Heterogeneous effects of Brazilian unemployment insurance reforms on layoffs

Abstract

This paper presents the first use of program administrative data from Brazil’s unemployment insurance (UI) program to assess the heterogeneous impact of changes in UI eligibility criteria on layoff probabilities. To estimate these impacts, we exploit exogenous program changes introduced by executive and legislative actions in 2015. We demonstrate the importance of using UI administrative data that accounts for the number of prior UI benefit requests to assess the heterogeneous effects of changes in eligibility rules and obtain more precise estimates. We show that the 2015 changes in UI eligibility rules reduced layoffs, and we find evidence that the changes also reduced collusion between workers and employers for layoffs as it became harder to extract subsidies from the UI system. Changes in UI eligibility criteria had heterogeneous impacts depending on the number of prior benefit requests. The layoff reductions were greatest before workers’ second benefit request.