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Does unemployment insurance offer incentives to take jobs in the formal sector?

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  • Mariano Bosch

    (Inter-American Development Bank, USA)

Abstract

Unemployment insurance can be an efficient tool to provide protection for workers against unemployment and foster formal job creation in developing countries. How much workers value this protection and to what extent it allows a more efficient job search are two key parameters that determine its effectiveness. However, evidence shows that important challenges remain in the introduction and expansion of unemployment insurance in developing countries. These challenges range from achieving coverage in countries with high informality, financing the scheme without further distorting the labor market, and ensuring progressive redistribution.

Suggested Citation

  • Mariano Bosch, 2016. "Does unemployment insurance offer incentives to take jobs in the formal sector?," IZA World of Labor, Institute of Labor Economics (IZA), pages 300-300, October.
  • Handle: RePEc:iza:izawol:journl:y:2016:n:300
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    References listed on IDEAS

    as
    1. David Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations: A Meta-analysis," CESifo Working Paper Series 2570, CESifo Group Munich.
    2. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
    3. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
    4. David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages 452-477, November.
    5. Rita Almeida & Pedro Carneiro, 2012. "Enforcement of Labor Regulation and Informality," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 64-89, July.
    6. Veronica Amarante & Rodrigo Arim & Andres Dean, 2011. "Protecting Workers against Unemployment in Uruguay," Research Department Publications 4731, Inter-American Development Bank, Research Department.
    7. Cristobal Huneeus & Silvia Leiva & Alejandro Micco, 2012. "Unemployment Insurance and Search Effort in Chile," Research Department Publications 4784, Inter-American Development Bank, Research Department.
    8. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection Discussion Papers and Notes 62726, The World Bank.
    9. Verónica Amarante & Rodrigo Arim & Andrés Dean, 2014. "The Effects of Being Out of the Labor Market on Subsequent Wages: Evidence for Uruguay," Journal of Labor Research, Springer, vol. 35(1), pages 39-62, March.
    10. Martín Gonzalez Rozada & Lucas Ronconi & Hernan Ruffo, 2011. "Protecting Workers against Unemployment in Latin America and the Caribbean: Evidence from Argentina," Research Department Publications 4759, Inter-American Development Bank, Research Department.
    11. François Gerard & Gustavo Gonzaga, 2013. "Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil," Textos para discussão 608, Department of Economics PUC-Rio (Brazil).
    12. Veronica Amarante & Rodrigo Arim & Andres Dean, 2011. "Protecting Workers against Unemployment in Uruguay," Research Department Publications 4731, Inter-American Development Bank, Research Department.
    13. Martín Gonzalez Rozada & Lucas Ronconi & Hernan Ruffo, 2011. "Protecting Workers against Unemployment in Latin America and the Caribbean: Evidence from Argentina," Research Department Publications 4759, Inter-American Development Bank, Research Department.
    14. Cristobal Huneeus & Silvia Leiva & Alejandro Micco, 2012. "Unemployment Insurance and Search Effort in Chile," Research Department Publications 4784, Inter-American Development Bank, Research Department.
    15. David Margolis & Lucas Navarro & David A. Robalino, 2014. "Unemployment Insurance, Job Search, and Informal Employment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00714372, HAL.
    16. Margolis, David N. & Navarro, Lucas & Robalino, David A., 2012. "Unemployment Insurance, Job Search and Informal Employment," IZA Discussion Papers 6660, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    unemployment insurance; informality; developing countries; labor markets; Latin America;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean

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