Francisco Haimovich

Labor informality bias of a poverty-alleviation program in Argentina

In 2002, in the midst of a serious macroeconomic crisis, Argentina implemented a large social program (the Programa Jefes de Hogar, PJH) that provides cash transfers to unemployed household heads meeting certain criteria. In practice, the difficulty in monitoring the unemployment requirement for informal (unregistered) workers would imply a disincentive for the program participants to search for a formal job. By applying matching techniques we evaluate the empirical relevance of this prediction during the period of strong economic growth that followed the crisis. We find some evidence on the informality bias of the PJH when the value of the cash transfer was relatively high compared to wages in the formal labor market.

Simulating the Impact of the 2009 Financial Crisis on Welfare in Latvia

This note details simulations of the distributional impacts of the 2009 financial crisis on households in Latvia. It uses household survey data collected prior to the crisis and simulates the impact of the growth slowdown. The simulations show that Latvia experienced a sharp rise in poverty, widening of the poverty gap, and a rise in income inequality due to the economic contraction in 2009. The 18 percent contraction in gross domestic product (affecting mainly trade hotels and restaurants, construction, and manufacturing) likely led the poverty head count to increase from 14.4 percent in 2008 to 20.2 percent in 2009. The poverty gap, which measures the national poverty deficit, was simulated to increase from 5.9 percent in 2008 to 8.3 percent in 2009. The analysis finds that the results are robust to most assumptions except post-layoff incomes, which substantially mitigated household welfare. The authors also simulate the impact of Latvias Emergency Social Safety Net components and find that the Safety Net likely mitigated crisis impacts for many beneficiaries. The simulations measure only direct short-run impacts; hence, they do not take into account general equilibrium effects. Post-crisis income data from a different data source suggest that poverty rates increased by 8.0 percentage points between 2008 and 2009. As a result, the authors suggest that their ex-ante simulation performs reasonably well and is a useful tool to identify vulnerable groups during the early stages of a crisis.

Education reform and labor market outcomes: The case of Argentina’s Ley Federal de Educación

In the nineties Argentina implemented a large education reform (Ley Federal de Educación - LFE) that mainly implied the extension of compulsory education in two additional years. The timing in the implementation substantially varied across provinces, providing a source of identification for unraveling the causal effect of the reform. The estimations from difference-in-difference models suggest that the LFE had a positive impact on years of education and the probability of high school graduation. The impact on labor market outcomes—employment, hours of work and wages—was positive for the non-poor youths, but almost null for the poor.

Educational Reform and Labor Market Outcomes: the Case of Argentina’s Ley Federal de Educación

In the nineties Argentina implemented a large education reform (Ley Federal de Educación – LFE) that mainly implied the extension of compulsory education in two additional years. The timing in the implementation substantially varied across provinces, providing a source of identification for unraveling the causal effect of the reform. The estimations from difference-in-difference models suggest that the LFE had an overall positive although mild impact on education and labor outcomes. The impact on the income-deprived youths was small for education outcomes and null for labor outcomes.

Is Social Assistance Contributing to Higher Informality in Turkey

Although still low for European standards, investments in Social Assistance (SA) transfers in Turkey have been increasing in recent years. The government is expanding access to subsidized health for individuals in the informal sector through a rapid expansion of the Green Card program. Generous non-contributory programs, such as the Green Card, may create perverse incentives for individuals to join or remain in the informal sector as they can access free services without paying taxes and/or contributions, thus potentially being able to get higher “net” labor earnings than in the formal sector. Despite the fact that the Green Card is a large and generous program offered to individuals in the informal sector, empirical analysis in this report does not find an actual impact of the program (or of its rapid expansion) on informality. The reason behind this finding is the existence of a very large differential in wages between formal and informal workers explained by differences worker’s productivity. Low-wage workers facing the possibility to move from the informal sector to the formal sector would have strong incentives to do so even if this would imply losing all SA benefits. As such, the expected monetary and job security gains of having a formal job dominate those of having an informal job even after accounting for SA transfers.

Predicting school dropout with administrative data: new evidence from Guatemala and Honduras

ABSTRACT School dropout is a growing concern across Latin America because of its negative social and economic consequences. Identifying who is likely to drop out, and therefore could be targeted for interventions, is a well-studied prediction problem in countries with strong administrative data. In this paper, we use new data in Guatemala and Honduras to estimate some of the first dropout prediction models for lower-middle income countries. These models correctly identify 80% of sixth grade students who will drop out within the next year, performing better than other commonly used targeting approaches and as well as models used in the U.S.