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Cash transfer policies in developing countries: universal or targeted?

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  • Ferreira, Pedro Cavalcanti
  • Peruffo, Marcel Cortes
  • Valério, André Cordeiro

Abstract

This paper employs a heterogeneous-agent life-cycle model with inter-generational linkages calibrated to Brazilian data to compare Universal Basic Income (UBI) and Conditional Cash Transfer (CCT) policies. Both reduce short-term poverty, but the CCT, which is means tested and requires school attendance, fosters sustained growth through human capital accumulation, further reducing poverty and inequality for future generations. In contrast, the UBI leads to long-term declines in savings and education, reducing income and welfare while increasing poverty. Despite this, a UBI would be favored by the current generation under a democratic majority rule due to its more equitable short-term benefits.

Suggested Citation

  • Ferreira, Pedro Cavalcanti & Peruffo, Marcel Cortes & Valério, André Cordeiro, 2025. "Cash transfer policies in developing countries: universal or targeted?," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 846, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:846
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    References listed on IDEAS

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    1. Rema Hanna & Benjamin A. Olken, 2018. "Universal Basic Incomes versus Targeted Transfers: Anti-Poverty Programs in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 201-226, Fall.
    2. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael Walker, 2022. "General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya," Econometrica, Econometric Society, vol. 90(6), pages 2603-2643, November.
    3. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
    4. Juan Carlos Conesa & Bo Li & Qian Li, 2020. "Universal Basic Income and Progressive Consumption Taxes," Department of Economics Working Papers 20-01, Stony Brook University, Department of Economics.
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