Unemployment insurance and informality in developing countries
AbstractWe 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 Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-257.
Date of creation: Sep 2011
Date of revision: Nov 2011
Unemployment insurance; informal sector; income effects; developing countries.;
Other versions of this item:
- David Bardey & Fernando Jaramillo, 2011. "Unemployment insurance and informality in developing countries," DOCUMENTOS DE TRABAJO 009015, UNIVERSIDAD DEL ROSARIO.
- 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-2011-11-28 (All new papers)
- NEP-DEV-2011-11-28 (Development)
- NEP-IAS-2011-11-28 (Insurance Economics)
- NEP-IUE-2011-11-28 (Informal & Underground Economics)
- NEP-LAB-2011-11-28 (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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"Unemployment insurance with a hidden labor market,"
Journal of Monetary Economics,
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"Optimal Unemployment Insurance,"
RCER Working Papers
421, University of Rochester - Center for Economic Research (RCER).
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- Cahuc, Pierre & Lehmann, Etienne, 1999. "Should unemployment benefits decrease with unemployment spell ?," CEPREMAP Working Papers (Couverture Orange) 9916, CEPREMAP.
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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