Is Informal Sector Work an Alternative to Workfare Benefits? The Case of Pre-program Expansion and Economic CrisisReview of Development Economics

This article is included in a special issue of the journal which includes 11 articles focused on informality.

Abstract: Limited availability of workfare programs, limited unemployment insurance and a large informal sector are features of the Argentine labor market at the outset of the 2001/02 economic crisis. This paper tests the hypothesis whether informal work is an alternative to workfare participation before a large-scale program expansion took place. Results from the propensity score matching indicate that observable characteristics of informal low-income workers and current workfare participants are significantly different. However, within these groups, it is possible to identify subgroups with similar observable characteristics. This indicates that only a subset of the individuals sees workfare and informal work as substitutable alternatives.