The Impact of Unemployment Insurance Savings Accounts on Subsequent Employment Quality

The introduction of unemployment insurance savings accounts (UISA) in Chile in October 2002 led to more comprehensive unemployment protection while decreasing the opportunity cost of job change. Using a difference-in-differences approach this paper examines whether the introduction of UISA had an impact on the differences in subsequent wages and contract types of (i) workers changing into a new employment, and (ii) workers experiencing a period of unemployment before re-entering the labour market. The analysis uses longitudinal social protection data and is the first to empirically investigate the effect of UISA on subsequent employment quality. The findings suggest that the introduction of the UISA scheme had a small negative effect on the wage difference of formal private sector workers, but no effect on contract types. Using informal private sector workers as a control group, only workers of the treatment group experiencing a period of unemployment show statistically different and positive results in wage growth. The robustness analysis, using an alternative “as if” introductory date and a different control group, largely supports these findings. The paper therefore concludes that the effect of UISA affiliation on wage growth is slightly negative, but positive compared to a control group for workers experiencing a period of unemployment, leading to a marginally higher employment quality for this latter group. JEL classifications: C21, C31, E24, J64, J65, J68, O54