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The Effect of Welfare Payments on Work in a Middle-Income Country


  • M. Caridad Araujo
  • Mariano Bosch
  • Rosario Maldonado
  • Norbert Schady


We study the impact of welfare payments in Ecuador on the probability that women and men work, and on whether they are employed in the formal or informal sectors. Our analysis is based on two distinct identification strategies and two separate sources of data spanning more than 10 years. We find no evidence that welfare discouraged work. However, among women, welfare payments led to reductions in social security contributions (which are mandated for salaried workers) and payment of VAT and income taxes (which are mandated for the self-employed and firm owners), although the magnitude of these effects is small.

Suggested Citation

  • M. Caridad Araujo & Mariano Bosch & Rosario Maldonado & Norbert Schady, 2017. "The Effect of Welfare Payments on Work in a Middle-Income Country," IDB Publications (Working Papers) 8509, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:8509

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    Welfare; Formal Sector; Work; Informal Sector;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • 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

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