Subsidizing Informality?: Non-contributory Public Spending in Latin America and the Caribbean
This paper presents new data documenting the level and evolution of public spending on non-contributory programs for 16 countries in Latin America and the Caribbean. Salaried formal workers contribute to social security and in return have access to an array of benefits -mainly old-age pensions and health services. In recent decades, informal workers – salaried and non-salaried- have gained access to similar benefits, financed through general revenues. Our calculations indicate that, on average, the region spends 1.7% of GDP in these programs. Although they were created in response to social demands, by targeting informal workers these programs may create a behavioral response -i.e. more informality. This paper does not attempt to measure behavioral effects. Its main contribution is to be the first to document this “subsidy to informality” following a common methodology across countries and years in the region.
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| Format: | Technical Notes biblioteca |
| Language: | English |
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Inter-American Development Bank
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| Subjects: | Working Condition, Informal Labor, Public Expenditure, H53 - Government Expenditures and Welfare Programs, H55 - Social Security and Public Pensions, J38 - Public Policy, Informality;Government Expenditure;Welfare programs;labor policy, |
| Online Access: | http://dx.doi.org/10.18235/0001373 https://publications.iadb.org/en/subsidizing-informality-non-contributory-public-spending-latin-america-and-caribbean |
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| Summary: | This paper presents new data documenting the level and evolution of public spending on non-contributory programs for 16 countries in Latin America and the Caribbean. Salaried formal workers contribute to social security and in return have access to an array of benefits -mainly old-age pensions and health services. In recent decades, informal workers – salaried and non-salaried- have gained access to similar benefits, financed through general revenues. Our calculations indicate that, on average, the region spends 1.7% of GDP in these programs. Although they were created in response to social demands, by targeting informal workers these programs may create a behavioral response -i.e. more informality. This paper does not attempt to measure behavioral effects. Its main contribution is to be the first to document this “subsidy to informality” following a common methodology across countries and years in the region. |
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