Informality and the expansion of social protection programs: Evidence from Mexico

Many countries are moving from employer-based to universal health coverage, which can generate crowd out. In Mexico, Seguro Popular provides public health coverage to the uninsured. Using the gradual roll-out of the system at the municipality level, we estimate that Seguro Popular had no effect on informality in the overall population. Informality did increase by 1.7% for less educated workers, but the wage gains for workers who switch between the formal and the informal sector were not significantly affected. This suggests that marginal workers do not choose between formal and informal jobs on the basis of health insurance coverage.