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.
- Language
-
Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 7233
- Classification
-
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
- Subject
-
informality
labor market imperfections
unemployment compensation
- Event
-
Geistige Schöpfung
- (who)
-
Charlot, Olivier
Malherbet, Franck
Ulus, Mustafa
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Charlot, Olivier
- Malherbet, Franck
- Ulus, Mustafa
- Institute for the Study of Labor (IZA)
Time of origin
- 2013
Other Objects (12)
Introducing unemployment insurance to developing countries
Introducing Unemployment Insurance to Developing Countries
Designing unemployment benefits in developing countries
Fighting urban unemployment : in developing countries
Capital flows to developing countries: Is there an allocation puzzle?
Cyclical movements in unemployment and informality in developing countries
Unemployment Insurance in Developing Countries: The Case of Brazil
Cyclical movements in unemployment and informality in developing countries
Unemployment Compensation and Older Workers
Unemployment and unemployment compensation from a global perspective
Unemployment and unemployment compensation from a global perspective
Unemployment and unemployment compensation from a global perspective
Introducing unemployment insurance to developing countries
Introducing Unemployment Insurance to Developing Countries
Designing unemployment benefits in developing countries
Fighting urban unemployment : in developing countries
Capital flows to developing countries: Is there an allocation puzzle?
Cyclical movements in unemployment and informality in developing countries
Unemployment Insurance in Developing Countries: The Case of Brazil
Cyclical movements in unemployment and informality in developing countries
Unemployment Compensation and Older Workers
Unemployment and unemployment compensation from a global perspective
Unemployment and unemployment compensation from a global perspective
Unemployment and unemployment compensation from a global perspective
Introducing unemployment insurance to developing countries
Introducing Unemployment Insurance to Developing Countries
Designing unemployment benefits in developing countries
Fighting urban unemployment : in developing countries
Capital flows to developing countries: Is there an allocation puzzle?
Cyclical movements in unemployment and informality in developing countries
Unemployment Insurance in Developing Countries: The Case of Brazil
Cyclical movements in unemployment and informality in developing countries
Unemployment Compensation and Older Workers
Unemployment and unemployment compensation from a global perspective
Unemployment and unemployment compensation from a global perspective