UC Berkeley

This dissertation studies the effect of several policy interventions on employment, informality, tax evasion, and well-being in developing countries. Specifically, it studies the effects of pension privatization, regulations limiting lawsuits due to workplace accidents, and changes in payroll tax rates. To provide causal evidence, it collects rich microdata and leverages several sources of quasi-experimental variation.

The first chapter, coauthored with Marcelo Bérgolo, studies the effects of the privatization of the pension system on workers’ reported earnings, employment and retirement behavior, and income in old age. We analyze a reform to the pension system in Uruguay that transitioned from a pay-as-you-go system with defined benefits into a mixed system, in which a fraction of social security contributions is used to fund the pay-as-you-go system and the remaining fraction is allocated to individual retirement accounts. For identification, we leverage a cohort-based discontinuity in the introduction of the new mixed system with regression discontinuity analyses, using rich administrative and census data. We find significant labor supply responses to the privatization on multiple dimensions. First, workers in the system with private retirement accounts are significantly more likely to be employed in their fifties. This effect is driven partially by lower rates of early retirement, with effects concentrated among individuals of low wealth and those who have mild disabilities. Second, workers in the system with retirement accounts report significantly higher earnings early-on in their careers, and we find suggestive evidence that this is due to a reduction of tax evasion. Regarding income in old age, we find little differences on income and poverty rates across the two systems in early old age. However, two decades after the privatization the government gave workers the option to reverse back to the non-privatized system, and we find that a significant share chose to, especially among those who did not choose the most profitable retirement savings option and those with career profiles that favor defined benefits formulas. Overall, our evidence suggests that pension privatization can boost labor supply in old age and have the unexpected benefit of increasing tax compliance, but it can have detrimental effects on the pension income of some workers, which can partially explain some of the push to roll back privatizations in several countries over the last two decades.

In the second chapter, coauthored with Damián Vergara, we study a reform to the workers' compensation system in Argentina that, after a workplace accident, mandated workers to go through a government medical commission that determines the degree of disability, whether the injury happened in the workplace, and the corresponding compensation, before additional legal actions can be taken. Leveraging the staggered implementation of the reform across provinces, we find that the reform substantially reduced workplace lawsuits with no effects on reported accidents. Employment increased by more than 5\% one year after the reform in highly exposed industries, with no effects on average earnings or the number of active firms.

In the third chapter, I study the impact of payroll tax rate changes on labor markets with informality leveraging tax changes in Argentina. I find that tax changes produce modest shifts of informality in expected directions. Payroll tax cuts mainly reduce informality in large firms, while tax hikes shift employment to small firms and increase their share of informality. Wages are unaffected by changes in payroll tax rates. The study provides new insights into the effects of payroll tax rate changes on labor markets with an informal sector, highlighting the role of firm size and worker tenure in mediating the effects on informality.