The trade-off between liquidity and insurance: voucher payments in a lab-in-the-field experiment with Colombian rural workers
Authors
Cano, Alexander
Cortés, Darwin
Mantilla, César
Prada, Laura
Restrepo, Medardo
Editor
Publication date
2022-03-10
Document language
eng
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Abstract
We conduct a lab-in-the-field experiment in which 214 rural workers must choose between a cash or a voucher payment for completing a real-effort task. Participants face a twenty-percent chance of suffering a negative shock that will reduce their cash payment by roughly two-thirds. Opting for the voucher reduces the likelihood of the shock by one-half. We employ a multiple-price list with a varying voucher payment and a fixed cash payment to study this trade-off relevant for expanding the coverage and contributions of rural labor formalization. Voucher take-up rates go from 32% to 56%, from the least to the more generous voucher. In a sample of undergrad students from the same region, take-up rates went from 17% to 33%. We find that voucher redemption costs explain take-up among students but not among rural workers. Being a rural worker with land, and receiving government subsidies in cash, predict a higher voucher take-up.
Description
Códigos JEL
C91 - Laboratory, Individual Behavior, O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements, R51 - Finance in Urban and Rural Economies
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Keywords
agriculture, dual labor market, informal labor market
Keywords
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Informalidad
