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IFS/STICERD/UCL Development Work in Progress Seminar

How can cash increase employment? Heterogeneity and complementarities in the world's largest cash transfer programme

Gabriel Leite-Mariante (LSE)

Thursday 04 April 2024 13:00 - 14:00

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Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


About this event

Cash transfers are the main social protection tool in most low- and middle-income countries, reaching more than one billion people globally. Theoretically, their effect on employment is ambiguous: non-labour income can decrease incentives to work, but also relax constraints preventing employment. This ambiguity begs the question: under what conditions can the effect on employment be positive? Using administrative data from Brazil, I exploit a plausibly exogenous shock to a large nationwide unconditional cash transfer (UCT), and find that regular formal employment of new beneficiaries increased by 1.2pp (8%) over two years, mostly through jobs in services. This substantial aggregate result masks large geographical heterogeneity within the country, which I explore through the analysis of possible regional correlates of treatment effects. I find that positive impacts are strongly associated with higher local public spending, and better provision of local public goods and services, suggesting a role of policy complementarities. To causally quantify the role of local public spending in treatment effects, I exploit discontinuities in budget allocation rules across Brazilian municipalities at discrete population cutoffs, arbitrarily creating “high-spending” and “low-spending” municipalities. I find that the increase in formal employment generated by the UCT is an order of magnitude stronger in municipalities with higher spending on public good provision. This result suggests that cash transfers and spending on local public services can act as complements in promoting regular formal employment in developing countries.

This seminar series is jointly organized by the IFS, STICERD, and UCL.

IFS/STICERD/UCL Development Economics Work In Progress seminars are held on Thursdays in term time at 13:00-14:00, at the IFS, unless specified otherwise.

Seminar organisers: Oriana Bandiera (STICERD, LSE), Imran Rasul (UCL), Britta Augsburg (IFS) and Jonathan Weigel (LSE).

For further information please contact Britta Augsburg: britta_a@ifs.org.uk.

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