Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program

September 28, 2016

 

By: François Gerard ; Gustavo Gonzaga
It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs – transfer and social insurance programs – in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality – increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers’ need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes.
JEL: H0 J46 J65
URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22608&r=ltv
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Women Working Longer: Facts and Some Explanations

September 28, 2016

 

By: Claudia Goldin ; Lawrence F. Katz
American women are working more, through their sixties and even into their seventies. Their increased participation at older ages started in the late 1980s before the turnaround in older men’s labor force participation and the economic downturns of the 2000s. The higher labor force participation of older women consists disproportionately of those working at full-time jobs. Increased labor force participation of women in their older ages is part of the general increase in cohort labor force participation. Cohort effects, in turn, are mainly a function of educational advances and greater prior work experience. But labor force participation rates of the most recent cohorts in their forties are less than those for previous cohorts. It would appear that employment at older ages could stagnate or even decrease. But several other factors will be operating in an opposing direction leading us to conclude that women are likely to continue to work even longer.
JEL: J21 J22 J26
URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22607&r=ltv

 


Electoral reciprocity in programmatic redistribution: Experimental Evidence

September 28, 2016

 

By: Sebastian Galiani ; Nadya Hajj ; Pablo Ibarraran ; Nandita Krishnaswamy ; Patrick J. McEwan
We analyzed two conditional cash transfers experiments that preceded Honduran presidential elections in 2001 and 2013. In the first, smaller transfers had no effects on voter turnout or incumbent vote share. In the second, larger transfers increased turnout and incumbent share in similar magnitudes, consistent with the mobilization of the incumbent party base rather than vote switching. Moreover, we found that turnout and incumbent share increased when cumulative payments were similar, but larger payments were made closer to the elections. As in prior lab experiments, individuals seem to overweight “peak” and “end” payments in their retrospective estimation of net benefits. We further argue that a model of intrinsically-reciprocal voters is most consistent with the findings.
JEL: H3 I38
URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22588&r=ltv

 


Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States

September 28, 2016

 

By: Hanushek, Eric A. (Stanford University) ; Ruhose, Jens (Leibniz University) ; Woessmann, Ludger (University of Munich)
Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. We develop detailed measures of skills of workers in each state based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. We find that differences in knowledge capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses, emphasizing the importance of appropriately measuring worker skills. These estimates support emphasis on school improvement as a strategy for state economic development.
Keywords: economic growth, human capital, cognitive skills, schooling, U.S. states JEL Classification: O47, I25, J24
URL: http://d.repec.org/n?u=RePEc:cge:wacage:299&r=ltv

 


Do Women Ask?

September 28, 2016

 

By: Artz, Benjamin (University of Wisconsin, Oshkosh) ; Goodall, Amanda H. (Cass Business School) ; Oswald, Andrew J. (University of Warwick)
Women typically earn less than men. The reasons are not fully understood. Previous studies argue that this may be because (i) women ‘don’t ask’ and (ii) the reason they fail to ask is out of concern for the quality of their relationships at work. This account is difficult to assess with standard labor-economics data sets. Hence we examine direct survey evidence. Using matched employer-employee data from 2013-14, the paper finds that the women-don’t-ask account is incorrect. Once an hours-of-work variable is included in ‘asking’ equations, hypotheses (i) and (ii) can be rejected. Women do ask. However, women do not get.
Keywords: matched employer-employee data, female discrimination, wages, gender
JEL: J31 J71
URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp10183&r=ltv

 


The Growth-Employment-Poverty Nexus in Latin America in the 2000s: Cross-Country Analysis

September 28, 2016

 

By: Guillermo Cruces (CEDLAS – UNLP , CONICET y IZA) ; Gary S. Fields (Cornell University y IZA) ; David Jaume (Cornell University) ; Mariana Viollaz (CEDLAS – UNLP)
In the great majority of Latin American countries in the 2000s, economic growth took place and brought about improvements in almost all labour market indicators and consequent reductions in poverty rates. Across countries, economic growth was not all that mattered; external factors were particularly important for changes in labour market conditions, while reductions in poverty were strongly related to improvements in earnings and employment indicators. Although the 2008 crisis affected some countries differently from others, nearly all labour market indicators were at least as high or higher by 2012 than immediately before the crisis in all countries but one.
JEL: J21 J30 O10 O54
URL: http://d.repec.org/n?u=RePEc:dls:wpaper:0200&r=ltv

Informal Labor and the Efficiency Cost of Social Programs: Evidence from the Brazilian Unemployment Insurance Program

September 12, 2016

 

By: Gerard, Francois ; Gonzaga, Gustavo
It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs — transfer and social insurance programs — in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality — increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers’ need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes.
Keywords: Informality; Unemployment insurance
JEL: H00 J65
URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:11485&r=ltv