The Effect of Welfare Payments on Work in a Middle-Income Country
Date issued
Aug 2017
Subject
Informal Labor;
Social Security;
Labor
JEL code
J22 - Time Allocation and Labor Supply;
H55 - Social Security and Public Pensions;
I38 - Government Policy • Provision and Effects of Welfare Programs
Category
Working Papers
We study the impact of welfare payments in Ecuador on the probability that women and men work, and on whether they are employed in the formal or informal sectors. Our analysis is based on two distinct identification strategies and two separate sources of data spanning more than 10 years. We find no evidence that welfare discouraged work. However, among women, welfare payments led to reductions in social security contributions (which are mandated for salaried workers) and payment of VAT and income taxes (which are mandated for the self-employed and firm owners), although the magnitude of these effects is small.
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