Does Expanding Health Insurance beyond Formal-Sector Workers Encourage Informality? Measuring the Impact of Mexico’s Seguro Popular
Seguro Popular was introduced in 2002 to provide health insurance to the 50 million Mexicans without Social Security. This paper tests whether the program has had unintended consequences, distorting workers' incentives to operate in the inform...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110831083052 http://hdl.handle.net/10986/3548 |
| Summary: | Seguro Popular was introduced in 2002 to
provide health insurance to the 50 million Mexicans without
Social Security. This paper tests whether the program has
had unintended consequences, distorting workers'
incentives to operate in the informal sector. The analysis
examines the impact of Seguro Popular on disaggregated labor
market decisions, taking into account that program coverage
depends not only on the individual's employment status,
but also that of other household members. The identification
strategy relies on the variation in Seguro Popular's
rollout across municipalities and time, with the
difference-in-difference estimation controlling for
household fixed effects. The paper finds that Seguro Popular
lowers formality by 0.4-0.7 percentage points, with
adjustments largely occurring within a few years of the
program's introduction. Rather than encouraging exit
from the formal sector, Seguro Popular is associated with a
3.1 percentage point reduction (a 20 percent decline) in the
inflow of workers into formality. Income effects are also
apparent, with significantly decreased flows out of
unemployment and lower labor force participation. The impact
is larger for those with less education, in larger
households, and with someone else in the household
guaranteeing Social Security coverage. However, workers pay
for part of these benefits with lower wages in the informal sector. |
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