The Impact of a Social Program on Labor Informality: The Case of AUH in Argentina

Abstract

The recent Universal Child Allowance program in Argentina provides monthly cash transfers to unregistered workers with children. As the program is accessible only to those who are not in formal employment, it may discourage workers transitions to the formal sector. In this paper we estimate this effect by comparing the transitions to registered jobs of eligible workers (with children) with a similar but not eligible group (without children) over time. The results suggest a statistically significant and economically large disincentive to the labor market formalization of the program beneficiaries. In contrast, there is no sufficient evidence for the existence of a significant incentive for registered workers to become informal.