Welfare impacts of a negative income tax on regions of Brazil

Rayan Wolf, Angelo C. Gurgel, Leonardo C. B. Cardoso, Ian Michael Trotter, Marcos S. Nazareth, Erly C. Teixeira

Abstract

This paper aims to analyze the effects of a public policy based on negative income tax (NIT) ideals as an alternative to the current social programs of income transfer in Brazil. A multiregional applied computable general equilibrium model of Brazil’s economy is used to analyze the impacts on households’ welfare, split into 10 income classes, and 2 factors (capital and labor) for each of 5 major regions. By analyzing two scenarios for the proposed policy, we show that the NIT could be more effective than the current social programs as well as resulting in longer lasting outcomes.