Work and tax evasion incentive effects of social insurance programs : evidence from an employment based benefit extension
Date
2012
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Publisher
Center for Distributive, Labor and Social Studies (CEDLAS), Universidad Nacional de La Plata, AR
Abstract
The paper studies a large-scale expansion of employment-based benefits in the social insurance system of a middle-income country (Uruguay). Policy changes extended the coverage of a compulsory, in-work and payroll tax-financed health insurance program to the dependent children of private sector salaried workers, but only to full-time registered employees (those complying with payroll tax and social security contribution requirements). Results indicate that individuals that benefited from the reform responded to financial incentives, significantly increasing their labor force participation and hours of work. The incentive effects of public policies on both labor supply and tax evasion margins matter for developing and middle-income countries.
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Keywords
LABOUR SUPPLY, TAX EVASION, SOCIAL INSURANCE, LABOUR LAW, LABOUR LEGISLATION, LABOUR POLICY, LABOUR PRODUCTIVITY, INFORMAL SECTOR, SOCIAL POLICY, SOCIAL SECURITY, SOCIAL EQUITY, WAGE INCENTIVES, HEALTH INSURANCE, INSURANCE, URUGUAY, SOUTH AMERICA