The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High

Autores
Bérgolo Sosa, Marcelo; Cruces, Guillermo Antonio
Año de publicación
2016
Idioma
inglés
Tipo de recurso
artículo
Estado
versión publicada
Descripción
The disincentive effects of social assistance programs on registered employment are a first order policy concern in developing countries. Means tests determine eligibility with respect to some income threshold, and governments can only verify earnings from registered employment. The loss of benefit at some level of formal earnings is an implicit tax that results in a strong disincentive for formal employment. We study an income-tested program in Uruguay and extend previous literature by developing an anatomy of the behavioral responses to this program. Our identification strategy is based on a sharp discontinuity in the program's eligibility rule and uses information from the program's records, social security administration data, and a follow-up survey. First, we establish that beneficiaries respond to the program's incentives by reducing their levels of registered employment by about 8 percentage points. Second, we find the program induces a larger reduction of formal employment for individuals with a medium probability to be a registered employee, suggesting some form of segmentation – those with a low propensity to work formally do not respond to the financial incentives of the program. Third, we find evidence that the fall in registered employment is due to a larger extent to an increase in unregistered employment, and to a lesser extent to a shift towards non-employment. Fourth, we find an elasticity of participation in registered employment of about 1.7, implying a deadweight loss from the behavioral responses to the program of about 3.2% of total registered labor income.
Centro de Estudios Distributivos, Laborales y Sociales
Materia
Ciencias Económicas
Welfare policy
Labor supply
Registered employment
Labor informality
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by-nc-sa/4.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/124355

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network_name_str SEDICI (UNLP)
spelling The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is HighBérgolo Sosa, MarceloCruces, Guillermo AntonioCiencias EconómicasWelfare policyLabor supplyRegistered employmentLabor informalityThe disincentive effects of social assistance programs on registered employment are a first order policy concern in developing countries. Means tests determine eligibility with respect to some income threshold, and governments can only verify earnings from registered employment. The loss of benefit at some level of formal earnings is an implicit tax that results in a strong disincentive for formal employment. We study an income-tested program in Uruguay and extend previous literature by developing an anatomy of the behavioral responses to this program. Our identification strategy is based on a sharp discontinuity in the program's eligibility rule and uses information from the program's records, social security administration data, and a follow-up survey. First, we establish that beneficiaries respond to the program's incentives by reducing their levels of registered employment by about 8 percentage points. Second, we find the program induces a larger reduction of formal employment for individuals with a medium probability to be a registered employee, suggesting some form of segmentation – those with a low propensity to work formally do not respond to the financial incentives of the program. Third, we find evidence that the fall in registered employment is due to a larger extent to an increase in unregistered employment, and to a lesser extent to a shift towards non-employment. Fourth, we find an elasticity of participation in registered employment of about 1.7, implying a deadweight loss from the behavioral responses to the program of about 3.2% of total registered labor income.Centro de Estudios Distributivos, Laborales y Sociales2016info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionArticulohttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdfhttp://sedici.unlp.edu.ar/handle/10915/124355enginfo:eu-repo/semantics/altIdentifier/issn/1556-5068info:eu-repo/semantics/altIdentifier/doi/10.2139/ssrn.3229548info:eu-repo/semantics/reference/hdl/10915/65284info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by-nc-sa/4.0/Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T11:29:54Zoai:sedici.unlp.edu.ar:10915/124355Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 11:29:54.406SEDICI (UNLP) - Universidad Nacional de La Platafalse
dc.title.none.fl_str_mv The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
title The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
spellingShingle The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
Bérgolo Sosa, Marcelo
Ciencias Económicas
Welfare policy
Labor supply
Registered employment
Labor informality
title_short The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
title_full The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
title_fullStr The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
title_full_unstemmed The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
title_sort The Anatomy of Behavioral Responses to Social Assistance When Informal Employment is High
dc.creator.none.fl_str_mv Bérgolo Sosa, Marcelo
Cruces, Guillermo Antonio
author Bérgolo Sosa, Marcelo
author_facet Bérgolo Sosa, Marcelo
Cruces, Guillermo Antonio
author_role author
author2 Cruces, Guillermo Antonio
author2_role author
dc.subject.none.fl_str_mv Ciencias Económicas
Welfare policy
Labor supply
Registered employment
Labor informality
topic Ciencias Económicas
Welfare policy
Labor supply
Registered employment
Labor informality
dc.description.none.fl_txt_mv The disincentive effects of social assistance programs on registered employment are a first order policy concern in developing countries. Means tests determine eligibility with respect to some income threshold, and governments can only verify earnings from registered employment. The loss of benefit at some level of formal earnings is an implicit tax that results in a strong disincentive for formal employment. We study an income-tested program in Uruguay and extend previous literature by developing an anatomy of the behavioral responses to this program. Our identification strategy is based on a sharp discontinuity in the program's eligibility rule and uses information from the program's records, social security administration data, and a follow-up survey. First, we establish that beneficiaries respond to the program's incentives by reducing their levels of registered employment by about 8 percentage points. Second, we find the program induces a larger reduction of formal employment for individuals with a medium probability to be a registered employee, suggesting some form of segmentation – those with a low propensity to work formally do not respond to the financial incentives of the program. Third, we find evidence that the fall in registered employment is due to a larger extent to an increase in unregistered employment, and to a lesser extent to a shift towards non-employment. Fourth, we find an elasticity of participation in registered employment of about 1.7, implying a deadweight loss from the behavioral responses to the program of about 3.2% of total registered labor income.
Centro de Estudios Distributivos, Laborales y Sociales
description The disincentive effects of social assistance programs on registered employment are a first order policy concern in developing countries. Means tests determine eligibility with respect to some income threshold, and governments can only verify earnings from registered employment. The loss of benefit at some level of formal earnings is an implicit tax that results in a strong disincentive for formal employment. We study an income-tested program in Uruguay and extend previous literature by developing an anatomy of the behavioral responses to this program. Our identification strategy is based on a sharp discontinuity in the program's eligibility rule and uses information from the program's records, social security administration data, and a follow-up survey. First, we establish that beneficiaries respond to the program's incentives by reducing their levels of registered employment by about 8 percentage points. Second, we find the program induces a larger reduction of formal employment for individuals with a medium probability to be a registered employee, suggesting some form of segmentation – those with a low propensity to work formally do not respond to the financial incentives of the program. Third, we find evidence that the fall in registered employment is due to a larger extent to an increase in unregistered employment, and to a lesser extent to a shift towards non-employment. Fourth, we find an elasticity of participation in registered employment of about 1.7, implying a deadweight loss from the behavioral responses to the program of about 3.2% of total registered labor income.
publishDate 2016
dc.date.none.fl_str_mv 2016
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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
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