Is the effect of conditional transfers on labor supply negligible everywhere?*

This paper contributes to the literature on welfare programs by using a GPS-based approach to estimate the impact of a Conditional Cash Transfer (CCT) on labor supply in Brazil. Unlike other CCT programs that have been evaluated, Bolsa Famı́lia’s is a widespread program that have taken place not only in rural and isolated areas, but also in large cities. Previous findings have shown that this type of welfare benefit does not reduce labor supply and then does not create program dependence. However, our hypothesis is that when the program goes from isolated areas to large cities and everybody is informed about its rules, impacts may differ. We find that the benefit actually increases the participation of households’ additional workers in rural areas. On the other hand, it reduces the participation of households’ main source of labor income in the formal sector in metropolitan areas. Thus the hypothesis that the program creates dependence cannot be rejected for the case of large cities. JEL Classification: I38, J22, C21, H31.