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

Author

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  • Martin Gonzalez-Rozada
  • Hernan Ruffo

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.

Suggested Citation

  • Martin Gonzalez-Rozada & Hernan Ruffo, 2014. "The Effects of Unemployment Insurance Under High Informality: Evidence from Argentina," Department of Economics Working Papers 2014_3, Universidad Torcuato Di Tella.
    • Handle: RePEc:udt:wpecon:2014_3
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Unemployment Insurance; Severance Payments; Regression discontinuity;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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