Bolsa Família and Household Labor Supply

Abstract

There is considerable debate about whether social protection programs providing transfers to households create disincentives for labor supply, but little attention is paid to the effect of programs on other forms of labor reallocation. This article estimates the impact of Brazil’s Bolsa Família program on several dimensions of household labor supply, using propensity-score-weighted regression. We find no disincentive effects on aggregate household labor supply but large effects on labor allocation between sectors and across household members. The program causes a substantial reallocation of labor hours from formal- to informal-sector work. We argue that this shift is plausibly induced by the program’s use of formal-sector income to determine means-tested eligibility. The shift toward informal work is observed only in urban areas, not in rural areas—a pattern consistent with larger formal/informal wage differentials in rural areas. We also find reallocation of labor hours from females to males in rural households, with potentially mixed implications for rural women’s time burden and decision-making power.