Welfare effects of unemployment benefits when informality is high
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Organización Internacional del Trabajo (OIT)
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| Natura: | Entrada de enciclopedia |
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International Labour Organization
2021
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| _version_ | 1874525351324942340 |
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| author | Hannah Liepmann Clemente Pignatti |
| author_facet | Hannah Liepmann Clemente Pignatti Hannah Liepmann Clemente Pignatti |
| contents | Welfare effects of unemployment benefits when informality is high Hannah Liepmann Clemente Pignatti We analyze for the first time the welfare effects of unemployment benefits (UBs) in a context of high infor- mality, exploiting matched administrative and survey data with individual-level information on UB receipt, formal and informal employment, wages and consumption. Using a difference-in-differences approach, we find that dismissal from a formal job causes a large drop in consumption, which is between three to six times larger than estimates for developed economies. This is generated by a permanent shift of UB re- cipients towards informal employment, where they earn substantially lower wages. We then exploit a kink in benefits and show that more generous UBs delay program exit through a substitution of formal with informal employment. However, the disincentive effects are small and short-lived. Because of the high insurance value and the low efficiency costs, welfare effects from increasing UBs are positive for a range of values of the coefficient of relative risk aversion. ILO working paper, 39, ILO ISBN 9789220351857 publication.encyclopediaEntry |
| format | Entrada de enciclopedia |
| id | ilo_995218899902676 |
| institution | Organización Internacional del Trabajo (OIT) |
| publishDate | 2021 |
| publisher | International Labour Organization |
| spellingShingle | Welfare effects of unemployment benefits when informality is high Hannah Liepmann Clemente Pignatti Welfare effects of unemployment benefits when informality is high Hannah Liepmann Clemente Pignatti We analyze for the first time the welfare effects of unemployment benefits (UBs) in a context of high infor- mality, exploiting matched administrative and survey data with individual-level information on UB receipt, formal and informal employment, wages and consumption. Using a difference-in-differences approach, we find that dismissal from a formal job causes a large drop in consumption, which is between three to six times larger than estimates for developed economies. This is generated by a permanent shift of UB re- cipients towards informal employment, where they earn substantially lower wages. We then exploit a kink in benefits and show that more generous UBs delay program exit through a substitution of formal with informal employment. However, the disincentive effects are small and short-lived. Because of the high insurance value and the low efficiency costs, welfare effects from increasing UBs are positive for a range of values of the coefficient of relative risk aversion. ILO working paper, 39, ILO ISBN 9789220351857 publication.encyclopediaEntry |
| title | Welfare effects of unemployment benefits when informality is high |
| url | https://researchrepository.ilo.org/esploro/outputs/encyclopediaEntry/Welfare-effects-of-unemployment-benefits-when/995218899902676 |