Social protection and job displacement in developing countries

Policy brief State

  • Across the development path, social insurance programmes such as job displacement insurance schemes become an increasingly important part of governments’ role.
  • This brief uses unique administrative data from São Paulo, Brazil, to study displaced workers’ need for insurance and the insurance value of the two most common government-mandated job displacement insurance programmes: severance pay (SP) and unemployment insurance (UI).
  • The results show the need for job displacement insurance is sizable, even in a context of high informality. Moreover, we find that the insurance value provided by these programmes can be very sensitive to their disbursement policy. This is particularly relevant for SP schemes, which are much more common than UI schemes in developing countries.
  • The authors make three policy recommendations relevant to policymakers across the developing world.