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Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs

Author

Listed:
  • Eduardo Zilberman

    (Department of Economics PUC-Rio)

  • Tiago Berriel

    (EPGe/FGV)

Abstract
This paper introduces cash transfers targeting the poor in an incomplete marketsmodel with heterogeneous agents facing idiosyncratic risk. These transfers change the degree of insurance in the economy and affect 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 financial markets is important for these results, whereas whether the program is funded with lump sum or distortive taxes is not.

Suggested Citation

  • Eduardo Zilberman & Tiago Berriel, 2012. "Targeting the Poor: A Macroeconomic Analysis of Cash Transfer Programs," Textos para discussão 598, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:598
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    Cited by:

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    2. Alisdair McKay & Ricardo Reis, 2016. "The Role of Automatic Stabilizers in the U.S. Business Cycle," Econometrica, Econometric Society, vol. 84, pages 141-194, January.
    3. Mookherjee, Dilip & Napel, Stefan, 2021. "Welfare rationales for conditionality of cash transfers," Journal of Development Economics, Elsevier, vol. 151(C).
    4. Anna Carolina Saba dos Reis & Eduardo Zilberman, 2013. "On the Optimal Size of Public Employment," Textos para discussão 612, Department of Economics PUC-Rio (Brazil).
    5. Napel, Stefan, 2014. "A Pareto Efficiency Rationale for the Welfare State," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100496, Verein für Socialpolitik / German Economic Association.
    6. Saki Bigio & Mengbo Zhang & Eduardo Zilberman, 2020. "Transfers vs Credit Policy: Macroeconomic Policy Trade-offs during Covid-19," NBER Working Papers 27118, National Bureau of Economic Research, Inc.
    7. Sunel, Enes, 2012. "Transitional Dynamics of Disinflation in a Small Open Economy with Heterogeneous Agents," MPRA Paper 39690, University Library of Munich, Germany.

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