Social protection, entrepreneurship and labour market activation

Brasilia, september 2014

Social Protection and

Labour Market Impacts in Argentina

Leonardo Gasparini Santiago Garganta

with the support of

Social protection in Argentina

• Broad coverage for formal workers • Increasing but still partial coverage of

informal workers. • Two flagship programs (since late 2000s)

o Moratoria: non-contributory pensions

o Asignación Universal por Hijo (AUH): CCT

Characteristics of AUH

• Monthly cash subsidy per child (around USD 50)

• Conditions • Parents should be unemployed or informal (unregistered) • Children under 18 • Compliance with education and health requirements

AUH is a large program • In terms of participants

o 30% of all children in the country o 90% of children in poorest deciles

• In terms of budget o 0.8 % of GDP

• In terms of the subsidy o Benefit per child represents

15% of mean hh income in poorest three deciles

Large compared to other programs in Argentina (Cruces and Gasparini, 2012) and to other Latin American CCTs (Stampini and Tornarolli, 2012)

Available data is scarce

• Not an RCT • No microdata available from the Program • National household survey (EPH): not a specific

question on AUH but can trace the subsidy with other questions

Large impact on poverty and inequality

0

10

20

30

40

50

60

1 2 3 4 5

Distribution of participants by quintile Reduction in poverty (line= USD 4 PPP)

Reduction in inequality

-13%

-24%

-30% -35%

-30%

-25%

-20%

-15%

-10%

-5%

0%FGT (0) FGT (1) FGT (2)

-2%

-13% -14%

-12%

-10%

-8%

-6%

-4%

-2%

0%Gini Ratio decil 10/1

Larger impact than the average in Latin America (Cruces and Gasparini, 2012).

The debate on unintended outcomes

• Ample support to the program but debate over some unintended outcomes: o Labour informality o Labour force participation

• Our research:

• look for signs of unintended outcomes • using diff-in-diff • exploiting the short panel structure of EPH

Incentives against formalization?

• Universal coverage initiatives may deteriorate the incentives to participate in the formal labor market (Galiani and Weinschelbaum (2012), Levy (2008), Antón et al. (2012))

• The presence of the program could • change decision between self-employment and formal job

• reduce bargaining power of informal workers against their employers

• The practical relevance of the potential disincentives can only be determined with empirical evidence.

Incentives against formalization? Transitions to formality

Informal workers in poor households

Source: Garganta and Gasparini (2014).

0

5

10

15

20

25

30

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Without children

With children

Before-program

Incentives against formalization Transitions to formality

Informal workers in poor households

Source: Garganta and Gasparini (2014).

0

5

10

15

20

25

30

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

With children

Without children

Before-program After-program

The effect on labour informality

(1) (2) (3)

With_Children * After -0.0765*** -0.0695*** -0.0821***(0.0184) (0.0167) (0.0257)

With_Children (H ) 0.0385*** 0.0472*** 0.0562***(0.0123) (0.0132) (0.0155)

After (Post ) 0.108*** 0.152*** 0.186***(0.0276) (0.0229) (0.0399)

With controls, time and regional dummies No Yes YesExcluding the unemployed No No YesObservations 16,635 16,635 13,777Pseudo R2 0.005 0.086 0.095

Size: estimates represent a mean reduction of around 30% in the probability of formalization for the treatment group

Robust to various checks

Using also

All 1 child 3 children Matching Discontinuity semester 2 2007 2008

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii)

With_Children * After -0.0894** -0.0610** -0.0895** -0.0977*** -0.0534* -0.0612*** -0.00928 0.0259(0.0353) (0.0266) (0.0358) (0.0379) (0.0301) (0.0203) (0.0346) (0.0272)

With_Children (H ) 0.0744*** 0.0323 0.0631*** 0.0488 0.0199 0.0475*** 0.0410* 0.0457**(0.0164) (0.0237) (0.0234) (0.0352) (0.0205) (0.0118) (0.0245) (0.0193)

After (Post ) 0.211*** 0.171*** 0.212*** 0.233*** -0.0127 0.0584** 0.0849** 0.0298(0.0579) (0.0528) (0.0583) (0.0597) (0.0317) (0.0247) (0.0377) (0.0361)

Controls Yes Yes Yes Yes Yes Yes Yes YesObservations 10,057 3,258 7,738 5,571 1,732 22,995 6992 9094Pseudo R2 0.099 0.114 0.102 0.114 0.126 0.087 0.1152 0.1017

Restricted sample: age (25-55) False experiments: intervention in

Effect is decreasing in the age of the child

0-5 6-10 11-14 15-17 Disabled

With_Children * After -0.0876*** -0.0707*** -0.0689** -0.0551* -0.0840**(0.0258) (0.0255) (0.0326) (0.0317) (0.0339)

With_Children (H) 0.0531** 0.0584** 0.0505 0.0318 0.0165(0.0219) (0.0273) (0.0598) (0.0599) (0.0306)

After (Post) 0.185*** 0.181*** 0.155*** 0.212*** 0.179***(0.0416) (0.0399) (0.0368) (0.0456) (0.0386)

Controls yes yes yes yes yesObservations 8,159 4,843 3,661 3,037 2,921Pseudo R2 0.1002 0.1142 0.1008 0.1269 0.1023

Age of youngest child

No effect for secondary workers with formalized primary worker

Primary Secondary Informal primary worker Formal primary worker(i) (ii) (iii) (iv)

With_Children * After -0.100** -0.0609** -0.0472* -0.0902(0.0393) (0.0262) (0.0277) (0.0644)

With_Children (H ) 0.0919*** 0.0174 0.0223 -0.175(0.0191) (0.0216) (0.0203) (0.152)

After (Post ) 0.206*** 0.173*** 0.153*** 0.188*(0.0536) (0.0420) (0.0340) (0.102)

Controls Yes Yes Yes YesObservations 7,494 6,283 5,732 542Pseudo R2 0.091 0.092 0.101 0.186

Type of worker Secondary worker

No evidence for transition to informality

Poorest 30% Poorest 20% Poorest 40%

With_Children * After 0.0692 0.0391 -0.0271(0.0518) (0.0726) (0.0277)

With_Children (H ) -0.0175 -0.0167 -0.0298(0.0268) (0.0562) (0.0298)

After (Post ) -0.0343 0.00902 0.0115(0.0494) (0.0685) (0.0323)

Controls Yes Yes YesObservations 4,883 2,261 8,011Pseudo R2 0.004 0.054 0.031

Labour force participation Is the program discouraging people from participating in the labour market?

o Negative, but small, effect for women o No effect for males

Females MalesTreat * After -0.0168* -0.00285

(0.00878) (0.0121)Treat 0.0307** -0.0207

(0.0125) (0.0134)After -0.00911 -0.0680

(0.0181) (0.0420)

Individual Characteristics Yes YesRegional and time dummies Yes Yes

Concluding remarks

• Need a more open and richer debate on labor

incentives of AUH

o More evidence on existing programs

o Interpretation of evidence

o Discussion on alternative designs

Thanks!