The role of social protection benefits during crisis: Income floors vs automatic stabilisers in Sub-Saharan Africa (with Katrin Gasior)
The effectiveness of social protection during economic shocks depends on two types of benefit: non-shock-responsive benefits, fixed prior to crisis, and automatic stabilisers, which adjust with income or employment losses. We analyse benefit effectiveness in seven Sub-Saharan African countries. Using tax-benefit microsimulation models and household survey data, we simulate employment losses and apply an extended decomposition framework to isolate the role of each benefit type. We find that, in Ghana and Zambia, high pre-crisis coverage of non-shock-responsive benefits cushions income losses among the poor by creating an income floor, despite no crisis expansion. In South Africa, income-related automatic stabilisers play a dual role – an income floor for existing recipients while expanding to newly eligible households under the shock – while unemployment insurance mitigates losses among better-off formal workers. In contrast, in Mozambique, Rwanda, Tanzania, and Uganda, low coverage, modest benefit levels, and limited shock responsiveness leave households unprotected when earnings collapse.
The Persistence of Income Reporting Errors in Household Survey Data (with Christopher R. Bollinger)
We examine the dynamics of income source misreporting in panel household survey data. We use a unique panel of survey data, the Austrian version of the SILC, linked to administrative records on state unemployment benefits and earnings. We find that misreporting is dynamic in three ways: errors persist over time; longer unemployment benefit spells are more likely to be partially missed; and among longer benefit spells some missed benefit income appears to be reported as earnings. These patterns reject Markov-type assumptions used to identify transition probabilities when administrative data are unavailable. We show that error persistence over time, combined with errors across sources, has important implications for substantive questions. Errors cause large biases in estimates of transitions into and out of earnings receipt, government programme participation, and poverty, and particularly the effectiveness of unemployment benefits in alleviating poverty.
Automatic stabilization: the missing welfare dimension in Latin America (with Olivier Bargain and H. Xavier Jara)
Comparing the redistributive effects of tax-benefit systems across countries can be useful to benchmark national policy design. However, this type of analysis often forget the role of automatic stabilization, i.e. the ability of systems to mitigate income losses in times of downturn. We provide a unique international assessment using tax-benefit simulations associated with household surveys for 50 countries of three large regions (Europe, Latin America and Sub-Saharan Africa). Using a well-established methodology, we show that tax-benefit systems in Latin America outperform those in Sub-Saharan Africa in terms of income redistribution and poverty reduction, but fiscal systems in both regions provide a limited degree of automatic stabilization against income shocks, in absolute terms and relative to Europe. This limited capacity is due to three factors: (i) the prevalence of a large informal sector, which limits the role of social insurance contributions and personal income taxation; (ii) the presence of high tax exemption thresholds and generous tax deductions; and (iii) the fact that cash transfer programs are not means-tested (i.e. mostly rely on proxy means-tests), which prevents them from acting as stabilizers.