Heterogeneous Impacts on Layoffs of Changes in Brazilian Unemployment Insurance Eligibility Rules

Abstract

This paper is based on the first use of program administrative data from Brazil’s unemployment insurance (UI) program to assess the impact of changes in UI eligibility criteria on layoff probabilities. We exploit exogenous program changes introduced by executive and legislative changes in 2015 to estimate impacts while accounting for the number of prior UI benefit requests. We estimate that changes in UI eligibility criteria had heterogeneous impacts distinguished by the number of prior benefit requests. We show that the 2015 changes in UI eligibility rules reduced layoffs and find evidence that the changes reduced collusion between workers and employers for layoffs because it became harder to extract subsidies from the UI system. The layoff reductions were greatest before workers' second benefit request.