Does Local Employment Growth Accelerate Exits from Social Assistance?: Evidence From Brazil’s Conditional Cash Transfer Bolsa Familia

A substantial literature studied the capacity of safety nets to expand automatically during labor market shocks; however, less is known about the dynamics of social assistance when labor market conditions improve, especially in developing countries. This paper studies how rising formal employment at the municipal level affects the likelihood of beneficiary families to exit Bolsa Familia, Brazil’s dynamic means-tested cash transfer. Leveraging panel data from Brazil’s social registry matched with seven years of formal employment records reveals significant and diverse dynamics within the program. We then use fixed-effects estimates, combined with a shift shares instrument, to identify the effects of exogenous changes in the local labor market on exits. Results show that the increase in local employment leads to a small, statistically significant rise in the probability of exiting from Bolsa Familia, associated with rising formal employment among social assistance recipients. Effects are concentrated in households with spare labor supply.