@TechReport{iza:izadps:dp14601,
            	author={Liepmann, Hannah and Pignatti, Clemente},
            	title={Welfare Effects of Unemployment Benefits When Informality Is High},
            	year={2021},
	month={Jul},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={14601},
            	url={https://www.iza.org/publications/dp14601},
	abstract={We analyze for the first time the welfare effects of unemployment benefits (UBs) in a context of high informality, exploiting matched administrative and survey data with individual-level information on UB receipt, formal and informal employment, wages and consumption. Using a difference-in-differences approach, we find that dismissal from a formal job causes a large drop in consumption, which is between three to six times larger than estimates for developed economies. This is generated by a permanent shift of UB recipients towards informal employment, where they earn substantially lower wages. We then exploit a kink in benefits and show that more generous UBs delay program exit through a substitution of formal with informal employment. However, the disincentive effects are small and short-lived. Because of the high insurance value and the low efficiency costs, welfare effects from increasing UBs are positive for a range of values of the coefficient of relative risk aversion.},
	keywords={informal employment;welfare effects;unemployment benefits},
            }