Working Paper

The Macroeconomic Effects of Cash Transfers: Evidence from Brazil

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.

Keywords: fiscal multipliers; cash transfers; Bartik instrument; Bolsa Familia; informality; relative multiplier; local multiplier; developing countries;

JEL Classification: E0; E26; E32; O54;

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Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Working Paper Series

Publication Date: 2023-12-15

Number: 2024-02

Pages: 56

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