EconPapers    
Economics at your fingertips  
 

Work and Tax Evasion Incentive Effects of Social Insurance Programs: Evidence from an Employment-Based Benefit Extension

Marcelo Bergolo () and Guillermo Cruces

No 8198, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This article studies how social insurance programs shape individual's incentives to take up registered employment and to report earnings to the tax authorities. The analysis is based on a social insurance reform in Uruguay that extended healthcare coverage to the dependent children of registered private-sector workers. The identification strategy relies on a comparison between individuals with and without dependent children before and after the reform. The reform increased benefit-eligible registered employment by 1.6 percentage points (about 5 percent above the pre-reform level), mainly due to an increase in labor force participation rather than to movement from unregistered to registered employment. The shift was greater for parents with younger children and for cohabiting adults whose partners' jobs did not provide the couples' children with access to the benefit. Finally, the reform increased the incidence of underreporting of salaried earnings by about 4 percentage points (25 percent higher than the pre-reform level), mostly for workers employed at small firms. The increase in fiscal revenue from higher levels of registered employment was several orders of magnitude greater than the loss of revenue due to an increase in underreporting.

Keywords: labor supply; work incentives; social insurance; tax evasion (search for similar items in EconPapers)
JEL-codes: J22 H26 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-iue, nep-lab, nep-lam, nep-lma, nep-pbe and nep-pub
Date: 2014-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Published in: Journal of Public Economics, 2014, 117, 211-228

Downloads: (external link)
http://ftp.iza.org/dp8198.pdf (application/pdf)

Related works:
Working Paper: Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension (2014) Downloads
Working Paper: Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension (2014) Downloads
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:iza:izadps:dp8198

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-05-17
Handle: RePEc:iza:izadps:dp8198