Cash transfers in Latin America: Effects on poverty and redistribution

In this paper, the authors present comparative evidence for eight Latin American countries regarding design and effects of cash transfers (CTs). On the basis of household survey data, they analyse their coverage, importance in household income, and effects on poverty reduction and income redistribution. The authors also present a static microsimulation to analyse the potential impacts of alternative programme designs including perfect targeting and higher budgets. Results illustrate the wide variation of these interventions in terms of their design, coverage, and importance in household income. CTs account for a significant portion of household income in lower deciles. In spite of this, their effects in terms of reductions in the incidence, intensity, and severity of poverty are, in the best of cases, moderate and, although their progressivity is high, their redistributive impact is limited. These results are mainly explained by the meager resources involved. Even under perfect targeting, the budgets allocated to transfer programs in these countries would be insufficient to achieve full coverage in the lowest part of the income distribution.