- 3. “An individual is considered an informal worker if (s)he belongs to any of the following categories: (i) unskilled self-employed, ( worker in a small private firm, (iii) zero-income worker†(Gasparini and Tornarolli 2006, 8).
Paper not yet in RePEc: Add citation now
- 4. “Self-employment is measured as the percentage of self-employed workers with respect to the total active population†(Loayza and Rigolini 2006, 15).
Paper not yet in RePEc: Add citation now
- 5. Share of the labor force not covered by a pension scheme (World Bank 2006b).
Paper not yet in RePEc: Add citation now
- 6. “The shadow economy includes all market-based legal production of goods and services that are deliberately concealed from pu for the following reasons: (1) to avoid payment of income, value added or other taxes, (2) to avoid payment of social security cont avoid having to meet certain legal labor market standards, such as minimum wages, maximum working hours, safety standards, et avoid complying with certain administrative procedures, such as completing statistical questionnaires or other administrative form (Schneider 2005, 600). In all cases, regional figures are unweighted averages.
Paper not yet in RePEc: Add citation now
- Acevedo, German, Patricio Eskenazi, and Carmen Pag es. 2006. “Unemployment Insurance in Chile: A New Model of Income Support for Unemployed Workers.†Social Protection Discussion Paper, The World Bank.
Paper not yet in RePEc: Add citation now
- Amadeo, Edward, and Jos e Camargo. 1996. “Instituic ˜ oes e o Mercado de Trabalho Brasileiro.†Flexibilidade do mercado de trabalho no Brasil, edited by Jos e Camargo.
Paper not yet in RePEc: Add citation now
- ao das Leis do Trabalho - CLT) was created in 1943. Two major revisions were implemented since then: in 1964, when the military regime restricted the power of labor unions, and in the 1988 Constitution, when workers’ benefits were increased and workers’ rights to organize were reintroduced. CLT is very broad and detailed, containing more than 900 articles (Gonzaga, 2003). Under Brazilian labor legislation, hiring a formal worker is costly. Payroll taxes are high, including 20% for Social Security contributions; 8% deposited in the worker’s severance account (see below); and 7.8% for funding an array of programs (training, education, land reform, etc.). Formal workers are also entitled to receive at least the minimum wage, a 13th monthly wage, 30 days of paid leave per year remunerated at 4/3 of the average monthly wage, a maternity leave of 120 days, an overtime rate of 50% for hours exceeding 44 hours a week, etc. I
Paper not yet in RePEc: Add citation now
Aterido, Reyes, Mary Hallward-Driemeier, and Carmen Pag es. 2011. “Does Expanding Health Insurance beyond Formal–Sector Workers Encourage Informality? Measuring the Impact of Mexico ’s Seguro Popular.†World Bank Policy Research Working Paper, 5785.
Azuara, Oliver, and Ioana Marinescu. 2011. “Informality and the Expansion of Social Protection Programs: Evidence from Mexico.†Mimeo, University of Chicago.
- B Appendix: A model of job–search with informality We develop a model of endogenous job–search with informal work opportunities to highlight the tradeoff between insurance and efficiency faced by a social planner deciding on the maximum UI benefit duration. To simplify derivations and notations, we first assume a fixed horizon of T periods, but we set up the problem such that the budget constraint of the social planner is consistent with the steady state budget constraint (1). In particular, we assume that UI taxes are levied only on workers who do not lose their formal job (Chetty, 2006; Kroft, 2008). We later show how the results carry on to an infinite horizon model. The measure of efficiency cost and the welfare formula we derive are robust to relaxing many assumptions of the model (e.g., introducing heterogeneity) 51Since 2011, workers have been entitled to an advance notice that increases from one to three months depending on seniority.
Paper not yet in RePEc: Add citation now
Baily, Martin. 1978. “Some Aspects of Optimal Unemployment Insurance.†Journal of Public Economics, 10: 379–402. B
- Blanchard, Olivier, and Jean Tirole. 2006. “The Joint Design of Unemployment Insurance and Employment Protection: A First Pass.†Journal of the European Economic Association, 6(1): 45– 77.
Paper not yet in RePEc: Add citation now
Bosch, Mariano, and Raymundo Campos-Vasquez. 2010. “The Trade–Offs in the Labor Market of Social Assistance Programs: the Case of the Seguro Popular Program in Mexico.†Mimeo.
Bosch, Mariano, and Willam Maloney. 2010. “Comparative Analysis of Labor Market Dynamics Using Markov Processes: An Application to Informality.†Labour Economics, 17(4): 621–631.
Botelho, Fernando, and Vladimir Ponczek. 2011. “Segmentation in the Brazilian Labor Market.†Economic Development and Cultural Change, 59(2): 437 –463.
Camacho, Ariana, Emily Conover, and Alejandro Hoyos. 2009. “Effects of Colombia’s Social Protection System on Workers’ Choice between Formal and Informal Employment.†Cede Working Paper, 2009–18.
Campos-Vazquez, Raymundo, and Melissa Knox. 2008. “Social Protection Programs and Employment: the Case of Mexicos Seguro Popular Program.†Mimeo.
Card, David, and Phillip Levine. 2000. “Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program.†Journal of Public Economics, 78: 107– 138.
- Card, David, Raj Chetty, and Andrea Weber. 2007a. “Cash–on–Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market.†Quarterly Journal of Economics, 122(4): 1511–1560.
Paper not yet in RePEc: Add citation now
Card, David, Raj Chetty, and Andrea Weber. 2007b. “The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?†American Economic Review, 97(2): 113–118.
Chetty, Raj, and Adam Looney. 2006. “Consumption Smoothing and the Welfare Consequences of Social Insurance in Developing Economics.†Journal of Public Economics, 90: 2351–2356.
Chetty, Raj, and Adam Looney. 2007. “Income Risk and the Benefits of Social Insurance: Evidence from Indonesia and the United States.†Fiscal Policy and Management in East Asia. NBER East Asia Seminar on Economics 16 (eds. T. Ito and A. Rose): Chicago, University of Chicago Press.
Chetty, Raj, and Amy Finkelstein. 2012. “Social Insurance: Connecting Theory to Data.†Handbook of Public Economics, 5 (forthcoming).
Chetty, Raj. 2006. “A General Formula for the Optimal Level of Social Insurance.†Journal of Public Economics, 90: 1879–1901.
Chetty, Raj. 2008. “Moral Hazard versus Liquidity and Optimal Unemployment Insurance.†Journal of Political Economy, 116(2): 173–234.
- Cunningham, Wendy. 2000. “Unemployment Insurance in Brazil: Unemployment Duration, Wages, and Sectoral Choice.†Mimeo, The World Bank.
Paper not yet in RePEc: Add citation now
- ergolo, Marcelo, and Guillermo Cruces. 2010. “Labor Informality and the Incentive Effects of Social Security: Evidence from a Health Reform in Uruguay.†CEDLAS Working Paper.
Paper not yet in RePEc: Add citation now
- Exchange rate: R$1.9 US$1 (in R$ of 2000).
Paper not yet in RePEc: Add citation now
Fields, Gary. 1975. “Rural–Urban Migration, Urban Unemployment and Underemployment, and Job Search Activity in LDCs.†Journal of Development Economics, 2(2): 165–187.
- Figure 6: The 1996 temporary UI extension, impacts on formal reemployment (a) Survival rates out of formal employment, control areas Regular UI exhaustion 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Figure 7: The 1996 temporary UI extension, impacts in different areas (a) Recife (formal employment rate 24%) Regular UI exhaustion Extended UI exhaustion Control years Treatment year 0 .02 .04 .06 .08 .1 .12 .14 0 1 2 3 4 6 7 8 9 10 11 12 5 Months since involuntary layoff (b) Porto Alegre (formal employment rate 35%) Regular UI exhaustion Extended UI exhaustion Treatment year Control years 0 .02 .04 .06 .08 .1 .12 .14 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Figure C.3: Replacement rate in the Brazilian UI program The black line displays the replacement rate of UI benefits as a function of the wage in the lost job (expressed in multiple of minimum wages). The grey line displays the density of the wage distribution at layoff. UI benefits cannot be inferior to the minimum wage. Since 1994, replacement rates depend on the wage (in multiples of the minimum wage) prior to layoff w as follows: 0.8 if w < 1.65; (0.8)(1.65)+(0.5)(w−1.65) w if 1.65 ≤ w ≤ 2.75; 1.87 w
Paper not yet in RePEc: Add citation now
Gasparini, Leonardo, Francisco Haimovich, and Sergio Olivieri. 2009. “Labor Informality Bias of a Poverty–Alleviation Program in Argentina.†Journal of Applied Economics, 12(2): 181– 205.
- Gerard, Franc ois, and Gustavo Gonzaga. 2013. “Job–Search Monitoring in a Context of High Informality.†Phd Thesis, Department of Economics, University of California, Berkeley.
Paper not yet in RePEc: Add citation now
Gonzaga, Gustavo. 2003. “Labor Turnover and Labor Legislation in Brazil.†Econom ıa: Journal of the Latin American and Caribbean Economic Association, 4(1): 165–207.
- Gordon, Roger, and Wei Li. 2009. “Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation.†Journal of Public Economics, 93 (7-8): 855–866.
Paper not yet in RePEc: Add citation now
Hamermesh, Daniel. 1979. “Entitlement Effects, Unemployment Insurance and Employment Decisions. †Economic Inquiry, 17(3): 317–332.
Harris, John, and Michael Todaro. 1970. “Migration, Unemployment and Development: a TwoSector Analysis.†American Economic Review, 60: 126–142.
- Hijzen, Alexander. 2011. “The Moral–Hazard and Liquidity Effects of Unemployment Compensation in Brazil: Evidence and Policy Implications.†Mimeo OECD. IADB. in progress. “Protecting Workers against Unemployment in Latin America and the Caribbean.†Inter–American Development Bank.
Paper not yet in RePEc: Add citation now
Kleven, Henrik, and Mazhar Waseem. 2012. “Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan.†Working Paper, London School of Economics.
Landais, Camille, Pascal Michaillat, and Emmanuel Saez. 2010. “Optimal Unemployment Insurance over the Business Cycle.†NBER Working Paper, 16526.
Landais, Camille. 2012. “Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design.†Mimeo, London School of Economics.
- Levy, Santiago. 2008. “Good Intentions, Bad Outcomes: Social Policy, Informality and Economics Growth in Mexico.†Brookings Institution Press, 357pp.
Paper not yet in RePEc: Add citation now
Maloney, William. 1999. “Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico.†World Bank Economic Review, 13: 275–302.
Margolis, David. 2008. “Unemployment Insurance versus Individual Unemployment Accounts and Transitions to Formal versus Informal Sector Jobs.†CREST Working Paper, 2008–35.
Meghir, Costas, Renata Narita, and Jean-Marc Robin. 2012. “Wages and Informality in Developing Countries.†NBER Working Paper, 18347.
- Months since involuntary layoff 1995 1996 1997 (b) Hazard rates of formal reemployment, control areas Regular UI exhaustion 0 .02 .04 .06 .08 .1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Months since involuntary layoff 1995 1996 1997 (b) Survival rates out of formal employment for UI non–takers, treatment 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Months since involuntary layoff 1995 1996 1997 (c) Survival rates out of formal employment, treatment areas Regular UI exhaustion Extended UI exhaustion Treatment 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Months since involuntary layoff 1995 1996 1997 (d) Hazard rates of formal reemployment, treatment areas Regular UI exhaustion Extended UI exhaustion Treatment 0 .02 .04 .06 .08 .1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
Niehaus, Paul, and Sandip Sukhtankar. 2012. “The Marginal Rate of Corruption in Public Programs: Evidence from India.†Mimeo, University of California at San Diego.
- Perry, Guillermo, Willam Maloney, Omar Arias, Pablo Fajnzylber, Andrew Mason, and Jaime Saavedra-Chanduvi. 2007. “Informality: Exit and Exclusion.†The World Bank, Washington DC.
Paper not yet in RePEc: Add citation now
Pomeranz, Dina. 2012. “No Taxation without Information: Deterrence and Self–Enforcement in the Value Added Tax.†Mimeo, Harvard Business School.
Robalino, David, Eduardo Zylberstajn, and Juan Robalino. 2011. “Incentive Effects of Risk Pooling, Redistributive and Savings Arrangements in Unemployment Benefit Systems: Evidence from a Job–Search Model for Brazil.†IZA Discussion Paper, 5476.
Robalino, David, Milan Vodopivec, and Andr as Bodor. 2009. “Savings for Unemployment in Good or Bad Times: Options for Developing Countries.†IZA Discussion Paper, 4516.
Saez, Emmanuel, Joel Slemrod, and Seth Giertz. 2012. “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review.†Journal of Economic Literature, 50(1): 3–50.
Saez, Emmanuel. 2002. “Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses.†Quarterly Journal of Economics, 117: 1039–1073.
Schmieder, Johannes, Till von Wachter, and Stefan Bender. 2012. “The Effects of Extended Unemployment Insurance Over the Business Cycle: Evidence from Regression Discontinuity Estimates over Twenty Years.†Quarterly Journal of Economics, 127(2): 701–752.
Schneider, Friedrich, Andreas Buehn, and Claudio Montenegro. 2010. “Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007.†World Bank Policy Research Working Paper Series, 5356.
- Source: Perry et al. (2007) Comparing informality across countries is challenging because it is unclear which jobs are actually monitored by, or registered with, government agencies. In this figure, an individual is considered to be an informal worker if she is (i) an unskilled self–employed, (ii) a salaried worker in a small private firm, or (iii) a zero–income worker.
Paper not yet in RePEc: Add citation now
- The hazard of formal reemployment decreases with an increase in UI benefits (behavioral cost): d ft dbt < 0, det dbt < 0 The hazard of formal reemployment increases when formal search costs decrease (mechanical cost↓); the impact of an increase in UI benefits is exacerbated when formal search costs decrease 53Simulations in Chetty (2008) suggest that this class of models is well defined. 54There is very little room for anticipation behaviors to matter in Brazil, so the assumption is not restrictive for the Brazilian case. The impact of multi-period changes in the parameters includes cross–period effects whose signs will depend more heavily on functional form assumptions.
Paper not yet in RePEc: Add citation now
- The top panel (s.e. clustered by 27 states) uses formal employment rates by state from yearly household surveys (PNAD). The middle panel (s.e. clustered by 137 mesoregions) uses only workers laid off between 2002 and 2009. The bottom panel (s.e. clustered by 124 mesoregions) excludes mesoregions with average formal employment rates over the period below the 5th and above the 95th percentile. Results in this table confirm results from Table 2. The mechanical cost of a hypothetical two–month UI extension is high on average but it decreases with formal employment rates.
Paper not yet in RePEc: Add citation now
- van Ours, Jan, and Milan Vodopivec. 2006. “How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment.†Journal of Labor Economics, 24(2): 351–378.
Paper not yet in RePEc: Add citation now
- Vel asquez, Mario. 2010. “Seguros de Desempleo y Reformas Recientes en America Latina.†Macroeconomia del desarrollo (United Nations), 99.
Paper not yet in RePEc: Add citation now
- VIII Figure C.2: Geographical distribution and evolution of formal employment rates in Brazil (a) Formal employment rates, 2000 census (b) Formal employment rates, 2010 census The maps display the variation in formal employment rates (private–sector formal employees within the 18–54 years old population) across space in Brazil, based on the 2000 (panel a) and 2010 censuses (panel b). The darker lines identify state boundaries. The thinner lines identify mesoregion boundaries, the next geographical subdivisions in Brazil. The maps show that there is tremendous variation in formal employment rates across states in Brazil. The North and the Northeast are poorer and less formal. There is also variation within state, however. Brazil experienced rapid economic growth in the last decade. Formal employment rates increased across the country (darker shades on panel b) but not uniformly. We obtain a similar pattern if we include public employees.
Paper not yet in RePEc: Add citation now
- Vodopivec, Milan, and Minna Tong. 2008. “China: Improving Unemployment Insurance.†World Bank Social Protection Discussion Paper, 0820.
Paper not yet in RePEc: Add citation now
- Vodopivec, Milan. 2009. “Introducing Unemployment Insurance to Developing Countries.†World Bank Social Protection Discussion Paper, 49170.
Paper not yet in RePEc: Add citation now
- XI Figure C.6: Test of the common trend assumption for the 1996 temporary UI extension (a) Survival rates out of formal employment for UI non–takers, control 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 0 1 2 3 4 6 7 8 9 10 11 12 5
Paper not yet in RePEc: Add citation now
- Year1996 (.11) (.0027) (.0112) (.0114) (.0122) Mean 8.97 .1 6.55 6.71 6.71 (control years) 8.97 .1 6.55 6.71 6.71 Observations 171,407 171,407 103,452 68,589 68,589 Tenure–based discontinuity Tenure -.1999*** -.0071*** .0024 -.0061 .0041 ≥24 months (.0478) (.0017) (.0052) (.0074) (.0068) Mean 8.58 .13 6.5 6.7 6.7 2002–2008 (20 ≤ T < 22) Observations 2,073,090 2,073,090 1,348,187 858,940 858,940 Significance levels: * 10%, ** 5%, ***1%.
Paper not yet in RePEc: Add citation now
Zenou, Yves. 2008. “Job Search and Mobility in Developing Countries: Theory and Policy Implications. †Journal of Development Economics, 86: 336–355.