Unemployment Insurance in High Informality Countries

Emilio Espino () and Juan Sanchez

No 4550, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Providing unemployment insurance is particularly problematic in countries with high informality because workers can claim unemployment benefits and work in the informal sector at the same time. This paper proposes a method to evaluate alternative schemes to provide insurance for unemployed individuals. First, it presents an economy that can be calibrated to reproduce key features of the economy for which the reform will be evaluated. Then, it shows how the implementation of an unemployment insurance savings account (UISA) scheme can be evaluated. The method is applied to Mexico, and the results show how the UISA scheme would eliminate incentives for participation in the informal sector. The implementation of the UISA would imply large welfare gains from the ex-ante perspective.

Keywords: Unemployment, insurance, informality; Social Security; Labor Policy (search for similar items in EconPapers)
JEL-codes: D82 H55 I38 J65 (search for similar items in EconPapers)
Date: 2013-02
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:4550

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