining the purchasing power of pension benefits while shifting the increased pension spending that resulted from automatic indexation towards conditional cash transfers would have allowed significantly stronger progress in reducing inequality. This strengthens the case for rethinking the current indexation mechanism of social security benefits in Brazil.

Keywords: Brazil; conditional cash transfers; inequality; pension system; poverty; social protection (search for similar items in EconPapers)
JEL-codes: D24 F13 F15 H20 K23 K41 L51 O47 O54 (search for similar items in EconPapers)
Date: 2021-03-16
New Economics Papers: this item is included in nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1662-en

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