Liquidity constraints, cash transfers and the demand for health care in the Covid‐19 pandemic

This paper proposes the hypothesis that liquidity constraints may delay or even prevent sick individuals from seeking medical help. If this is the case, a cash transfer can directly increase the demand for medical care. We evaluated this hypothesis empirically in the context of the implementation of Emergency Aid (EA), a large‐scale cash transfer program in Brazil, during the Covid‐19 pandemic. We used the program's implementation calendar along with a Regression Discontinuity in Time to assess the causal effects of EA on the search for the health system. Consistent with our hypothesis, we estimate that the transfer immediately decreased the time to search for the health system by 14% and increased COVID‐19 hospitalizations by 0.015%.