Unemployment Assistance and Transition to Employment in Argentina

In 2001–2, Argentina experienced a wrenching economic crisis. Plan Jefes, implemented in May 2002, was Argentina’s institutional response to the increase in unemployment and poverty triggered by the crisis. The program provided a safety net and appears to have protected some families against indigence. Despite this success, the continued existence of the program, which provides benefits to eligible unemployed individuals for an unlimited duration, may have unappealing consequences. Reliance on the plan may reduce the incentive to search for work and in the long run may damage individual employability and perpetuate poverty. Motivated by these concerns, this article examines the effect of participating in Plan Jefes on the probability of exiting unemployment. Regardless of the data set, the specification and the empirical approach, the article shows that Plan enrollees are at least 14 percentage points less likely to transit to employment as compared to individuals who applied but did not join the Plan. The effect of the program tends to be larger for females, and—over time—the program becomes increasingly feminized. Prima facie, the estimates suggest that programs such as Plan Jefes need to reconsider the balance between providing a safety net and dulling job-search incentives.