The impact of the action plan for promoting employment and combating unemployment on employment informality in Algeria

ABSTRACT

This paper examines whether the Action Plan for Promoting Employment and Combating Unemployment, a labor market intermediation program adopted by the Algerian government in 2008, reduced the informality of employment in Algeria. Using repeated cross-section data from the Household Survey on Employment for the period from 1997 to 2013, and a difference-in-difference methodology, we estimate whether the Action Plan has reduced the probability that workers are employed informally in enterprises of more than 5 workers – the type of enterprise that is most likely to be directly affected by the Action Plan. Our results show that the Action Plan has in fact contributed to reducing employment informality in such enterprises, but with heterogeneous effects. More precisely, it reduced informality for employees of establishments of 10 workers or more but had no significant effects on informality for those working in enterprises of 5 to 9 workers. Furthermore, when we restrict our estimates to new entrants only, we do not find statistically significant effects.

KEYWORDS:

• Informal employment
• Labor Market Programs
• Impact Assessment
• Algeria

JEL CODES:

• J08
• J46
• J48
• O17

Acknowledgement

The contents of this document are the sole responsibility of the authors and can under no circumstances be regarded as reflecting the position of the European Union.

Disclosure statement

No potential conflict of interest was reported by the authors.

Glossary

ADS	=	Agence de Développement Social
AIG	=	Activités d'intérêt general
ANEM	=	Agence Nationale de l’Emploi
ANGEM	=	Agence Nationale de Gestion de Micro-crédit
ANDI	=	Agence Nationale Développement de à l`investissement
ANDPME	=	Agence Nationale Développement de la Petite et Moyenne Entreprise
ANSEJ	=	Agence Nationale de Soutien à l’Emploi des Jeunes
CFI	=	Contrat de formation insertion
CID	=	Contrat d'intergration des diplomés
CIP	=	Contrat d'intergration professional
CNS	=	Conseil National de la Statistique
CREAD	=	Centre de Recherche en Economie Appliquée pour le Développement
CPE	=	Contrat de Pré emploi
CTA	=	Contrat de travail aidé
DA	=	Dinar Algérien
DAIP	=	Dispositif d`Aide à L’Insertion Professionnel
DAIS	=	Dispositif d'Activité d'Insertion Sociale
ESIL	=	Emploi Salarie d`Initiative Locale
IAIG	=	Indemnité d'activités d’ intérêt général
PAS	=	Programme d`ajustement Structurel
PID	=	Programme d'intégration des diplômés
SNMG	=	Salaire National Minimum Garanti

Notes

1 The average growth rate of the working age population over the 1996–2002 period was 3.4%. The female labor force participation rate was 9.2% in 1990 and increased to 17.1% in 2000.

2 Calculated by authors based on data from the Household Survey of Employment (Enquete Emploi aupres des Menages) implemented by ONS.

3 Wahba and Assaad (2016) use a similar approach to assess the effects of changes in labor regulations on employment informality in Egypt.

4 Pissarides (1990) evaluated the responsiveness of hiring to the vacancy rate and the unemployment rate, whereas Abraham (1983) focused on unemployment resulting from frictional adjustments rather than insufficient demand.

5 Between the ages of 15 and 29 years.

6 Table A1 in the appendix shows the distribution of social security contributions in Algeria.

7 The can be written as a function of the other averages:

8 Actually, in our case there are two treatment variables and their interactions with the Post dummy. The first is one indicating partial treatment (being in a firm of 5-9 workers) and the second is a full treatment (being in a firm of 10+ workers). For simplicity, we show only one treatment here.

9 Although the data is available for 2003, 2004 and 2005, this data is missing an important variable for our analysis, namely the size of the enterprise, which was only asked for own-account workers in these years. Our regressions therefore rely on data from 1997, 2001, 2002 and then annually from 2006 to 2013.

10 This information is obtained from a question about age of the first job which is asked of all individuals in the survey.

11 As can be seen in Figure 1, even firms of 10+ workers have early 50–60% of their workers hired informally.

Additional information

Funding

This research benefited from financial assistance of the European Union within the context of the European Commission-FEMISE project on: ‘Support to economic research, studies and dialogue of the Euro-Mediterranean Partnership”.