Arbeitspapier

Unemployment compensation and the allocation of labor in developing countries

This paper studies the effects of the introduction of unemployment compensation (UC) in countries characterized by pervasive informality. We provide a simple framework to analyze the impact of UC on the allocation of workers between formal and informal activities, as well as the allocation of workers between sectors featuring different incentives to go informal. We show that a reasonable amount of UC may reduce informality, while larger amounts of UC induce large disincentives to go formal because of the level of taxation involved. We also argue that the financing of UC should be part and parcel of a well- conceived UC system. We show that UC finance based on payroll taxes is likely to entail an excess level of informality resulting from cross-subsidies between heterogenous sectors. The introduction of a simple layoff tax meant to finance the UC system is then shown to reduce informality, hence highlighting how a well-designed financing scheme may be used as a supplementary instrument to curb informality.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 7233

Klassifikation
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Informal Economy; Underground Economy
Mobility, Unemployment, Vacancies, and Immigrant Workers: General
Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
Thema
informality
labor market imperfections
unemployment compensation

Ereignis
Geistige Schöpfung
(wer)
Charlot, Olivier
Malherbet, Franck
Ulus, Mustafa
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2013

Handle
Letzte Aktualisierung
20.09.2024, 08:23 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Charlot, Olivier
  • Malherbet, Franck
  • Ulus, Mustafa
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2013

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