Conditional Cash Transfers in Brazil, Chile and Mexico: Impacts upon Inequality

Abstract

This Working Paper decomposes changes in the Gini coefficient in order to investigate whether Conditional Cash Transfers (CCT) have had an inequality reducing effect in three Latin American countries: Brazil, Mexico and Chile. Its technique is the decomposition of the Gini coefficient by factor components. Its main finding is that CCT programmes helped reduce inequality between the mid-1990s and roughly the mid-2000s. The share of total income represented by the CCTs has been very small: about 0.5 per cent in Mexico and Brazil and a very small 0.01 per cent in Chile. But since their targeting has been outstanding, their equalizing impact was responsible for about 21 per cent of the fall in both the Brazilian and the Mexican Gini index, each of which fell by approximately 2.7 points during the period that this paper reviewed. In Chile the effect was responsible for a 15 per cent reduction in inequality, although the total reduction in inequality was very modest: a mere 0.1 Gini point. The difference was due to the small size of the Chilean programme relative to the larger Mexican and Brazilian programmes.