Unemployment Insurance Versus Individual Unemployment Accounts and Transitions to Formal Versus Informal Sector Jobs

David Margolis

No 2008-35, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper analyzes the impact of the unemployment safety net on the speed of returningto employment in 6 major urban areas of Brazil. Distinguishing between formal andinformal sector jobs as destinations and controlling for unobserved characteristics thataffect transitions, we find that previous formal sector work (which opens eligibility tounemployment insurance (UI) and individual unemployment accounts (FGTS))accelerates the rate of transition to formal sector jobs and reduces the rate of transition toinformal sector jobs. Additional unemployment benefits provided through the UI systemdo not directly affect transitions to formal sector jobs, although they do slow transitionsto informal sector jobs. The results suggest that the unemployment safety net may affectoutcomes by reducing search intensity for informal sector jobs, while demand sidephenomena may be driving the results for transitions to the formal sector.

Pages: 34
Date: 2008
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Citations: View citations in EconPapers (15)

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