Job Loss and the Role of Public Policies for Vulnerable Workers

Marcelo Bérgolo, Mery Ferrando, Matias Giaccobasso and Joan Vilá

No 14659, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Job displacement generates large and persistent income losses. This paper examines how alternative social protection mechanisms mitigate the consequences of job loss in Uruguay, a middle-income country with a relatively well-developed social safety net. Using matched employer-employee administrative data, we combine variation from mass layoffs with difference-in-differences and regression-discontinuity designs to estimate the effects of job displacement and the insurance value of two policies: (i) a traditional contributory unemployment insurance program and (ii) a noncontributory conditional cash transfer program targeting low-income households. We document that after employment falls it gradually rebounds, while earnings decline sharply, with labor income falling by about 50% in the short term, and remain below pre-displacement levels even five years later. The persistent earnings losses are primarily driven by lower post-displacement wages. Comparing the insurance value of alternative policy responses, we find that the cash transfer program provides substantial protection for vulnerable and middle-income workers facing layoffs, while unemployment insurance does not generate comparable medium-term gains.

Keywords: Job; displacement (search for similar items in EconPapers)
JEL-codes: H53 I38 J64 J65 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14659

DOI: 10.18235/0014409

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