Download Uninsured Risks, Social Policies and Productivity

Social Policies and
Productivity
Juan Pablo Atal and Hugo Ñopo
Goal of the Chapter
To explore the link between:
– Governments’ decisions (regarding labor
markets regulation and social protection
policies), and
– Productivity (at least labor productivity).
Outline of the Presentation
1. Trying to define the question
–
–
A conceptual map for the report and key definitions
What does the literature say? (some possible
channels)
2. Proposing a way to answer it
–
–
Focus on specific channels
Use of two layers of evidence
a. Cross-country regressions
b. Identifying productivity effects of policy-making from
existing natural experiments and social interventions
Outline of the Presentation
1. Trying to define the question
–
–
A conceptual map for the report and key definitions
What does the literature say? (some possible
channels)
2. Proposing a way to answer it
–
–
Focusing on specific channels
Two layers of evidence
a. Cross-country regressions
b. Identifying productivity effects of policy-making from
existing natural experiments and social interventions
Conceptual Map
(Brief, perhaps incomplete and biased)
Labor Market
-Supply
- Formality (SS coverage)
- Dependance relationship/
entrepreneurship
HOUSEHOLD
DECISIONS
GOVERNMENT
DECISIONS
PRODUCTIVITY
AND
GROWTH
Unions
FIRM
DECISIONS
Fiscal
- Spending (Social,
Infraestructure)
Legislative
- Labor Market
Institutions
- Investment
Promotion
- Taxes
- Final goods
Hiring
(formal/
informal)
Investment,
R&D
Conceptual Map
(Brief, perhaps incomplete and biased)
Labor Market
-Supply
- Formality (SS coverage)
- Dependance relationship/
entrepreneurship
HOUSEHOLD
DECISIONS
GOVERNMENT
DECISIONS
PRODUCTIVITY
AND
GROWTH
Unions
FIRM
DECISIONS
Fiscal
- Spending (Social,
Infraestructure)
Legislative
- Labor Market
Institutions
- Investment
Promotion
- Taxes
- Final goods
Hiring
(formal/
informal)
Investment,
R&D
Government Spending and Social
Policy
From Public Finance Theory: Government Spending can be classified in
(Harris 2002):
1.
Public Goods and Services: Pure public goods as national defense and
general services as administration, legislation and regulation.
2.
Economic Services: Private goods of services prone to natural monopoly or
strong externalities. Examples include public utilities and financial support for
specific activities such as research and development.
3.
Merit goods and services: Quasi-public goods provided on grounds of
market failure, externalities or economic justice principles. Examples:
education (citizens may ignore the social returns of human capital investment
or may have limited access to capital markets) and health care.
4.
Social transfers: Transfers providing income support to households whose
living standards have declined sharply or those who face exceptional
expenses due to old age, disability, sickness, unemployment or family
circumstances.
Social
Policy
Outline of the Presentation
1. Trying to define the question
–
–
A conceptual map for the report and key definitions
What does the literature say? (some possible
channels)
2. Proposing a way to answer it
–
–
Focusing on specific channels
Two layers of evidence
a. Cross-country regressions
b. Identifying productivity effects of policy-making from
existing natural experiments and social interventions
Social Policy and Labor
Productivity: Some Channels
• Direct: education, health
• Intermediary: labor markets regulation, taxation,
social protection/security (welfare dependency,
non-wage labor costs).
• Indirect: inequality, mobility, social cohesion and
trust
Social Policy and Labor
Productivity: Some Channels
•
Direct
–
–
–
•
Intermediary
–
–
–
•
Literature on private return to schooling. An additional year of schooling has a return tha
ranges between 5 and 13% (for a review see Card, 2001).
Long run elasticity of output per capita with respect to human capital in the range of 0.6 for
the OECD (Bils and Klenow (1998), Krueger and Lindahl (2000), Topel (1999), Temple (2000))
Improvements in labor quality accounts for 30 % of the US productivity residual (Griliches,
1997) and 58 % in Canada (Mun and Ho, 2000)
Job security policies have a substantial impact on the level and the distribution of
employment in LA (Heckman and Pages, 2000)
Stringent legislation slows down job turnover. Employment and output effects. (Micco and
Pages, 2007)
Welfare dependency: And its effects on formal/informal labor allocation (Levy, 2008)
Indirect:
–
–
Inequality: Controversial and not conclusive empirical and theoretical literature.
Social cohesion and trust: Lack of trust makes harder to do business, increasing transaction
costs (IADB, 2008)
Outline of the Presentation
1. Trying to define the question
–
–
A conceptual map for the report and key definitions
What does the literature say? (some possible
channels)
2. Proposing a way to answer it
–
–
Focusing on specific channels
Two layers of evidence
a. Cross-country regressions
b. Identifying productivity effects of policy-making from
existing natural experiments and social interventions
Social Policy and Labor
Productivity. Some Channels
• Direct: education, health
• Intermediary: labor markets regulation, taxation,
social protection/security (welfare dependency,
non-wage labor costs).
• Indirect: inequality, mobility, social cohesion and
trust
How answerable are these questions?
• Two layers of evidence
– Layer 1: Cross-country comparisons of, on the
one hand, governments’ spending and
regulation, and on the other, labor force
participation and formality.
– Layer 2: Within-country
analysis
of
households’ reactions to social policy-making
Layer 1:Crafting a dataset
Social Government Spending 1995
[% GDP]
ARG
URY
BRA
CRI
COL
BOL
CHL
MEX
PRY
VEN
NIC
PER
DOM
HON
TYT
ECU
SLV
GTM
EDUCATION
HEALTH
SOCIAL SECURITY
HOUSING
0
Source: CEPAL
5
10
15
20
25
Layer 1:Crafting a dataset
Social Government Spending 2005
[% GDP]
ARG
URY
BRA
CRI
COL
BOL
CHL
MEX
PRY
VEN
NIC
PER
DOM
HON
TYT
ECU
SLV
GTM
EDUCATION
HEALTH
SOCIAL SECURITY
HOUSING
0
Source: CEPAL
5
10
15
20
25
Layer 1:Crafting a dataset
Average Social Government Spending
[% GDP]
20
15
10
5
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
EDUCATION
Source: CEPAL
HEALTH
SOCIAL SECURITY
HOUSING
Layer 1:Crafting a dataset
Mapping Social Expenditures
• We have been able to obtain disaggregated data
for some countries. Example: Peru
• For others, we had access to data but further
intensive work is needed. Example: Nicaragua
• The goal is to disaggregate these expenditures
according to formality and poverty status.
Layer 1:Crafting a dataset
Labor Market and Investment Promotion Regulations
• We will use/update Heckman and Pages
(2000)
• We will use data from the Doing Business
Report
Layer 1:Crafting a dataset
The Outcomes
• From RES’ Harmonized Household
Surveys (Sociometro) we will create
synthetic observations (by birth cohort and
possibly other covariates) and compute:
– Labor supply
• Participation
• Hours of work
– Formality
– Entrepreneurship
Yes, we all “love” cross-country
regressions…
• But at least, it is one way of
comparing many countries in
the region.
• And we have the potential of
reaching many countries in
our sample:
– REAs: with your help!
– Carmen: with your help as
well ($$$) .
• Ideal:
to
measure
the
OUTPUTS (quality) of social
policy and link them to
productivity.
• Reality: we will measure the
INPUTS of social policy and
link them to some labor
markets outcomes.
• The
heterogeneity
of
the
relationship between social
policies and productivity will
hardly be captured.
Layer 2: Reviewing the Literature
• Camacho and Conover (2008): Exploits the variation in fraction of
interviews taken after social program reforms conducted for the
Census of the Poor, within a municipality and across time to assess
its effect on formal/informal allocation.
–
Result: Colombian government when instituting and expanding social programs in the early
nineties, inadvertently created incentives for people to move from the formal to the informal
labor market.
• Yánez-Pagans (2008): Exploits the sharp discontinuity in Bolivida
assignment mechanism to assess its effect on educational
expenditure.
–
Results: Show differences in intra-household income allocation process towards children's
educational expenditure by gender and ethnicity.
• Gasparini et al. (2007): Using data from Jefes de Hogar (PJH) and
some matching estrategies.
–
Results: The program induced an increase in informality.
• Among others and further inputs from Mexico (health) and
Argentina (non-contributive pensions) by Pages et alia
(forthcoming)
Plug-ins
• Conditional Cash Transfers (CCTs - César
Bouillon)
• Social cohesion and trust (IADB, 2008)
Next steps, time frame, wishes,
requests and hopes…
• Layer 1. Crafting the dataset: 5 months
(outsourced)
• Layer 2. Literature review: goes in parallel
• Writing the chapter: 2 months
 This chapter can be ready by April, 2009
(but we will need support for the
outsourced activity).