Silvia Espinoza, University of Bristol - Social Protection and Incentives to Labour Informality

Title: Social Protection and Incentives to Labour Informality: A Regression Discontinuity Design applied to Colombia's Non-Contributory Health Regime

Abstract: This paper studies whether the structure and targeting of the Colombian welfare system, particularly the fact that the Non-Contributory Health Regime is only available to the poor if they don’t hold a formal job, affects a worker's decision to be informal. I use a Regression Discontinuity Design, which exploits the fact that targeting for non-contributory (social assistance) programmes in Colombia is carried out using a proxy means test index called Sisben, where individuals who fall below a known threshold of Sisben scores receive the programmes. This provides exogenous variation in coverage to non-contributory programmes without affecting labour informality directly, and estimates a Local Average Treatment Effect for those around the eligibility threshold. I find evidence that being eligible to non-contributory health increases the probability of being informal by about 12-20 percentage points for male heads of household around the eligibility threshold, while being covered by non-contributory health increases it by around 80 percentage points.

Presenter: Silvia Espinoza, University of Bristol

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