Why is the Study Important?

In recent years, cash transfer programs have attracted increasing attention from scholars, policymakers, and the general public in many parts of the world.

How low-income households respond to increases in income has emerged as a crucial element in understanding consumption, saving, and employment choices of households, and a central ingredient in designing tax and transfer policy and social insurance (Deaton 1992; Hall and Mishkin 1982; Jappelli and Pistaferri 2010). Guaranteed income programs like Maricá’s RBC are especially appealing as a possible means to alleviate poverty, patch social safety nets, reduce economic inequality, and address job insecurity. Evidence from cash transfer pilots and programs thus far is encouraging. Studies that have analyzed one-time positive income shocks have found increased consumption, food security, and psychological well-being (Haushofer and Shapiro, 2016). Conditional cash transfer programs such as the U.S. Earned Income Tax Credit (EITC) and Paycheck Plus were found to lead to improved health (MDRC 2018 and Forget 2011), educational attainment and labor market outcomes (Bastian & Michelmore, 2018), and to lower criminality and recidivism (Agan & Makowski, 2018). In addition, government-sponsored programs such as the Alaska Permanent Fund and the cash transfer program in Iran have shown that the transfers resulted in no decrease to labor supply or aggregate employment (Jones & Marinescu 2018; Salehi-Isfahani & Mostafavi-Dehzooei 2018).

However, little is known about how a permanent, government-implemented guaranteed income program with benefits as meaningful as those offered in Maricá affects welfare outcomes. Because most studies have focused on pilots or trials rather than permanent policies, it has been difficult to gauge macroeconomic impacts or to understand changes in the socioeconomic trajectories of recipient households.

Our study of Maricá’s RBC program fills these gaps. By studying an actually existing policy offering large and permanent payments at partial saturation, we are well positioned to study general equilibrium effects at the level of the local economy. Our capacity to measure these effects is further amplified by Maricá’s decision to pay RBC benefits in mumbucas, a local currency backed one-to-one by reais and spendable only in the city itself. The interdisciplinarity of our mixed-methods study, moreover, amplifies its explanatory potential, allowing us to contribute to vital ongoing debates across the social sciences.

In addition to these broadly valuable findings, our international collaboration is likely to have a meaningful policy impact in Brazil. A global pioneer in poverty alleviation widely heralded for the success of its Bolsa Família conditional cash transfer program (see below), in 2004 Brazil became the only country to codify in law the right of every citizen to a basic income, one which would be actualized in accord with federal budgetary constraints and beginning with those in greatest need. Maricá’s policy was designed along these lines, to serve as a model for other municipalities to emulate. The fact that Bolsa Familía itself followed a similar trajectory, unifying several pre-existing local initiatives, demonstrates the potential for RBC to impact national social welfare policy in the world’s sixth most populous country.

About Bolsa Família

Merging previously existing small programs and earmarked benefits, Brazil’s principal conditional cash transfer program, Bolsa Família, was created in 2004 and expanded substantially in the following years, until it was replaced by the Auxílio Brasil program in 2022. The number of recipient families increased from six million in 2004 to a peak of 14 million in 2015, and the average value of the benefit practically tripled in this period (Souza et al, 2019). Evidence suggests the program has led to a reduction in poverty and inequality, improvements in nutrition and health, and increased attendance and reduced failure in school, without a reduction in labor supply (Campello and Neri, 2013; Silva, 2019; Souza et al. 2019). In spite of all the achievements of the program, it remained too restrictive in at least four senses. First, because its eligibility limits were very low (families without children must earn R$89 or less per capita, or R$178 for those with children), Bolsa Família fails to reach millions of vulnerable families. Second, Bolsa Família’s benefits were small, with an average value of around R$190 per family just before the Covid-19 crisis. Third, recipients were required to meet certain conditions, including school attendance and regular medical checkups. Finally, benefits were calculated per household and not per individual.