Spillovers in Earnings Responses to Social Assistance Programs: Evidence from the Workplace

• In Event: Households and Behavioral Responses in Developing Countries

Abstract

This paper examines the spillover effects of income-eligibility enforcement on labor market behavior among coworkers of beneficiaries of Uruguay's AFAM-PE program, a conditional cash transfer program for low-income families with children. Income-testing requirements create strong incentives for beneficiaries to adjust earnings and labor supply to maintain program eligibility. Our study explores how the enforcement of these requirements influences peers in workplace networks. Using a regression discontinuity design and linked administrative data, we leverage quasi-random variation in the likelihood of benefit suspension among coworkers near the income threshold. We find significant reductions in labor earnings reporting among coworkers of peers affected by a benefit suspension. These effects materialize in that coworkers' families are less likely to receive a benefit suspension in the future if their peers experience that shock.

Authors

• Marcelo Bergolo, De La Republica University

• Joan Vila, UDELAR

• Guillermo Cruces, CEDLAS-UNLP and U. of Nottingham