Social Insurance, Informality, and Labor Markets

How to Protect Workers While Creating Good Jobs
 
 
Oxford University Press
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  • erschienen am 4. Dezember 2014
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  • 384 Seiten
 
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978-0-19-150836-3 (ISBN)
 
Most countries implement social protection programs to help individuals manage risks such as unemployment, disability, illness, longevity or death. In many middle income countries, these are often based on a 'Bismarckian model' (named after Otto von Bismarck), where benefits are financed by contributions levied on salaried employment. In countries with a large informal sector, however, only a fraction of the population is covered by this system and non-contributory programs have been added or are planned to increase coverage. This can create distortions in the labor market, and the book is about policies to expand the coverage of social insurance programs to all workers, without reducing incentives to job creation and formal work. While few would argue against the need and social merits of social insurance and social assistance programs there are growing concerns about their unintended consequences on labor markets because of poor design. The programs can distort incentives and individual behaviors in ways that either reduce employment levels and/or promote informality, ultimately affecting productivity and economic performance. For instance, high social security contribution rates can reduce formal employment; badly designed unemployment benefits can reduce incentives to keep, search, and take jobs; and fragmented social assistance programs can become a tax on formal labor and encourage informality. The book reviews the evidence regarding the effects of social insurance and social assistance programs on labor market outcomes and discusses options to improve their design and implementation. The book focuses particularly on middle income countries in Latin America and Asia with a large informal sector and suggests ways to reduce these distortions and better manage and finance the subsidies to make coverage universal, while creating good jobs. The book compiles expert papers from the joint conferences of the World Bank (WB), the Institute for the Study of Labor (IZA) and the Inter-American Development Bank (IDB) on Employment and Development.
  • Englisch
  • Oxford
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  • Großbritannien
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978-0-19-150836-3 (9780191508363)
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Markus Frölich is Full Professor of Econometrics at the University of Mannheim and former Program Director of the IZA/World Bank research area "Employment and Development". His main research areas are labor market policies, unemployment, social protection, microfinance and econometric policy evaluation in Africa and Asia. He received his Ph.D. in economics from the University of St.Gallen in 2002. He is Associate Editor of IZA World of Labor, the IZA Journal of Labor & Development, the Journal of Business and Economic Statistics (JBES) and Co-Editor of Labour Economics. He has published in leading economic journals such as the Economic Journal, Journal of American Statistical Association, Journal of Econometrics, Journal of Royal Statistical Society, Journal of Applied Econometrics, Review of Economics and Statistics, among others. David Kaplan is a senior labor market specialist in the Labor Markets and Social Security Unit of the Inter-American Development Bank (IDB). Prior to joining the IDB in 2010, he worked as a research economist at the U.S. Bureau of Labor Statistics; as an assistant professor of economics at the Instituto Tecnológico Autónomo de México; and as a private sector development specialist at the World Bank. He is an expert in labor markets in developing countries, particularly in the areas of labor regulations and social insurance. David Kaplan has published research articles in journals such as the Journal of Economic Perspectives, the Journal of Development Economics, the Journal of Public Economics, and the Review of Economics and Statistics. He received a Ph.D. in economics from Cornell University in 1998. Carmen Pagés-Serra is the Chief of the Labor Markets and Social Security Unit of the Inter-American Development Bank (IDB). Previously, she was a principal research economist at the IDB's Research Department and led key publications such as The Age of Productivity: Transforming Economies from the Bottom Up; Law and Employment: Lessons from Latin America and the Caribbean, jointly with the Nobel Laureate Prof. James Heckman; Good Jobs Wanted: Labor Markets in Latin America and the Caribbean; and Job Creation in Latin America and the Caribbean: Recent Trends and Policy Challenges (jointly with S. Scarpetta and G. Pierre). She has published extensively in leading academic and policy journals in the areas of labor markets and social security. Prior to joining the IDB, she was a senior labor economist at the World Bank from 2004 to 2006. She holds a M.A. degree in economics from the Universidad Autónoma de Barcelona and a Ph.D. in economics from Boston University. Jamele Rigolini is a Senior Economist in the World Bank Chief Economist Office for Latin America and the Caribbean. His research interests include social protection, labor markets, institutions and economic growth policies. Prior to joining the World Bank he was an Assistant Professor of Economics at the University of Warwick, where he taught classes on development economics and economic growth. He also worked for the Inter-American Development Bank, McKinsey & Co, and the International Union for the Conservation of Nature. Jamele Rigolini graduated in Physics from the Swiss Federal Institute of Technology (ETH) in Zürich, and holds a Ph.D. in Economics from New York University. He has published in leading economics and development journals including the Journal of Public Economics, the Journal of Development Economics, and World Development. David Robalino is the Labor Team leader at the Social Protection anchor of the World Bank and the Co-Director of the Labor and Development Program at IZA. Since joining the Bank David has been working on issues related to social security, labor markets and fiscal policy. He has worked in several countries in Latin America, the Middle East and North Africa, Sub-Saharan Africa, and Asia. David has published on issues related to macroeconomics and labor markets, social insurance and pensions, health financing, the economics of HIV/AIDS, and the economics of climate change. More recently David has been working on issues related to the design of unemployment benefits systems in middle income countries, the extension of social insurance programs to the informal sector, and the integration of social protection and education/training policies to improve labor market outcomes. Prior to joining the Bank David was a researcher at the RAND Corporation.
  • Cover
  • Social Insurance, Informality, and Labor Markets: How to Protect Workers While Creating Good Jobs
  • Copyright
  • Contents
  • List of Figures
  • List of Tables
  • Preface*
  • Assessing the Effects of Social Insurance on Labor Markets
  • Setting the Mandate of the Insurance Programs and Designing Redistributive Arrangements
  • Financing a Universal Social Insurance System
  • Conclusions
  • Have more Flexibility When Setting the Mandate, or Bundle of Benefits, of Social Insurance Programs
  • Reduce Tax-wedges
  • 1: Social Insurance, Informality, and Labor Markets: How to Protect Workers While Creating Good Jobs
  • 1.1. Introduction
  • 1.2. Conceptualizing the Links Between Social Insurance and the Labor Market
  • 1.3. Assessing the Effects of Social Insurance on Labor Markets
  • 1.4. Setting the Mandate of the Insurance Programs
  • 1.4.1. Defining the Mandate of the Social Insurance System
  • 1.4.2. Designing Redistributive Arrangements
  • 1.5. Financing a Universal Social Insurance System
  • 1.6. Concluding Remarks
  • Notes
  • References
  • Part I: Assessing the Effects of Social Insurance on Labor Markets
  • 2: The Evolution of Social Security Systems in Latin America*
  • 2.1. Introduction
  • 2.2. The Bismarckian Vision of Social Security
  • 2.3. When Did Latin America Adopt the Bismarckian Model?
  • 2.4. A Comparison Between Social Security Policy and Education Policy
  • 2.5. The Beveridge Model of Social Security
  • 2.6. Why Did Latin America Adopt the Bismarckian Model?
  • 2.7. The Expected Expansion of Coverage Never Materialized
  • 2.8. Why Has Informality Been So Persistent?
  • 2.9. The Movement Towards Parallel Non-Contributory Programs
  • 2.10. The Result of a Long Historical Process is a Poorly Designed Patchwork System of Social Security
  • 2.11. An Alternative Social Security Model Can Be Implemented
  • 2.12. Conclusions
  • Notes
  • References
  • 3: Labor Informality and the Incentive Effects of Social Protection Systems: Evidence from a Health Reform in Uruguay*
  • 3.1. Introduction
  • 3.2. The Social Protection System in Uruguay
  • 3.3. The Health Reform and its Labor Market Incentive Effects
  • 3.3.1. The 2008 Health Reform
  • 3.3.2. Health Insurance Expansion and Incentives for Formal-Sector Employment
  • 3.4. Data and Identification Strategy
  • 3.4.1. Data
  • 3.4.2. Identification Strategy
  • 3.5. Empirical Results: Incentive Effects and the Health Reform in Uruguay
  • 3.5.1. Effects at the Individual Level
  • 3.5.2. The Impact of Health Reform on Intra-Household Labor Arrangements
  • 3.6. Conclusions and Policy Discussion
  • Notes
  • References
  • 4: Effects of Non-Contributory Systems on Informality: Taking Stock of Eight Years of Implementation of Mexico's Seguro Popular*
  • 4.1. Introduction
  • 4.2. The Reform
  • 4.3. Implementation of, and Affiliation to, Seguro Popular
  • 4.4. Direct Effect of Seguro Popular on Health Services Provision and Health Outcomes
  • 4.5. Unintended Effects of Seguro Popular on the Labor Market
  • 4.6. Discussion and Conclusions
  • Notes
  • References
  • 5: Unemployment Insurance, Job Search, and Informal Employment*
  • 5.1. Introduction
  • 5.2. Overview of Current Malaysian Labor Markets
  • 5.3. The Model Framework
  • 5.3.1. Unemployment Value Function
  • 5.3.2. Self-Employment Value Function
  • 5.3.3. Wage and Salary Sector Value Functions
  • 5.3.4. Employer-Side Value Functions
  • 5.3.5. Wages
  • 5.4. The Data
  • 5.4.1. The Household Income Survey (2009)
  • 5.4.2. The Labor Force Survey with the Wages and Salaries Supplement (2009)
  • 5.5. Estimation
  • 5.5.1. Direct Recovery of Parameters and Population Moments
  • 5.5.2. Recovery of y for All Sampled Individuals
  • 5.5.3. Estimation of the Distributions of Sector-Specific Productivity Draws GI (x|y) and GF (x|y)
  • 5.5.4. Recovery of the Remaining Parameters by Simulated Pseudo Method of Moments
  • 5.6. Microsimulations of Policy Experiments
  • 5.7. Conclusion
  • Appendix A: Basic Structure of the Model
  • Appendix B: Regression Results
  • Appendix C: Simulation Results
  • Notes
  • References
  • 6: Does Formal Work Pay? The Role of Labor Taxation and Social Benefit Design in the New Member States*
  • 6.1. Introduction
  • 6.2. Measurements of Informality and Disincentives for Formal Work
  • 6.2.1. Definition of Informal Employment
  • 6.2.2. The Comparison Between Formal and Informal Employment
  • 6.2.3. Labor Taxation: The Tax-Wedge
  • 6.2.4. Social Benefits
  • 6.2.5. The Formalization Tax Rate
  • 6.2.6. The Marginal Effective Tax Rate
  • 6.3. Do Disincentives for Formal Work Matter?
  • 6.3.1. Data
  • 6.3.2. Descriptive Statistics
  • 6.3.3. Econometric Analysis
  • 6.3.4. Expected Results
  • 6.3.5. Results
  • 6.4. Conclusions and Policy Implications
  • Notes
  • References
  • Part II: Setting the Mandate of the Insurance Programs and Designing Redistributive Arrangements
  • 7: Participation in Mandated and Voluntary Social Risk Management Arrangements: The Role and Limits of Financial Education and Other Interventions*
  • 7.1. Introduction: Background, Motivation, and Structure
  • 7.2. The Role and Limits of Information/Capability to Foster Individual Self-Provision and Reduce the Need for Compulsion
  • 7.2.1. Key Reasons for Non-Participation in Voluntary Market-Based and/or Mandated Social Risk Management Arrangements
  • 7.2.1.1. Supply Side Issues
  • 7.2.1.2. Demand Side Issues
  • Constraints Due to Products and Systems Information Limitations
  • Constraints Due to Limitations in Knowledge, Skills, and Attitude
  • Constraints Due to Behavioral Limitations
  • 7.2.2. Are More Information and Better Financial Education Always Beneficial to Higher Participation?
  • 7.2.2.1. In an (Almost) Full Information Economy with Utility Maximizing Individuals
  • 7.2.2.2. In an Asymmetric Information Economy with Utility Maximizing Individuals
  • 7.2.2.3. In an Incomplete Information Economy with Rational/Bounded-Rational Individuals
  • 7.3. The Role and Limits of Financial Literacy/Capability
  • 7.3.1. Main Content Domains of Financial Literacy/Capability to Improve the Use of Social Risk Management Instruments
  • 7.3.2. Conceptualizing and Measuring Financial Literacy/Capability
  • 7.3.2.1. Conceptualizing Financial Literacy/Capability
  • The Normative/Cognitive Approach
  • The Positive/Agnostic Approach
  • 7.3.2.2. Measuring Financial Literacy/Capability Across Time and Space
  • 7.3.2.3. Measuring Financial Literacy/Capability Around the World
  • 7.4. The Role and Limits of Financial Education and Other Interventions
  • 7.4.1. Does Financial Education Work in General and for Social Risk Management Use?
  • 7.4.2. What are Promising Alternatives to Influence Behavior in General and for Social Risk Management Use?
  • 7.4.2.1. Nudging
  • 7.4.2.2. Advocacy
  • 7.5. Conclusions
  • Notes
  • References
  • 8: Labor Income and the Design of Default Portfolios in Mandatory Pension Systems: An Application to Chile*
  • 8.1. Introduction
  • 8.2. A Model of Life-Cycle Behavior
  • 8.2.1. Recursive Formulation of the Problem
  • 8.3. Calibration of the Illustrative Examples
  • 8.4. Results
  • 8.4.1. The Benchmark Individual
  • 8.4.2. Welfare Analysis
  • 8.4.3. Simulation Results for Alternative Types of Individuals
  • 8.4.3.1. Female Wage Earners
  • 8.4.3.2. Public Workers
  • 8.4.3.3. High Education
  • 8.4.3.4. Employers
  • 8.5. Conclusions
  • Appendix A: The Details of the Model
  • A Labor Income, Asset Allocation and Portfolio Defaults
  • B Life-Cycle Problem
  • B1 Bellman Equation (Active Worker)
  • B2 Theoretical Solutions
  • B3 Numerical Solution Method
  • B4 Properties of the Solutions
  • C Sensitivity Analysis
  • Appendix B: The Chilean Pension System
  • A Retirement Accounts, Portfolio Choice, and Portfolio Defaults
  • B Pension Benefits and Retirement Age
  • C Minimum and Maximum Pensions
  • D Pension Assets Risk and Returns
  • Notes
  • References
  • 9: Assessing Redistribution within Social Insurance Systems: The Cases of Argentina, Brazil, Chile, Mexico, and Uruguay*
  • 9.1. Introduction
  • 9.2. The Old-Age Pension and Unemployment Insurance Programs
  • 9.3. Conceptual Framework
  • 9.4. Data
  • 9.4.1. Argentinean Data
  • 9.4.2. Brazilian Data
  • 9.4.3. Chilean Data
  • 9.4.4. Mexican Data
  • 9.4.5. Uruguayan Data
  • 9.5. Methods
  • 9.5.1. Labor Income and Labor Status Models
  • 9.5.2. Computation of Social Security Contributions and Benefits
  • 9.5.3. Computation of Pre- and Post-Social Security Lifetime Income
  • 9.5.4. Computation of Income Distribution Indexes
  • 9.6. Results
  • 9.7. Concluding Remarks
  • Notes
  • References
  • 10: The Design of a Multi-Tier Contributory Pension System: The Distributional Impact of the 2008 Chilean Pension Reform*
  • 10.1. Introduction
  • 10.2. The Chilean Pension System and Its Reform
  • 10.2.1. The System in 2008
  • 10.2.2. Description of the 2008 Reform
  • 10.3. Data
  • 10.4. Methodology
  • 10.4.1. Forecasting the Components Pensions and Pension Wealth
  • 10.4.1.1. Wages and Labor Supply
  • 10.4.1.2. Child Subsidies
  • 10.4.1.3. Compensation Upon Divorce
  • 10.4.1.4. Survivor Pension
  • 10.4.1.5. Disability Insurance
  • 10.4.2. Forecasting Individual Pensions and Pension Wealth
  • 10.5. Results
  • 10.5.1. Accrual Rates and Average Pension Wealth
  • 10.5.2. Changes in the Accumulated Pension Wealth Before and After theReform
  • 10.5.3. Changes in the Distribution of Pensions Resulting from the Reform
  • 10.5.4. Changes in the Distribution of the Pension Difference Between Men and Women
  • 10.5.5. Changes in Pensions and Pension Wealth Inequality
  • 10.5.6. Changes in Poverty Levels Before and After the Reform for Elderly People, in Particular, for Elderly Women
  • 10.6. Conclusions
  • Appendix A: Tables
  • A Children Profiles
  • B Divorce Profiles
  • C Outcomes of Interest
  • Appendix B: Assumptions
  • Appendix C: Other Components Introduced by the Reform
  • Appendix D: Computing Pension Entitlements
  • Notes
  • References
  • 11: Should Cash Transfers Be Confined to the Poor? Implications for Poverty and Inequality in Latin America*
  • 11.1. Introduction
  • 11.2. The Cash and Targeting Revolutions
  • 11.3. Data and Methodology
  • 11.4. Results
  • 11.4.1. Children
  • 11.4.2. Elderly
  • 11.4.3. Cost-Effectiveness of Categorical vs. Targeted Programs
  • 11.4.4. Imperfect Targeting and Administrative Costs
  • 11.4.5. Relative Targeting
  • 11.4.6. Alternative Age Groups
  • 11.4.7. Geographic Targeting
  • 11.5. Conclusions
  • Appendix
  • Notes
  • References
  • Part III: Financing Social Insurance Programs
  • 12: Labor Market Institutions and Informality in Transition and Latin American Countries*
  • 12.1. Introduction
  • 12.2. Using a Broad Definition of Informality
  • 12.3. The Impact of Policies to Lower Labor Costs andto Reduce Regulation
  • 12.3.1. A Partial Equilibrium Model of Lowering Labor Costs to Employers
  • 12.3.2. Empirical Evidence on the Effects of Lowering Labor Costs to Employers
  • 12.3.3. Labor Supply Effects of Lowering the Tax-Wedge
  • 12.3.4. Labor Market Regulation and Informality
  • 12.4. Taxation and Informality within the Formal Sector
  • 12.5. Empirical Analysis with Macro Data
  • 12.5.1. Data Sources and Descriptive Statistics
  • 12.5.1.1. Data Sources
  • 12.5.1.2. Descriptive Statistics
  • 12.5.2. Methodology
  • 12.5.3. Empirical Results
  • 12.6. Conclusions
  • Appendix - IZA-World Bank Panel Data Base
  • Notes
  • References
  • 13: Financing Social Expenditures in Developing Countries: Payroll or Value-Added Taxes?
  • 13.1. Introduction
  • 13.2. Financing SI in Latin America
  • 13.2.1. Current Concerns
  • 13.2.2. Economic Aspects of Payroll Taxation
  • 13.2.2.1. Statutory Incidence
  • 13.2.2.2. Payroll Taxes as Benefit Taxes
  • 13.2.2.3. Informality
  • 13.3. The Choice of Tax Base
  • 13.3.1. Payroll Taxes and VAT: The Policy Landscape
  • 13.3.2. A Conceptual Framework
  • 13.4. A Formal Model
  • 13.4.1. Tax Incidence Without Informality
  • 13.4.1.1. Equal Tax Rate Comparisons
  • 13.4.2. The Informal Sector
  • 13.4.2.1. Comparing Tax Systems
  • 13.4.2.2. Is VAT More Efficient Than Payroll Taxation?
  • 13.4.3. Discussion
  • 13.5. Concluding Remarks
  • Notes
  • References
  • 14: Financing Universal Social Security in Mexico*
  • 14.1. Introduction
  • 14.2. Current Social Insurance and Tax Policy vs. USI
  • 14.2.1. Current Social Insurance vs. USI
  • 14.2.2. Current Tax Policy vs. USI
  • 14.3. The Model
  • 14.4. Taking the Model to the Data
  • 14.5. Is the New Scheme Financially Sound?
  • 14.6. Conclusions
  • Notes
  • References
  • 15: Alternative Ways of Pricing and Financing Social Insurance*
  • 15.1. Introduction
  • 15.2. Current Social Insurance and Tax Structures
  • 15.2.1. Social Insurance Financing
  • 15.2.2. Income Taxes and VAT
  • 15.3. Problems with Payroll Financing of Social Insurance
  • 15.3.1. Background
  • 15.3.2. Sources of Social Insurance Pricing Problems
  • 15.3.2.1. Inadequate Rate of Return
  • 15.3.2.2. Conflicts with Social Assistance Programs
  • 15.4. How Can Pricing Issues Be Addressed?
  • 15.4.1. Tie Benefits More Closely to Contributions
  • 15.4.2. Increase the Rate of Return on Pension Saving
  • 15.4.3. Coordinate Social Insurance with Social Assistance
  • 15.4.4. Make Social Insurance a "Menu"
  • 15.4.5. Summary
  • 15.5. Implications for Informality
  • 15.6. Implications for Financing Social Insurance
  • Appendix A: Defining the Structure of a Social Insurance Program
  • Appendix B: (Notional) Defined-Contribution vs. Defined-Benefit Systems
  • Appendix C: Financial Market Rates of Return
  • A Intercohort Risk Sharing
  • B How Persistent is the Current Downturn in Equity Markets Likely to Be?
  • Notes
  • References
  • Notes on Editors and Authors
  • Index

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