The Effects of Unemployment Insurance Under High Informality: Evidence from Argentina

Martin Gonzalez-Rozada and Hernán Ruffo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: We evaluate the effects of unemployment insurance policy (UI) in Argentina using administrative data and exploiting policy reforms around 2006-2007. We find that the extension of UI eligibility increases significantly and substantially unemployment duration while reemployment wages are only modestly increased. On the other hand, a rise in UI transfers of the same expected cost affects re-employment wages more and unemployment duration less. Finally, using reforms to severance pay we show that liquidity provision generates a substantial effect. We use different optimality formulas derived from search models to evaluate the welfare gains of changing UI and we focus on the trade-off between providing larger or longer transfers. After calibrating these formulas we conclude that for the average worker transfers should increase but UI duration should be shortened.

Keywords: Unemployment Insurance; Severance Payments; Regression discontinuity (search for similar items in EconPapers)
JEL-codes: C41 I38 J64 J65 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2014-12
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2014_3

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