Unemployment insurance and informality in developing countries
ABSTRACT: 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 securea new formal job and therefore cannot be interpreted as a subsidy to the informalsector.
|Date of creation:||03 Oct 2011|
|Contact details of provider:|| |
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.:
- Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
- Álvarez-Parra, Fernando & Sánchez, Juan M., 2009.
"Unemployment insurance with a hidden labor market,"
Journal of Monetary Economics,
Elsevier, vol. 56(7), pages 954-967, October.
- Fernando Álvarez-Parra & Juan M. Sanchez, 2009. "Unemployment insurance with a hidden labor market," Working Paper 09-09, Federal Reserve Bank of Richmond.
- Cahuc, Pierre & Lehmann, Etienne, 1999. "Should unemployment benefits decrease with unemployment spell ?," CEPREMAP Working Papers (Couverture Orange) 9916, CEPREMAP.
- Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-438, April.
- Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
- Lars Ljungqvist & Thomas Sargent, 1999. "Matlab code for Hopenhayn-Nicolini's optimal unemployment insurance model," QM&RBC Codes 18, Quantitative Macroeconomics & Real Business Cycles.
When requesting a correction, please mention this item's handle: RePEc:col:000092:009015. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Facultad de Economía)
If references are entirely missing, you can add them using this form.