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Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment

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  • Adriana Camacho
  • Emily Conover
  • Alejandro Hoyos

Abstract

We examine whether the Colombian government, when instituting and expanding social programs in the early nineties, inadvertently created incentives for people to become informal. We use data from repeated cross-sections of the Colombian Household Survey for periods before and after implementation of the reforms. As robustness, we also construct a panel of individuals interviewed for the first and second Census of the Poor. Using the variation in the onset of interviews across municipalities we find robust and consistent estimates of an increase in informal employment between 2 and 4 percentage points. From a policy perspective this implies that the broad expansion of government provided health insurance in Colombia contributed to increasing informal employment.

Suggested Citation

  • Adriana Camacho & Emily Conover & Alejandro Hoyos, 2009. "Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment," Documentos CEDE 6003, Universidad de los Andes, Facultad de Economía, CEDE.
  • Handle: RePEc:col:000089:006003
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    More about this item

    Keywords

    Incentives; Informal Sector; Health Insurance; Social Protection; Colombia.;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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