Strategic Formal Layoffs: Unemployment Insurance and Informal Labor Markets

Bernardus Van Doornik, David Schoenherr and Janis Skrastins

American Economic Journal: Applied Economics, 2023, vol. 15, issue 1, 292-318

Abstract: Exploiting an unemployment insurance reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by 11 percent. Most of the additional layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled when benefits cease. These patterns are stronger for industries and municipalities with a high degree of labor market informality.

JEL-codes: J22 J46 J63 J65 K31 O15 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/app.20200787 (application/pdf)
https://doi.org/10.3886/E153522V1 (text/html)
https://www.aeaweb.org/doi/10.1257/app.20200787.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/app.20200787.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Strategic Formal Layoffs: Unemployment Insurance and Informal Labor Markets (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejapp:v:15:y:2023:i:1:p:292-318

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/app.20200787

Access Statistics for this article

American Economic Journal: Applied Economics is currently edited by Alexandre Mas

More articles in American Economic Journal: Applied Economics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().