Does Local Employment Growth Accelerate Exits from Social Assistance ? Evidence From Brazil’s Conditional Cash Transfer Bolsa Familia

A substantial literature studied the capacity of safety nets to expand automatically during labor market shocks; however, less is known about the dynamics of social assistance when labor market conditions improve, and who may benefit from positive changes, especially in developing countries. This paper studies how rising formal employment at the municipal level affects the likelihood of beneficiary families to exit Bolsa Familia, Brazil’s dynamic means-tested cash transfer. The analysis exploits panel data from Brazil’s vast social registry, matched with seven years of Bolsa Familia payroll information and formal employment records. It finds that the Bolsa Familia program displays significant and heterogeneous dynamism, with beneficiaries with higher levels of education and fewer constraints to labor supply taking fewer years to exit. The analysis then uses fixed-effects estimates, combined with a shift shares instrument, to identify the effects of exogenous changes in the local labor market on exits. The findings show that the increase in local employment leads to a small, statistically significant rise in the probability of exiting from Bolsa Familia, associated with rising formal employment among social assistance recipients. These effects are concentrated in households with spare labor supply and those with medium levels of education.