Programas de proteccion social y empleo: El Seguro Popular mexicano.

AutorCampos-Vazquez, Raymundo M.

Social Protection Programs and Employment The Case of Mexico's Seguro Popular Program

Introduction

There have been many empirical studies on the effects of means-tested social assistance programs on labor supply in the United States and other industrialized nations (see Moffitt, 2002 for an overview of programs in the United States). While many of these studies have found that some types of social assistance programs do have negative effects on individual labor supply decisions (e.g. AFDC, Hoynes, 1996), other programs appear to have little or no effect on labor supply (e.g. Food Stamps, Hagstrom, 1998). The link between social assistance and employment is even less clear in developing countries. Little empirical research has been done, and we cannot necessarily extrapolate from the developed country case. One reason we may expect to find stronger effects of these programs on employment in Less Developed Countries (LDCS) is the prevalence of large, legal informal labor markets in these countries. In the presence of strong informal labor markets, the incentives to reduce employment offered by means-tested social assistance programs may drive workers to hide income or employment itself by working in the informal sector.

These large informal labor markets themselves are another reason to be interested in the employment effects of social assistance programs specific to LDCs. These countries face a continuous trade-off between providing social programs to their large poor populations and concerns about the loss of efficiency and economic growth which is believed to be associated with the growth of informal labor markets (Perry et al., 2007). Authors like Baeza and Packard (2006), Levy (2008) and Wagstaff (2007) advocate a change in the means of financing social assistance programs in LDCs, because of the belief that these programs promote informality and that informality negatively affects productivity and economic growth. (1) While we cannot address the latter concern in the present study, we do attempt to provide some evidence of the role (or lack thereof) of social assistance programs in promoting informality in the labor market. (2)

In this paper, we contribute to the literature on the employment effects of social assistance programs in the developing world by examining the case of Mexico's Seguro Popular program. Designed in part to increase and improve health care access for Mexico's approximately 50 million uninsured citizens, Seguro Popular (SP) is a component of Mexico's sweeping health system reform, begun in the early 2000s and scheduled to cover all uninsured by 2013. In particular, workers can have access to SP only if they are not covered by Mexico's official, formal, social security institutions. Hence, SP may provide incentives to workers to stay in the informal sector for longer periods of time or to switch from formal to informal sector jobs. In this paper we look for evidence of that claim.

We are not the first to examine the impact of the SP in the labor market. Barros (2008) finds no impact of the program in formal employment trends. We view our paper as complementary evidence. Barros (2008) relies on consumption-income expenditure surveys, while we focus on employment surveys. Also, he aggregates the information at the state level, while we use municipality level information. Azuara and Marinescu (2011) also analyze the impact of Seguro Popular on informality using a similar strategy to the one used in this paper. However, they analyze individual data, while we use aggregate information at the municipal level. Aggregating information allows us to show trends before and after the program was implemented across municipalities. Both Barros (2008) and Azuara and Marinescu (2011) find no effect of Seguro Popular on formal employment outcomes. Aterido et al. (2011), on the other hand, find a small negative impact of Seguro Popular on formal employment. However, Aterido et al. (2011) focus in the joint decisions of members within the household.

Our analysis follows a difference-in-difference approach, exploiting the variation created by the time-staggered entry of Mexican municipalities into the program. We use two longitudinal data sets, the National Survey of Employment (Encuesta Nacional de Empleo or ene) and the Urban Household Evaluation Survey (Encuesta de Evaluacion de los Hogares Urbanos or Encelurb), the evaluation survey for the implementation of the Oportunidades program in urban areas. These two data sets cover over 150 municipalities during the early years of Seguro Popular implementation, from 2001 through 2004. We look for evidence of significant shifts in employment out of the formal sector in municipalities where workers were given access to the Seguro Popular program during the period studied. Our comparison group is the set of municipalities which had not yet received the program by the time of our study.

We find little evidence of significant effects of Seguro Popular on the labor market, at least during these early years of the program. Although we cannot outright reject a small negative effect, our estimated coefficients are small and mostly insignificant. They tell us that there is little change in the likelihood of being formally employed in a city once it gains access to Seguro Popular. In the aggregate results, males with less than a high school education have the largest negative response to the Seguro Popular program of all demographic groups we analyze. The estimated coefficient implies a 1 per cent decline in formal employment rates after the introduction of Seguro Popular; however, the result is not statistically significant. We analyze several specifications to test the robustness of the result. We consider how Seguro Popular affected formal employment outcomes with a lag and on growth rates of formal employment instead of levels. We restrict the sample to specific demographic groups, exclude government and agriculture, exclude non-salaried workers and the results do not change. The individual data set analysis confirms the aggregate data results. Individuals in cities with Seguro Popular are not more likely to switch from formal to informal sector jobs than individuals in cities with no Seguro Popular. Another common result across data sets is that Seguro Popular does not modify female employment decisions. The results often include estimates with the wrong sign and large standard errors. In sum, both data sets indicate that SP does not significantly affect employment outcomes.

We also consider alternative explanations for the lack of a measurable effect. These include the possibility that take-up of the program is not high enough during the period of our study to allow changes in employment to be detected, and the possibility that the Seguro Popular program is not valued enough by its potential beneficiaries to provide an incentive to leave the formal sector. We provide suggestive evidence for the years 2005-2006 using aggregate data for the municipalities analyzed for the period 2001-2004. (3) Cities that substantially increased the coverage of Seguro Popular did not change their formal employment rates substantially.

The rest of the paper is organized as follows: In the first section, we give a history of the social security system in Mexico, including the perceived disparities which led to health care reform in the early 2000s. We also detail the structure of that reform, including the Seguro Popular program and its implementation. A brief overview of the literature on informality in Mexico is also given in this section. Then, we describe an individual decision-making model, which shows how a worker may decide to switch out of the formal sector when given access to a meanstested social assistance program. Section III explains in detail the two data sets used in our analysis, the Encuesta Nacional de Empleo and Encuesta de Evaluacion de los Hogares Urbanos, while section IV converts our decision-making model into econometric form and discusses identification issues. Section V describes and interprets the results of our analysis, and section VI concludes, pointing the way for future research.

  1. Background and History

    I.1. Mexico's Health Care System and Reform

    Mexico's current social protection system was born in 1943. Under it, formally employed workers (and their families) are entitled to a full spectrum of benefits including health insurance. (4) In exchange for these benefits, they and their employers pay payroll taxes amounting to roughly 24 per cent of their salaries excluding other local and federal taxes. The unemployed and workers not employed in the formal sector are not entitled to these benefits, although there is a network of social assistance programs to which they do have access. In the specific case of health care, two institutions were created for formal sector workers: the Instituto Mexicano de Seguro Social (IMSS) and the Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE), for workers in the private and public segments of the formal sector, respectively. The Secretaria de Salud y Asistencia (SSA) was created to serve all others. As the name indicates, the role of the latter institution was purely "social assistance", and while these services are intended to provide for up to 50 per cent of the population, they account for less than a third of federal health spending (Lloyd-Sherlock, 2006).

    By 2000, the inequalities in this system were apparent. Nearly 50 per cent of the Mexican population, amounting to 47 million people, was uninsured (Secretaria de Salud, 2004). The World Health Organization (2000) ranked Mexico 144th out of 191 countries in fairness of health care finance, and the Mexican Ministry of Health estimated that 2 to 4 million families, or 10 to 20 per cent of the total population, suffered catastrophic and impoverishing health care expenses every year. These families were almost...

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