A growing number of developing economies are providing cash transfers to poor people that require certain behaviors on their part, such as attending school or regularly visiting health care facilities. A simple ex ante methodology is proposed for evaluating such programs and used to assess the Bolsa Escola program in Brazil. The results suggest that about 60 percent of poor 10-to 15-year-olds not in school enroll in response to the program. The program reduces the incidence of poverty by only a little more than one percentage point, however, and the Gini coefficient falls just half a point. Results are better for measures more sensitive to the bottom of the distribution, but the effect is never large.During the 1990s many developing economies adopted a new type of redistribution programs. Programs such as Food for Education in Bangladesh, Bolsa Escola in Brazil, and PROGRESA (Programa de Educación, Salud y Alimentación) in Mexico are means-tested conditional cash transfer programs. As the name indicates, they share two defining features, which jointly set them apart from most other programs. First, these programs include means tests, defined in terms of a maximum household income level, above which households are not eligible to receive the benefit. 1 Second, they include a behavioral conditionality that requires that members of participating households regularly undertake some prespecified action. The most common such requirement is for children between 6 and 15 years of age to remain enrolled in and actually attend school. In Mexico's PROGRESA, additional requirements, such as obligatory pre-and postnatal visits for pregnant women or lactating mothers, apply to some households.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Income distribution, Inequality decomposition, Micro-simulations, C15, D31, J22,

Measured by the Gini coefficient, income inequality in Brazil rose from 0.57 in 1981 to 0.63 in 1989, before falling back to 0.56 in 2004. This latest figure would lower Brazil's world inequality rank from 2nd (in 1989) to 10th (in 2004). Poverty incidence also followed an inverted U-curve over the last quarter century, rising from 0.30 in 1981 to 0.33 in 1993, before falling to 0.22 in 2004. Using standard decomposition techniques, this paper presents a preliminary investigation of the determinants of Brazil's distributional reversal over this period. The rise in inequality in the 1980s appears to have been driven by increases in the educational attainment of the population in a context of convex returns, and by high and accelerating inflation. While the secular decline in inequality, which began in 1993, is associated with declining inflation, it also appears to have been driven by four structural and policy changes which have so far not attracted sufficient attention in the literature, namely: sharp declines in the returns to education; pronounced rural-urban convergence; increases in social assistance transfers targeted to the poor; and a possible decline in racial inequality. Although poverty dynamics since the Real Plan of 1994 have been driven primarily by economic growth, the decline in inequality has also made a substantial contribution to poverty reduction.

No abstract