OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

How effective are different social policies in Brazil? A simulation experiment

Brazil spends around 15% of GDP on different social benefits, but within these expenditures, different benefits have different social impacts. While the small conditional cash transfer programme Bolsa Família is well-targeted to the poor and has a strong diminishing effect on inequality, pension benefits largely reach those with above-median incomes. Over many years, and as a result of different indexation mechanisms, the real value of pension benefits has increased rapidly, while conditional cash transfers have struggled to keep pace with inflation. This paper presents a simulation experiment using household data to demonstrate the significant potential that changes in the annual benefit indexation mechanism of social security benefits could have had for reducing inequality. Maintaining the purchasing power of pension benefits while shifting the increased pension spending that resulted from automatic indexation towards conditional cash transfers would have allowed significantly stronger progress in reducing inequality. This strengthens the case for rethinking the current indexation mechanism of social security benefits in Brazil.


Keywords: pension system, Brazil, poverty, social protection, conditional cash transfers, inequality
JEL: L51: Industrial Organization / Regulation and Industrial Policy / Economics of Regulation; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; F13: International Economics / Trade / Trade Policy; International Trade Organizations; O54: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Latin America; Caribbean; K41: Law and Economics / Legal Procedure, the Legal System, and Illegal Behavior / Litigation Process; K23: Law and Economics / Regulation and Business Law / Regulated Industries and Administrative Law; F15: International Economics / Trade / Economic Integration; D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; H20: Public Economics / Taxation, Subsidies, and Revenue / Taxation, Subsidies, and Revenue: General
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