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Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs

  • Eduardo Zilberman

    (PUC-Rio)

  • Tiago Berriel

    (EPGE-FGV)

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.

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File URL: https://economicdynamics.org/meetpapers/2012/paper_934.pdf
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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 934.

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Date of creation: 2012
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Handle: RePEc:red:sed012:934
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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