TY - JOUR
T1 - Strategic Formal Layoffs
T2 - Unemployment Insurance and Informal Labor Markets
AU - Van Doornik, Bernardus
AU - Schoenherr, David
AU - Skrastins, Janis
N1 - Publisher Copyright:
© 2023, American Economic Journal: Applied Economics. All Rights Reserved.
PY - 2023
Y1 - 2023
N2 - Exploiting an unemployment insurance reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by 11 percent. Most of the additional layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled when benefits cease. These patterns are stronger for industries and municipalities with a high degree of labor market informality.
AB - Exploiting an unemployment insurance reform in Brazil, we study incentive effects of UI in the presence of informal labor markets. We find that eligibility for UI benefits increases formal layoffs by 11 percent. Most of the additional layoffs are related to workers transitioning to informal employment. We further document formal layoff and recall patterns consistent with rent extraction from the UI system. Workers are laid off as they become eligible for UI benefits and recalled when benefits cease. These patterns are stronger for industries and municipalities with a high degree of labor market informality.
UR - https://www.scopus.com/pages/publications/85163307080
U2 - 10.1257/app.20200787
DO - 10.1257/app.20200787
M3 - Article
AN - SCOPUS:85163307080
SN - 1945-7782
VL - 15
SP - 292
EP - 318
JO - American Economic Journal: Applied Economics
JF - American Economic Journal: Applied Economics
IS - 1
ER -