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  5. Welfare Analysis of Changing Notches: Evidence from Bolsa Família

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Welfare Analysis of Changing Notches: Evidence from Bolsa Família

  • Katy Bergstrom
  • William Dodds
  • Juan Rios
American Economic Journal: Economic Policy (Forthcoming)

Abstract

We develop a framework to bound the welfare impacts of arbitrarily large reforms to notches using two sufficient statistics: the change in the number of households locating below the new notch and the change in the number of households locating below the old notch. Our bounds hold in a wide class of models, highlighting a new way to use reduced-form bunching evidence for welfare analysis without making strong assumptions on the economic environment. We estimate these two statistics using a difference-in-difference strategy for a reform to the anti-poverty program Bolsa Família, finding that the reform’s MVPF is between 0.90-1.12.

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