https://orcid.org/0000-0002-2139-3291
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Abstract
Information asymmetries and limited skills are two main factors affecting job seekers’ chances to access quality jobs in developing countries. This paper evaluates the effectiveness of a program combining job intermediation and wage subsidy in Bolivia, a country with one of the highest levels of informality in Latin-America. Using administrative and survey data, we find that the program substantially increases employment and formality. These effects are heterogeneous across different subsamples of interest. Our results suggest that Active Labor Market Policies might be an effective solution for improving access to quality jobs in the context of high informality.
Acknowledgment
We thank Mauricio Chumacero, Soraya Roman, Nelson Chacon, Graciana Rucci, and Manuel Urquidi for support and helpful comments. We also thank Ricardo Avalos for his research assistance. The data that support the findings of this study are available from the Inter-American Development Bank and PAE.
Disclosure statement
The authors report there are no competing interests to declare.
Notes
1 Following the national regulation of Bolivia (Law 342), we define youth as individuals younger than 29.
2 Key differences between the context of develop and developing countries (e.g., informality, access to information, quality and relevance of education and skills formation) constrains the chances of extrapolating the results from the former. Generating evidence from developing countries is particularly important now that many countries in LAC have started implementing or reinforced their wage subsidy programmes as a response to COVID-19 (United Nations International Children's Emergency Fund [UNICEF], Citation2020).
3 Evidence about intermediation services are more frequent in Nordic and Anglo countries, while evidence about subsidies are more frequent in Germanic and Nordic countries.
4 Most of the programmes and evidence about effectiveness comes from developed countries, where wage subsidies have a long-standing tradition (O’Higgins, Citation2017). For instance, Gelber, Isen, and Kessler (Citation2016) find that an internship programme in New York increases earnings and employment in the short-term.
5 Galasso et al. (Citation2004) analyse the impact of a wage subsidy programme in Argentina, finding that it improves the probability of employment and does not affect earnings. The effects are larger among women and youth.
6 Between 2005 and 2017 the poverty rate in Bolivia reduced from 59.6 to 36.4 percent and the yearly average GDP was 4.9 percent.
7 In 2012, the unemployment rate for youth, women, and people with low level of education were 3, 3, and 1 percent, respectively. In turn, informality rates were 87, 83, and 96 percent, respectively. Informality rate is defined as percentage of employed workers contributing to social security. Inter-American Development Bank, Labour Market and Social Security Information System (SIMS).
8 In 2017, a second version of PAE was implemented. The new version maintains the same logic and logistic of the original programme but includes three specific pilots aiming at targeting three vulnerable groups (youths, women, and people with disabilities). Our evaluation corresponds to the original programme design.
9 Although PAE aims at targeting those with lower levels of education, the programme does not include any eligibility criteria in this regard. Beneficiaries tend to have higher education levels than the general population (Table SM7).
10 According to Mazza (Citation2017), nearly 80 percent of workers in Bolivia finds jobs through informal channels.
11 Wage subsidies increases with educational level and by economic sector. For each educational level, subsidies in manufacture are higher than in services, which in turn are higher than in commerce.
12 Jobseekers could be beneficiaries of PAE only once in their lifetime.
13 PES works as a single window for different labour programmes, such as: Mi Primer Empleo Digno, for disadvantaged youths; Intermediación Directa, which is a search and intermediation assistance programme; and Plan de Empleo, which is a platform combining several policies aiming at increasing employability. Unfortunately, due to data restrictions, it is not possible to identify individuals who are beneficiaries of these interventions. Therefore, our estimates are likely to be a lower bound of the real effect of PAE.
14 At registration with the programme, firms sign an affidavit stating the intention that the vacancy leads to a permanent hiring.
15 The maximum number of beneficiaries of a firm could not exceed 50 percent of its current stock of workers. Once a firm achieved its quota of beneficiaries, it could only reapply a year after the first beneficiaries graduated from PAE.
16 For each jobseeker, shortlists provide national identity number, name and surname, date of birth, address, phone number, and occupation sought. These shortlists do not rank jobseekers but listed them by the date of registration into the PES.
17 Employers received the information that was available at the time of PES registration only. During the intermediation process, caseworkers only matched vacancies with jobseekers and did not offer more services (e.g., vocational information, training) (Cooper, Citation2014).
18 Table SM10 in the SM show the characteristics of PAE beneficiaries.
19 Data collection about jobseekers was performed for those registered between January 2015 and June 2017. Nevertheless, we restrict our analysis to 2016 and 2017, due a high level of attrition for 2015 jobseekers. The difficulty in finding jobseekers prior to 2016 is explained by the high percentage of people who changed their contact telephone numbers, a common occurrence in Bolivia.
20 To consider an interview as “refused” interviewers were required to make at least five communication attempts, at different times.
21 Similar rates hold by beneficiaries and no-beneficiaries status (Table SM1).
22 Table SM3 in the SM shows the differences between those who completed or not (including the ones who were not contacted) the survey. Those who completed the survey are older, more likely to be women and married, have a higher level of education, higher expected wage and manifested interest in fewer vacancies than those who did not complete the survey. As expected by the data collection protocol, those registered in 2017 are slightly more likely to complete the survey.
23 Graph SM1 in the SM shows the distribution of propensity scores for the treatment and control groups. Less than 1 percent of the sample falls outside the common support.
24 In Table SM7 we compare some baseline characteristics of PES beneficiaries with household survey data. This allow us to get a sense about how representative is our sample. We could conclude that, on average, those in SPE are younger, more educated and less indigenous.
25 Through the paper, income is deflated to 2017 prices and converted to US $ using an exchange rate of 6.96 bolivianos per US$.
26 Table SM4 in the SM shows that the effect of PAE on employment, formal employment, and log earnings presented in this Section hold when different kernel bandwidths (0.09, 0.03 and 0.01, rather than the 0.06 default) are used. Similarly, results hold when standard errors are calculated by a bootstrap with 500 replications (Table SM5 in the SM).
27 Table SM6 in the SM shows the effect of PAE on earnings, unconditional on working. For this, we calculate an inverse hyperbolic sine transformation (IHS).
28 These results need to be taken carefully because differences in the composition of applicants to the different cohorts might confound with the effects of PAE over time.
29 Tables SM8 and SM9 show that baseline characteristics are balanced under the two methods (IPW and ex-post randomization).
30 To strengthen our analysis, we additionally performed the ex-post randomization exercise 100 times and plotted the distribution of the estimated coefficients for each outcome. Graph SM2 in the SM show that the distributions are also consistent with the results found with the original sample.