The Macroeconomic Effects of Cash Transfers: Evidence from Brazil

Authors

Arthur Mendes, Wataru Miyamoto, Thuy Lan Nguyen, Steven Pennings, Leo Feler

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2024-02 | January 29, 2024

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.

Article Citation

Mendes, Arthur, Wataru Miyamoto, Thuy Lan Nguyen, Steven Pennings, and Leo Feler. 2024. “The Macroeconomic Effects of Cash Transfers: Evidence from Brazil,” Federal Reserve Bank of San Francisco Working Paper 2024-02. Available at https://doi.org/10.24148/wp2024-02