Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176081 
Year of Publication: 
2012
Series/Report no.: 
Texto para discussão No. 598
Publisher: 
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro
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.
JEL: 
D31
E21
H31
Document Type: 
Working Paper

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