Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment

36 Pages Posted: 10 Nov 2009

See all articles by Adriana Camacho

Adriana Camacho

Universidad de los Andes, Colombia - Department of Economics

Emily Conover

Hamilton College - Economics Department

Alejandro Hoyos

Universidad de los Andes, Colombia

Date Written: August 9, 2009

Abstract

We examine whether the Colombian government, when instituting and expanding social programs in the early nineties, inadvertently created incentives for people to become informal. We use data from repeated cross-sections of the Colombian Household Survey for periods before and after implementation of the reforms. As robustness, we also construct a panel of individuals interviewed for the first and second Census of the Poor. Using the variation in the onset of interviews across municipalities we find robust and consistent estimates of an increase in informal employment between 2 and 4 percentage points. From a policy perspective this implies that the broad expansion of government provided health insurance in Colombia contributed to increasing informal employment.

Keywords: Incentives, Informal Sector, Health Insurance, Social Protection, Colombia

JEL Classification: I11, I18, O17

Suggested Citation

Camacho, Adriana and Conover, Emily and Hoyos, Alejandro, Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment (August 9, 2009). Documento CEDE No. 2009-18, Available at SSRN: https://ssrn.com/abstract=1502784 or http://dx.doi.org/10.2139/ssrn.1502784

Adriana Camacho (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Emily Conover

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States

Alejandro Hoyos

Universidad de los Andes, Colombia ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

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