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Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs

Eduardo Zilberman and Tiago Berriel (tberriel@econ.puc-rio.br)

No 934, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: This paper introduces cash transfers targeting the poor in an incomplete markets model with heterogeneous agents facing idiosyncratic risk. These transfers change the degree of insurance in the economy and aect precautionary motives asymmetrically, leading the poorest households to decrease savings proportionally more than their richer counterparts. In a model economy calibrated to Brazil, once the cash transfer program is adopted, wealth inequality and social welfare increase, poverty decreases, while employment and income inequality remain about the same. Imperfect access to nancial markets is important for these results, whereas whether the program is funded with lump sum or distortive taxes is not.

Date: 2012
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Related works:
Working Paper: Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs (2012) Downloads
Working Paper: Targeting the poor: a macroeconomic analysis of cash transfer programs (2011) Downloads
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