Informal Labor and the Efficiency Cost of Social Programs: Evidence from Unemployment Insurance in Brazil

• 成果类型: Article
• 署名作者: Gerard, Francois; Gonzaga, Gustavo
• 署名单位: University of London; Queen Mary University London; Pontificia Universidade Catolica do Rio de Janeiro
• 刊物名称: AMERICAN ECONOMIC JOURNAL-ECONOMIC POLICY
• ISSN/ISSBN: 1945-7731
• DOI: 10.1257/pol.20180072
• 发表日期: 2021
• 页码: 167-206
• 关键词: potential duration; payroll taxes; benefits; CONSEQUENCES; liquidity; evasion; SYSTEM; IMPACT; wages

摘要

It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs in developing countries. We evaluate such claims for the case of unemployment insurance (UI) by combining an optimal UI framework with comprehensive data from Brazil. Using quasi-experimental variation in potential UI duration, we find clear evidence for the usual moral hazard problem that UI reduces incentives to return to a formal job. Yet, the associated efficiency cost is lower than it is in the United States, and it is lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are lower to begin with where informality is higher, so that a larger share of workers would draw UI benefits absent any moral hazard. In sum, efficiency concerns may actually become more relevant as an economy formalizes.