Data and code for: "Informal Labor and the Efficiency Cost of Social Programs: Evidence from Unemployment Insurance in Brazil"

Principal Investigator(s):  View help for Principal Investigator(s) Francois Gerard, Queen Mary University of London; Gustavo Gonzaga, Pontifical Catholic University of Rio de Janeiro

Version:  View help for Version V1

Name File Type Size Last Modified
  EXP2008 11/13/2020 10:30:AM
  Generalize_patterns 11/13/2020 10:30:AM
  Matlab 11/13/2020 10:30:AM
  PME 11/13/2020 10:35:AM
  PNAD 11/13/2020 10:37:AM
  RAIS_UI_dataprep 11/13/2020 10:37:AM
  RD 11/13/2020 10:37:AM
  Useful 11/13/2020 10:37:AM

Project Description

Summary:  View help for Summary It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs in developing countries. We evaluate such claims for the case of Unemployment Insurance (UI) by combining an optimal UI framework with comprehensive data from Brazil. Using quasi-experimental variation in potential UI duration, we find clear evidence for the usual moral hazard problem that UI reduces incentives to return to a formal job. Yet, the associated efficiency cost is lower than in the U.S., and is lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are lower to begin with where informality is higher, so that a larger share of workers would draw UI benefits absent any moral hazard. In sum, efficiency concerns may actually become more relevant as an economy formalizes.

Scope of Project

Subject Terms:  View help for Subject Terms informal labor; unemployment insurance; efficiency cost; social programs; Brazil
JEL Classification:  View help for JEL Classification
      J46 Informal Labor Markets
      J64 Unemployment: Models, Duration, Incidence, and Job Search
      J65 Unemployment Insurance; Severance Pay; Plant Closings
Geographic Coverage:  View help for Geographic Coverage Brazil
Data Type(s):  View help for Data Type(s) program source code; survey data


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Published Versions

V1 [2021-07-20]

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