info:eu-repo/semantics/article
Incentives in Brazilian Bolsa Família CCT Program: Adverse selection, moral hazard, improving mechanisms and simulations
Autor
Bugarin, Mauricio Soares
Gadelha, Sérgio
Santos, Artur
Duarte, Janete
Amaral Jr., João B.
Neves, José
Oliveira, Plinio
Regatieri, Rebeca
Institución
Resumen
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.