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

Author

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  • Jens Matthias Arnold
  • Matheus Bueno

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.

Suggested Citation

  • Jens Matthias Arnold & Matheus Bueno, 2021. "How effective are different social policies in Brazil? A simulation experiment," OECD Economics Department Working Papers 1662, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1662-en
    DOI: 10.1787/47087376-en
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    More about this item

    Keywords

    Brazil; conditional cash transfers; inequality; pension system; poverty; social protection;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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