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The welfare effects of unemployment insurance in Argentina. New estimates using changes in the schedule of transfers

Martin Gonzalez-Rozada and Hernán Ruffo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: Unemployment insurance transfers should balance the provision of consumption to the unemployed with the disincentive effects on the search behavior. Developing countries face the additional challenge of informality. Workers can choose to hide their employment state and labor income in informal jobs, an additional form of moral hazard. To provide evidence about the effects of this policy in a country affected by informality we exploit kinks in the schedule of transfers in Argentina. Our results suggest that higher benefits induce moderate behavioral responses in job-finding rates and increase re-employment wages. We use a sufficient statistics formula from a model with random wage offers and we calibrate it with our estimates. We show that welfare could rise substantially if benefits were increased in Argentina. Importantly, our conclusion is relevant for the median eligible worker that is strongly affected by informality.

Keywords: Unemployment Insurance; Sufficient statistics; Regression kink design; Instrumental Variables. (search for similar items in EconPapers)
JEL-codes: C41 I38 J65 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-02
New Economics Papers: this item is included in nep-ias, nep-iue, nep-lab and nep-lam
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Working Paper: The welfare effects of unemployment insurance in Argentina. New estimates using changes in the schedule of transfers (2022) Downloads
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