CCTs in Brazil

CONDITIONAL CASH TRANSFERS CUT CRIME AS WELL AS POVERTY – EVIDENCE FROM BRAZIL

Cash payments to poor families who vaccinate their children and send them to school also help to bring down crime. That is the central finding of a study of the Brazilian government’s Bolsa Familia, the world’s biggest programme of ‘conditional cash transfers’.

The research by Andre Loureiro, presented at the Royal Economic Society’s 2013 annual conference, focuses on the effect of the programme on poverty and crime by comparing states that were similar before the Bolsa Familia programme but that introduced the programme at different times. It finds that:

  • States that implemented the cash transfers programme quicker saw poverty fall by three percentage points more than states that were slower to introduce the programme.
  • Conditional cash transfer payments led to a fall in robbery, theft and kidnapping rates, while no significant effect was found for homicide and murder.
  • But once other factors are considered, such as the relative wealth of the state, it appears that the effect on crime was restricted to a fall in theft. The author finds that states that introduced the programme earlier had a 20% further fall in theft rates compared with states where implementation was slower.

These results support the idea that conditional cash transfer programmes not only raise incomes in the short run but also raise expected future incomes. This reduces the incentive to commit crimes, particularly crimes that are committed for financial reasons, such as theft. The author comments:

‘My result corroborates the argument that only crimes purely motivated by monetary gains would be affected by variations in the legal income. This might also be related to the fact that many people receiving the benefits are still poor or below a threshold of ‘acceptable’ income, making the illicit activities still worth the risk.

Conditional cash transfer programmes aim to reduce poverty by making welfare payments conditional on certain actions by recipients. These actions often include enrolling children in school and receiving vaccinations and are chosen for their expected effect on reducing poverty in the short run with cash transfers and in the long run by raising levels of health and education.

Conditional cash transfer programmes have grown increasingly popular over the last decade, particularly in the fast-growing developing countries of Central and South America, with programmes now in place in countries such as Brazil, Chile, Colombia, Honduras, Mexico and Peru.

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Welfare benefits can have effects beyond poverty alleviation. If criminal behaviour is driven not only by the expected criminal gain, the harshness and the probability of punishment, but also by the opportunity cost of crime given by the prevailing legal income, then poverty reduction policies would have an important role on reducing crime rates.

Many developing countries have recently implemented policies based on conditional behaviour that are aimed at vulnerable people: Conditional Cash Transfers (CCT) Programmes, where the recipients receive a monthly benefit that represents a significant increase in their initial income.

The conditions that the recipients have to fulfil include school attendance and vaccination of their children. That would imply that the CCT benefit would affect not only the current level of income but also the expected level of income in the future.

The question that this research seeks to answer is whether those policies have also affected crime rate levels using data on the largest CCT programme in the world, Bolsa Familia, implemented in Brazil in December 2003.

The task of empirically establishing a causal relationship between conditional cash transfers and crime is not as straightforward as it initially seems, because the government, to pursuit principles of efficiency and fairness, will generally allocate more resources on areas with a higher poverty rates. A naive exploration of the data will show a positive relationship between welfare expenditure per capita and poverty rates. A similar picture emerges when the relationship is with crime rates.

A causal relationship can be obtained by exploring the temporal heterogeneity in the implementation of the Brazilian CCT programme across the states. For reasons unrelated to poverty and crime rates, some states had a faster implementation of the programme than others.

That fact allows the identification of the causal impact of CCT programmes on poverty and criminality. States that reached the level of cash transfers expenditures proposed by the guidelines of the programme more promptly had a further three percentage points reduction in poverty rates, which corresponds to a further reduction of approximately 10% in the initial rates.

The results suggest that CCT expenditures contribute to reduction in robbery, theft and kidnapping rates, while no significant effect was found for homicide and murder. But only the effect on theft remains statistically significant when other socio-economic variables are included in the analysis, with an average decrease on theft rates approximately 20% beyond the reduction observed in states with a slow implementation.

This result corroborates the argument that only crimes purely motivated by monetary gains would be affected by variations in the legal income. Nevertheless, this result might also be related to the fact that many people receiving the benefits are still poor or below a threshold of ‘acceptable’ income, making the illicit activities still worth the risk.

ENDS


Contact:

Andre Loureiro
a.o.f.loureiro@sms.ed.ac.uk
+44-7818745432

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh

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