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Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs

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  • Berriel, Tiago C.
  • Zilberman, Eduardo

Abstract

This paper introduces cash transfers targeting the poor in an incomplete marketsmodel with heterogeneous agents facing idiosyncratic risk. These transfers change thedegree of insurance in the economy and a ect precautionary motives asymmetrically,leading the poorest households to decrease savings proportionally more than theirricher counterparts. In a model economy calibrated to Brazil, once the cash transferprogram 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 fundedwith lump sum or distortive taxes is not.

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 726.

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Date of creation: 14 Dec 2011
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Handle: RePEc:fgv:epgewp:726

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Cited by:
  1. Sunel, Enes, 2012. "Transitional Dynamics of Disinflation in a Small Open Economy with Heterogeneous Agents," MPRA Paper 39690, University Library of Munich, Germany.
  2. Eduardo Zilberman & Anna Dos Reis, 2013. "On the Optimal Size of Public Employment," 2013 Meeting Papers 482, Society for Economic Dynamics.

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