The Effect of Unconditional Cash Transfers on Adult Labour Supply: A Unitary Discrete Choice Model for the Case of Ecuador

Abstract

-We examine the effect of unconditional cash transfers by a unitary discrete labour supply model. We argue that there is no negative income effect of social transfers in the case of poor adults because leisure could not be assumed to be a normal good under such conditions. Using data from the national employment survey of Ecuador (ENEMDUR) we estimate the effect of the Bono de Desarrollo Humano (BDH). Results show that cash transfers, unconditional in labour, donot produce labour disincentives in the case of household heads, but may be paying for housework and childcare provided by partners and single adults. However, labour market and care work gender inequality must be addressed by complementary policies.

Institutionalizing segregation: Conditional cash transfers and employment choices

“…(1) a drop in paid labour-as visible in either longer duration of unemployment and/or higher rates of inactivity among recipients; and (2) an increased probability of remaining in or even transitioning towards informal sector employment (Gonzalez-Rozada and Llerena Pinto 2011; Mideros and O'Donoghue 2014). Viewed against these findings, the data analysis presented in this paper confirms that the BDH is associated with higher inactivity and higher rates of informality among recipients.…”

“…Viewed against these findings, the data analysis presented in this paper confirms that the BDH is associated with higher inactivity and higher rates of informality among recipients. Yet, contrary to other studies, it is argued that these findings should not be interpreted as resulting from perverse incentives generated by the cash transfer benefits, but rather are caused by structural impediments faced by women in the labour market-as noted by Mideros and O'Donoghue (2014). Evidence suggests that in Ecuador, women's employment options are limited, even more so among the poorest (CEPAL 2013).…”

“…In Machala, where employment rates are lower, 44.5 per cent, marital status is significantly associated with higher inactivity rates, especially for the second cohort, aged 20 to 35 years old. Previous studies (Mideros and O'Donoghue 2014;Schady and Rosero 2007) had found that participation in paid work among BDH recipients is conditional on the presence of a partner, i.e. labour attachment is more likely in mono-parental households or alternatively, there is an incentive to remain in inactivity in bi-parental households.…”

“…Another study, by Mideros and O'Donoghue (2014), departs from a unitary discrete choice labour supply model, using Encuesta Nacional de Empleo, Desempleo y Subempleo Urbano y Rural (ENEMDUR), or Urban and Rural National Survey on Employment, Unemployment, and Underemployment quarterly household data. The authors acknowledge that employment choices, e.g.…”

The growth-employment-poverty nexus in Latin America in the 2000s: Ecuador country study

“…In fact, between 2006 and 2010 there was an important increase in social expenditure as a percentage of GDP, which went from 4.8 to 9.8 per cent. Mideros and O'Donoghue (2014) estimated that in 2012 the Bono de Desarrollo Humano, a cash transfer targeted at poor households, reduced the extreme and moderate poverty rates measured by the country's official poverty line by 20.8 per cent and 9.0 per cent respectively. Similar results were found by Naranjo (2008).…”