The Design of Unemployment Insurance Under High Informality: Evidence from Argentina

Speaker

Hernán Ruffo

Sus temas de investigación incluyen economías de empleo, macroeconomía y…

22 de abril de 2014 - 11:30 a 13:30 hs

Contenidos:

This presentation exploits time and cross sectional variation to estimate the effect of unemployment insurance and severance pay on unemployment duration and reemployment wages in Argentina. We find that, while extending unemployment insurance generates a strong reduction in unemployment duration, the impact on increasing the level of benefits in a comparable amount is milder. Additionally, reemployment wages are only modestly increased by the employment insurance extension, but their response to higher level of benefits is stronger and significant. As a novel exercise, we make use of these estimations to apply and compare the methods used for evaluating of the optimality of unemployment insurance. The results suggest that the optimal way of providing unemployment insurance is by higher transfers with shorter duration. We argue that prevalent informality in the labor market introduces unobservable reemployment, what generates incentives to accept these kind of jobes while maintaining the transfers of the insurance. The way to reduce the negative effects of this additional moral hazard is to provide shorter unemployment insurance, as the optimal unemployment insurance literature has shown. 

Universidad de San Andrés

  • Vito Dumas 284
  • Victoria
  • Buenos Aires
  • Argentina

Tags

macroeconomía, trabajo, Argentina

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