Abstract
The Bolsa Família CCT Program (BFP) has successfully reduced poverty in Brazil. However, the theoretical literature on associated economic incentives is scarce. A mechanism-design analysis identifies problems of adverse selection and moral hazard in the BFP. The paper proposes simple improving incentive-mechanisms. The Citizens’ Contribution Mechanism (CCM) requires beneficiaries to devote time to the PBF encouraging recipients with higher income to leave. The Graduation Mechanism (GM) offers financial incentives to ensure sustainable emancipation of qualified beneficiaries. The Human Capital Incentive Mechanism (HCM) increases transfers to efficient municipalities. We show that the CCM solves the adverse selection problem, the GM solves the moral hazard problem of beneficiaries and the HCM solves a moral hazard problem of local managers. A simulation based on 2010 census data shows that the mechanisms allow, within 6 years, significant increases in the reach and precision of the PBF and yields cost reductions of over R$4.6 billion.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
