Research Department Working Paper n°41

Joint provision of income and employment support: Evidence from a crisis response in Uruguay

This paper analyses the effects of the activation and income-support interventions of the comprehensive social assistance intervention PANES, launched in Uruguay in May 2005 as an emergency plan to respond to a sharp deterioration of economic and social conditions in the country since 1999. It exploits the particular setup of the programme to assess the effects of the income support Ingreso Ciudadano (IC), which covered the entire pool of PANES participants, and the active component Trabajo por Uruguay (TxU), a public works programme implemented to increase the employability and social inclusion of beneficiaries.

There is an increasing recognition in the policy debate of the importance of providing support to unemployed individuals through a combination of income support and active labour market policies. However, very little evidence exists on the effectiveness of this policy approach (and possible trade-offs) beyond developed economies. We provide one of the first evaluations of these schemes in the context of an emerging economy by looking at a public works programme implemented in Uruguay between 2005 and 2007 as part of a comprehensive cash transfer intervention that reached around 10 per cent of households in the country during a major recession. Exploiting specific eligibility criteria for participation in the cash transfer programme, we use rich administrative data of panel nature to study the effects of (i) participating in the public works programme (active component), (ii) receiving the cash transfer (income-support component) and, (iii) of benefiting of both the active and income-support programmes. We find that participation in the active programme has positive (albeit only marginally significant) effects on the employment probability, but non-significant effects on the quality of the job found. The positive employment effect does not generate displacement effects from participants to non-participants within the same household. However, the effect fades away when participants receive the cash transfer. Finally, the programme did not have any effect on measures of civic engagement and social integration.