Unemployment Assistance and Transition to Employment in Argentina

53 Pages Posted: 14 Jul 2008

See all articles by Ana Iturriza

Ana Iturriza

Erasmus University Rotterdam (EUR) - Institute of Social Studies (ISS)

Arjun S. Bedi

Erasmus University Rotterdam - International Institute of Social Studies; IZA Institute of Labor Economics

Robert A. Sparrow

Wageningen UR - Development Economics Group; Erasmus University Rotterdam (EUR) - Institute of Social Studies (ISS); IZA Institute of Labor Economics

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Abstract

In 2001-02, Argentina experienced a wrenching economic crisis. Plan Jefes, implemented in May 2002, was Argentina's institutional response to the increase in unemployment and poverty triggered by the crisis. The program provided a social safety net and appears to have successfully protected some families against indigence. Despite this success, the continued existence of the program, which provides benefits to eligible unemployed individuals for an unlimited duration, may have unappealing long-term consequences. Reliance on the plan may reduce the incentive to search for work and in the long-run may damage individual employability and perpetuate poverty. Motivated by these concerns, this paper examines the effect of participating in Plan Jefes on the probability of exiting from unemployment. Regardless of the data set, the specification and the empirical approach, the evidence assembled in this paper shows that for the period under analysis individuals enrolled in the Plan are between 12 to 19 percentage points less likely to transit to employment as compared to individuals who applied but did not join the Plan. The negative effect of the program tends to be larger for females and as a consequence, over time, the program becomes increasingly feminized. Prima facie, the estimates suggest that programs such as Plan Jefes need to re-consider the balance between providing a social safety net and dulling job-search incentives.

Keywords: unemployment assistance programs, unemployment transitions, Argentina

JEL Classification: J64, J65

Suggested Citation

Iturriza, Ana and Bedi, Arjun S. and Sparrow, Robert A., Unemployment Assistance and Transition to Employment in Argentina. IZA Discussion Paper No. 3579. Available at SSRN: https://ssrn.com/abstract=1158976 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Ana Iturriza

Erasmus University Rotterdam (EUR) - Institute of Social Studies (ISS) ( email )

PO Box 29776
2502 LT The Hague, 2518 AX
Netherlands

Arjun S. Bedi

Erasmus University Rotterdam - International Institute of Social Studies ( email )

PO Box 29776
2502 LT The Hague, 2518 AX
Netherlands
+31 70 426 0493 (Phone)
+31 70 426 0799 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Robert A. Sparrow

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Erasmus University Rotterdam (EUR) - Institute of Social Studies (ISS) ( email )

PO Box 29776
Den Haag, 2518 AX
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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