Welfare Effects of Unemployment Benefits When Informality Is High

Arbeitspapier

We analyze for the first time the welfare effects of unemployment benefits (UBs) in a context of high informality, 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 recipients 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.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 14601

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Informal Labor Markets ; Unemployment Insurance; Severance Pay; Plant Closings ; Mobility, Unemployment, and Vacancies: Public Policy
• Thema: unemployment benefits ; welfare effects ; informal employment

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Liepmann, Hannah ; Pignatti, Clemente
• Ereignis: Veröffentlichung
• (wer): Institute of Labor Economics (IZA)
• (wo): Bonn
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/245652
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ