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Universal health care, formal and informal labor supply in Brazil

Grant number: 14/09713-2
Support type:Research Grants - Visiting Researcher Grant - International
Duration: August 04, 2014 - August 11, 2014
Field of knowledge:Applied Social Sciences - Economics - Social Welfare Economics
Principal Investigator:Enlinson Henrique Carvalho de Mattos
Grantee:Enlinson Henrique Carvalho de Mattos
Visiting researcher: Marcelo Aarestrup Arbex
Visiting researcher institution: University of Windsor, Canada
Home Institution: Escola de Economia de São Paulo (EESP). Fundação Getúlio Vargas (FGV). São Paulo , SP, Brazil

Abstract

This project evaluates the impact of publicly provided goods with and without market substitutes affect time allocation. Tax evasion reduces tax revenue and affects the provision of public goods. Agents can work in the informal sector and still consume public goods. The supply of hours to the formal market then depends on the preference parameters and on the availability of private substitutes for public consumption. We sort goods into two groups according to whether or not the good has close substitutes being provided by the government. The first group of goods is comprised of all goods that have no private substitutes, for instance, street lighting, garbage collection, highway system and sewer systems. Other consumption goods, such as education and health, can be acquired either in the market or provided by the government. The dynamics and proprieties of labor supply become richer in the presence of market and publicly provided goods and informal activities because there are now three substitution margins: overall consumption versus leisure, market goods and publicly provided goods and publicly goods with and without substitutes. We present empirical tests for this model using Brazilian data. Using data from PNAD (National Household Sample Survey), 2008 and 2009 is possible to identify the consumption of goods provided by the government and to estimate the role of these goods in the choice (intensive margin) of the working sector (formal versus informal). Unlike traditional literature which analyzes the provision of public good, it is observed the demand of these goods by individuals. Using Tobit regressions, our results suggest that consumption of goods that present substitute in the private sector affect negatively formal labor hours of working. On the other hand, larger consumptions of publicly provided goods without substitutes are associated with an increase in formal labor market hours. This could suggest that individuals might value more exclusive government activities (and are willing to pay taxes for that). (AU)