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.
Published on March 16, 2021
In series:OECD Economics Department Working Papersview more titles