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The Labour Market Effects of Unemployment Compensation in Brazil

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  • Alexander Hijzen

    (OECD)

Abstract

This paper analyses the impact of unemployment insurance and severance pay on the duration of nonemployment and transitions from non-employment to formal salaried employment, informal salaried employment and self-employment. It makes use of panel data from the Pesquisa Mensal de Emgrego, a monthly survey for six large cities in Brazil, for the period 2002M3 to 2010M10. The impact of income support to job losers is identified by means of a difference-in-differences approach that exploits eligibility conditions for income support in combination with proportional hazard models that take account of the spell-based nature of the data. A key aspect of the analysis is that it attempts to assess the role of moral hazard while controlling for the role of liquidity effects. The aggregate results indicate that income support has an important impact on the duration of non-employment. This largely appears to be driven by liquidity effects, while the role of moral hazard is limited. By contrast, the analysis by destination state suggests that moral hazard effects dominate liquidity effects associated with income support. The apparent inconsistency between the two sets of results is due to the fact that the aggregate analysis only accounts for moral hazard effects that increase the duration of nonemployment, while the analysis by destination state captures both moral hazard effects in the form of reduced work incentives per se and those in the form of increased incentives to work informally during the period of benefit receipt. In practice, the latter effect may reflect the tendency for firms to employ benefit recipients informally until their benefits expire. Ce document analyse l’impact de l’assurance chômage et des indemnités de licenciement sur la durée du chômage et la transition vers un emploi salarié dans le secteur formel ou informel, ou vers un emploi indépendant. L’analyse repose sur des données de panel comprises entre M3 2003 et M10 2010 tirées de l’enquête mensuelle sur l’emploi Pesquisa Mensal de Emprego qui concerne six grande zone urbaines du Brésil. Le test de l’incidence du soutien de revenu pour les chômeurs s’appuie sur la méthode de la différence des différences, exploitant les conditions d’éligibilité aux indemnités de soutien de revenu en combinaison avec des modèles de risque proportionnels qui tiennent compte de la nature épisodique des données. Un point essentiel de l’analyse est de tenter d’évaluer le rôle de l’aléa moral tout en tenant compte du rôle des effets de liquidités. Les résultats au niveau agrégé indiquent que le soutien des revenus a un impact important sur la durée du chômage. Il semble que ce résultat soit largement dû aux effets de liquidités, le rôle de l’aléa moral étant limité. En revanche, l’analyse par type d’emploi retrouvé suggère que les effets d’aléa moral dominent les effets de liquidité associés à la garantie de revenu. Cette contradiction apparente entre les deux groupes de résultats s’explique par le fait que l’analyse au niveau agrégé ne prend en compte que les effets d’aléa moral qui augmentent la durée du chômage, alors que l’analyse par destination capture à la fois les effets d’aléa moral qui se manifestent sous la forme d’une incitation réduite à reprendre un emploi, mais aussi ceux associés à l’incitation plus forte à travailler dans le secteur informel pendant la période d’indemnisation. En pratique, ce dernier effet pourrait refléter une tendance des entreprises à employer de manière informelle les bénéficiaires de prestations jusqu’à ce que leurs droits à indemnisation cessent.

Suggested Citation

  • Alexander Hijzen, 2011. "The Labour Market Effects of Unemployment Compensation in Brazil," OECD Social, Employment and Migration Working Papers 119, OECD Publishing.
  • Handle: RePEc:oec:elsaab:119-en
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    File URL: http://dx.doi.org/10.1787/5kg0prkh67d0-en
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    References listed on IDEAS

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    Cited by:

    1. Charlot, Olivier & Malherbet, Franck & Terra, Cristina, 2015. "Informality in developing economies: Regulation and fiscal policies," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 1-27.

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