Cash-on-hand in Developing Countries and the Value of Social Insurance: Evidence from Brazil

Britto, Diogo G. C. (2015) Cash-on-hand in Developing Countries and the Value of Social Insurance: Evidence from Brazil. Bologna: Dipartimento di Scienze economiche DSE, p. 42. DOI 10.6092/unibo/amsacta/4662. In: Quaderni - Working Paper DSE (1059). ISSN 2282-6483.
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Abstract

This paper first exploits a "bonus" policy providing low-income workers with cash grants in Brazil to study the effect of liquidity provision on unemployment outcomes. Based on a RD Design, I find that granting unemployed workers with a bonus equal to half of their previous monthly earnings decreases the probability of exiting unemployment within 8 weeks by around 0.65%. Second, by exploiting the UI potential duration schedule, I find that granting workers with an extra month of unemployment benefits decreases the same outcome by 1.9%. Then, theoretical results from Landais (2014) are used to combine these estimates and disentangle liquidity and moral hazard effects of UI. Based on these, I estimate the liquidity-to-moral hazard ratio in Brazil to be as large as 98%, similarly to values previously found in the US. It suggests that, contrary to common belief, providing UI in developing countries with large informal labor markets may yield substantial welfare gains.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Britto, Diogo G. C.
Keywords
Unemployment Insurance, Unemployment Duration, Liquidity-to-Moral Hazard Ratio, Informal Labor Market
Subjects
ISSN
2282-6483
DOI
Deposit date
25 Feb 2016 13:57
Last modified
25 Feb 2016 13:57
URI

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