In December 2010 Health Insurance in Uruguay was extended to the partners
of workers in the formal labor market. This extension may have modified the
incentives to participate in the formal and informal labor markets, potentially
reducing overall participation or the share of individuals in the formal labor
market whose partners were formally employed. Using a difference-in-differences
methodology, effects of the Health Insurance expansion are estimated
by comparing individuals affected by the policy over time with similar but unaffected individuals. We find negative and statistically significant effects: the policy extension
reduces the share of the economically-active population in the formal labor market by 0.95 percentage
points and women in formal employment in the private sector by 2.13 percentage points.
In addition to these effects, we find significant heterogeneous effects by age, educational level,
and the formality conditions of the partners. We also find an effect of the policy on occupation,
though of smaller magnitude and not always statistically-significant.