Conference Paper
Does Formalization Improve Welfare? Evidence from Social Insurance in Algeria
No.
ERF32AC_49
Publisher
ERF
Date
May, 2026
Topic
D3. Distribution
I3. Welfare, Well-Being, and Poverty
This paper examines the impact of social security affiliation on workers’ welfare in Algeria, focusing on health, income, and savings. Using data from the CREAD survey (2014) and the MICS 6 survey (2019), the study applies the Propensity Score Matching (PSM) method to address selection bias and to estimate the causal effects of social security coverage. The findings indicate that social security affiliation has a significant positive impact on both health and income. Specifically, affiliated individuals are less likely to report chronic illnesses and tend to be diagnosed at a later age compared to non-affiliated individuals, reflecting improved long-term health outcomes. In terms of income, social security coverage is associated with higher average earnings, suggesting that affiliation provides financial stability and economic security. However, the results regarding savings are less conclusive, as no statistically significant impact is observed, possibly due to reduced disposable income resulting from social security contributions. These mixed findings underscore the importance of tailoring social security systems to better address the needs of informal workers, including flexible contribution schemes and targeted financial incentives. The results provide critical insights for policymakers seeking to expand social security coverage in Algeria, emphasizing the need for enhanced communication strategies to increase awareness of the social security benefits and reduce coverage gaps, thereby promoting formalization and improving overall population well-being.