Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/115412
Authors: 
Finkelstein Shapiro, Alan
Sarzosa, Miguel
Year of Publication: 
2013
Series/Report no.: 
IDB Working Paper Series IDB-WP-385
Abstract: 
We use a dynamic stochastic general equilibrium search and matching model with salaried employment and informal self-employment to analyze the implications of introducing universal unemployment protection for informal workers through transfers, which are conditional on participation in training programs. We study how changes in unemployment benefits (UB) for unemployed workers in training programs (training UB), modify labor market outcomes for the unemployed. The model suggests that increasing training UB reduces unprotected unemployment and improves labor market outcomes through higher formal salaried employment and lower informal self-employment. Allowing for idiosyncratic quality in these training programs is key for these results. Higher training UB can also reduce total informal employment through a drastic reduction in the share of informal self-employment, without necessarily causing a large increase in total unemployment. Finally, the model suggests that increasing training UB may increase the volatility of unprotected unemployment. The influence of training programs on formal wage-setting is crucial to explain these results.
Subjects: 
Business cycles
informality
labor search
JEL: 
E02
E24
E26
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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