Cash Transfers and the Labor Market

• Autor(a) principal: Cavalcanti, Tiago
• Data de Publicação: 2010
• Outros Autores: Corrêa, Márcio
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: Revista Brasileira de Economia (Online)
• Texto Completo: https://periodicos.fgv.br/rbe/article/view/1480
• topic: Income Transfers; Job Creation; Job Destruction.; Income Transfers; Job Creation; Job Destruction.

This paper studies the efects of cash transfers to the poor on the labor market. We investigate this issue by building a matching model of the labor market with endoge- nous job destruction in which agents can be in three states: employed, unemployed, or out of the labor force (home production). Workers are heterogenous in their labor market productivity. An idiosyncratic productivity shock arrives at constant instan- taneous rate. Depending on this shock, workers might want to leave the labor market and workers out of the labor force might decide to look for a job. We introduce cash transfers to all agents with income below some threshold level. We found two quali- tative results: (i) The size of cash transfers has a negative e®ect on the employment rate, but an ambiguous e®ect on the unemployment rate; and (ii) the coverage of this welfare program has a positive e®ect on the employment rate, and an ambiguous e®ect on the unemployment rate. We also provide some numerical simulations.