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The Macroeconomic Effects of Cash Transfers: Evidence from Brazil

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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 2.2% 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.

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  • Leo Feler & Arthur Mendes & Wataru Miyamoto & Thuy Lan Nguyen & Steven Pennings, 2023. "The Macroeconomic Effects of Cash Transfers: Evidence from Brazil," Working Paper Series 2024-02, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:97580
    DOI: 10.24148/wp2024-02
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    More about this item

    Keywords

    fiscal multipliers; cash transfers; Bartik instrument; Bolsa Familia; informality; relative multiplier; local multiplier; developing countries;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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