The Impact of Conditional Cash Transfers on Poverty, Inequality, and Employment During COVID-19: A Case Study from Brazil

Abstract

The policy responses to the COVID-19 pandemic varied widely between countries. Understanding how effective these responses were is important to improve preparedness for future crises. This paper investigates how one of largest scale conditional cash transfer COVID relief policies in the world—the Brazilian Emergency Aid (EA)—impacted poverty, inequality, and the labor market amidst the public health crisis. We use fixed-effects estimators to analyze the impact of the EA on labor force participation, unemployment, poverty, and income at the household level. We find that inequality, measured by per capita household income, reduced to a historical low and was accompanied by substantial poverty declines—even as compared to pre-pandemic levels. Furthermore, our results suggest that the policy has effectively targeted those in most need—temporarily reducing historical racial inequalities—while not incentivizing reductions in labor force participation. Absent the policy, adverse shocks would have been significant and are likely to occur once the transfer is interrupted. We also observe that the policy was not enough to curb the spread of the virus, suggesting that cash transfers alone are insufficient to protect citizens.

The role of rules and norms in conditional cash transfer programs – Latin American experience

“…Selective qualitative analyses are also undertaken to assess deeper impacts of program participation (changes in within-household relationships, attitudes towards public institutions, child labour, women empowerment, etc.). There is a general agreement about the positive results of CCTs in terms of increasing consumption, improving living standards at the bottom of the distribution, and reducing poverty and inequality (Nazareno & de Castro Galvao, 2023). On the other hand, direct assessments of cost-efficiency and macroeconomic results remain elusive due to complex inter-correlations between poverty rates and many other variables, both economic and political.…”

“…During the pandemic Brazil launched one of the world's largest emergency-aid (EA) programs. The program was successful in targeting those who were most in need and reduced both income inequalities and poverty rates, even compared to the pre-pandemic levels (Nazareno & de Castro Galvao, 2023). The EA used the pre-existing structure of social support to quickly transfer cash even to most remote areas of the country; almost 40% of the population received the aid.…”

“…The effects of the CCT programs are well studied and the literature is ample, yet sometimes inconclusive 2 . Most studies and meta-studies assess the cost-effectiveness of CCT programs (Caldés et al, 2010;Cecchini & Atuesta, 2017;Dávila Lárraga, 2016;Izquierdo et al, 2018), their direct impact on poverty reduction, the indirect impact on poverty prevention (Amarante & Brun, 2016;Araújo et al, 2017;Molina-Milan et al, 2016;Yaschine & Orozco, 2010), and the labour market prospects of beneficiaries (de Brauw et al, 2015;Del Boca et al, 2021;Gerard et al, 2021;López Mourelo & Escudero, 2016;Nazareno & de Castro Galvao, 2023). What they usually ignore are the rules and norms -important from the institutional perspective 3 -that affect the behaviour of participants as well as non-participants and influence their attitudes towards work, childcare, social responsibility, etc.…”