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Unemployment Insurance Versus Individual Unemployment Accounts and Transitions to Formal Versus Informal Sector Jobs

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  • David MARGOLIS

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Abstract

This paper analyzes the impact of the unemployment safety net on the speed of returningto employment in 6 major urban areas of Brazil. Distinguishing between formal andinformal sector jobs as destinations and controlling for unobserved characteristics thataffect transitions, we find that previous formal sector work (which opens eligibility tounemployment insurance (UI) and individual unemployment accounts (FGTS))accelerates the rate of transition to formal sector jobs and reduces the rate of transition toinformal sector jobs. Additional unemployment benefits provided through the UI systemdo not directly affect transitions to formal sector jobs, although they do slow transitionsto informal sector jobs. The results suggest that the unemployment safety net may affectoutcomes by reducing search intensity for informal sector jobs, while demand sidephenomena may be driving the results for transitions to the formal sector.

Suggested Citation

  • David MARGOLIS, 2008. "Unemployment Insurance Versus Individual Unemployment Accounts and Transitions to Formal Versus Informal Sector Jobs," Working Papers 2008-35, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2008-35
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    References listed on IDEAS

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    1. David N. Margolis, 1996. "Cohort Effects and Returns to Seniority in France," Annals of Economics and Statistics, GENES, issue 41-42, pages 443-464.
    2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
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    4. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
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    6. Bijwaard, G.E., 2007. "Instrumental variable estimation of treatment effects for duration outcomes," Econometric Institute Research Papers EI 2007-20, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    7. repec:adr:anecst:y:1996:i:41-42:p:18 is not listed on IDEAS
    8. Mitali Das & Whitney K. Newey & Francis Vella, 2003. "Nonparametric Estimation of Sample Selection Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(1), pages 33-58.
    9. Chris Elbers & Geert Ridder, 1982. "True and Spurious Duration Dependence: The Identifiability of the Proportional Hazard Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(3), pages 403-409.
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    Cited by:

    1. Hartley, Gonzalo Reyes & van Ours, Jan C. & Vodopivec, Milan, 2011. "Incentive effects of unemployment insurance savings accounts: Evidence from Chile," Labour Economics, Elsevier, vol. 18(6), pages 798-809.
    2. Gerard, François & Gonzaga, Gustavo, 2016. "Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program," CEPR Discussion Papers 11485, C.E.P.R. Discussion Papers.
    3. 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).
    4. Gibran da Silva Teixeira & Giácomo Balbinotto Neto & Pedro Henrique Soares Leivas, 2020. "Evidence on Rule Manipulation and Moral Hazard in the Brazilian Unemployment Insurance Program," International Journal of Social Science Studies, Redfame publishing, vol. 8(1), pages 67-78, January.
    5. Nicola Brandt, 2012. "Reducing Poverty in Chile: Cash Transfers and Better Jobs," OECD Economics Department Working Papers 951, OECD Publishing.
    6. 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).
    7. François Gerard & Gustavo Gonzaga, 2011. "Unemployment Insurance in Developing Countries: The Case of Brazil," Textos para discussão 593, Department of Economics PUC-Rio (Brazil).

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