Social Transfer Multipliers in Developed and Emerging Countries: The Role of Hand-to-Mouth Consumers

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ID: 321412
2026
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Abstract
Abstract This paper estimates the macroeconomic effects of social transfer payments to individuals for a sample of 23 developed and Latin American countries. On impact, the social transfer multiplier is 0.3 in developed countries, but 0.9 in Latin American economies. Hand-to-mouth consumers, who have no access to financial markets and a high marginal propensity to consume, play a key role to explain the heterogeneity in the size of social transfer multipliers. Survey-based data from the Global Findex dataset show that the average share of the population living hand-to-mouth is 23 percent in developed economies versus 60 percent in Latin American countries. Using a two-agent New Keynesian model, the difference in the share of hand-to-mouth consumers is able to explain 80 percent of the difference in the estimated social transfer multipliers. The share of hand-to-mouth individuals in emerging countries is in general 47 percent, which suggests that a larger social transfer multiplier may be expected for this type of economy.
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Authors Jessica Bracco, Luciana Galeano, Pedro Juarros, Daniel Riera‐Crichton, Guillermo Vuletin
Journal The World Bank Economic Review
Year 2026
DOI
10.1093/wber/lhag024
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