Abstract:
We analyse the disconnect between the intended design and actual outcomes of Honduras's social protection system. The current framework results in low coverage rates and limited redistribution, and imposes an implicit tax on formal activity. It also discourages productivity-enhancing decisions by workers and firms, contributing to the persistence of high informality and inequality. To address these issues and fulfil the objectives of social protection, we propose reforms which aim to expand coverage, improve equity, and strengthen incentives for workers and firms to comply with norms. As Honduras discusses social protection reform, this study offers timely insights to inform policy.
