Does Social Assistance Disincentivise Employment, Job Formality, and Mobility? Learning from Past Unconditional Cash Transfer Programmes in Indonesia

How do cash transfers affect employment, job formality, and mobility, especially in times of crises and economic recovery? I examine this question in the context of Indonesia’s major unconditional cash transfer (UCT) programmes, rolled out in a targeted manner in response to adverse economic shocks. Identification is based on a generalised difference-in-differences with propensity score matching approach exploiting three waves of nationally-representative longitudinal data on household transfer receipts and labour market outcomes. Annual retrospective data in each survey wave allows me to look at immediate effects, potentially important due to the transient nature of the transfers. Consistent with income and substitution effects, the cash transfers reduce employment and job formality, especially among lower skill groups. Relatively larger effects on job formality highlight the importance of this margin of adjustment related to the targeting design.