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.
Suggested 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. https://doi.org/10.24148/wp2024-02