Unemployment insurance and informality in developing countries
AbstractABSTRACT: We analyze whether the introduction of unemployment insurance (UI hereafter) benefits in developing countries would reduce the effort made by unemployed to secure a new job in the formal sector. We show that one shot UI benefits unambiguously increase the effort to secure a new job in the formal sector. The relative strength of income/substitution effects only determine how leisure and informal activities are affected. Consequently, our (partial equilibrium) analysis reveals that short term UI benefits in developing countries do not reduce incentives to secure a new formal job and therefore cannot be interpreted as a subsidy to the informal sector.
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Bibliographic InfoPaper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 009015.
Date of creation: 03 Oct 2011
Date of revision:
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Other versions of this item:
- Bardey, David & Jaramillo, Fernando, 2011. "Unemployment insurance and informality in developing countries," TSE Working Papers 11-257, Toulouse School of Economics (TSE), revised Nov 2011.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-DEV-2011-10-15 (Development)
- NEP-IAS-2011-10-15 (Insurance Economics)
- NEP-IUE-2011-10-15 (Informal & Underground Economics)
- NEP-LAB-2011-10-15 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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09-09, Federal Reserve Bank of Richmond.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Unemployment insurance in developing economies?
by Economic Logician in Economic Logic on 2011-11-01 14:49:00
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