Title

Rent-Extraction from the Unemployment Insurance System: The Role of Firms

Author(s)

Bernardus Van Doornik Bernardus Van Doornik (Banco Central do Brasil)

David Schoenherr David Schoenherr (Princeton University)

Janis Skrastins Janis Skrastins (Washington University in St. Louis)

Abstract

Exploiting an unemployment insurance (UI) reform in Brazil, we document formal layoff and recall patterns consistent with rent extraction from the UI system. Firms lay off workers just as they become eligible for UI benefits and recall them just when benefits cease. In addition, firms continue to employ some of the formally laid off workers informally. Salary patterns around the reform are consistent with workers sharing rents with firms through lower equilibrium salaries. We estimate that 2.3 to 11.8 percent of UI payments do not fulfill an insurance purpose, but redistribute income to firms and workers who play the system.

Creation Date

2020-08

Section URL ID

Paper Number

2020-20

URL

https://drive.google.com/file/d/0B1ijSZ0kc-DxWFM1VGJGZ1lOZEE/view?resourcekey=0-uWnJfQkWbiyv7xbGaR8LZg

File Function

Jel

J21, J22, J46, J65, K31

Keyword(s)

unemployment insurance, informality, labor supply, rent-seeking

Suppress

false

Series

13