Another caveat with the ENOE industry classification is that the codes are so broad that I cannot separate out only 34 IMSS industries that I use to estimate the effect of the wage subsidy program. Instead, I have to use employees in all durable goods industries. Despite these shortcomings, I believe that the evidence from the ENOE data can shed further light on the impact estimates I obtained with IMSS data.

The ENOE asks individuals whether their job provides them with access to medical services through IMSS or other government institutions vs. no access to such services. Figure 6 plots the number of individuals working in eligible industries who state they have access to IMSS, and separately the number of individuals who state they have no access to government medical care, in each quarter from 2005 to 2014.<sup>11</sup> On average across these quarters, the ENOE includes about 4,000 individuals who work in eligible industries and have access to IMSS, and only about 130 individuals who work in eligible industries and have no access to government medical care. The number of individuals with access to IMSS drops during the crisis, hitting a low in 2009, and increases steadily thereafter. In contrast, the number of individuals without access to government medical care remains constant throughout all quarters. This constant pattern suggests that the wage subsidy program did not simply shift workers from informal to formal employment and that the impact estimates in this paper reflect changes in actual employment instead.

# **4.6 Displacement effects**

There is evidence that labor market programs can have displacement effects, i.e. the program may shift employment from ineligible to eligible jobs instead of creating more jobs overall (Crépon et al. 2013). That is, employment in the control group may be negatively affected by the program and impact estimates may thus overstate its true effect. In the context here, displacement effects are probably not a great concern during the program and in the first years after the program since the subsidy was paid for maintaining existing jobs instead of creating new jobs. In addition, the crisis resulted in layoffs in both eligible and ineligible industries, so that firms in eligible industries had a pool of unemployed workers with previous experience in eligible industries they could draw on when they started to hire back workers in 2009 and 2010. However, once employment in eligible industries reached pre‐crisis levels (in 2011), it becomes conceptually more likely that new hires may have come from workers in ineligible industries.

I try to assess whether the wage subsidy program had displacement effects using the data from the ENOE, described in section 4.4. The ENOE has a panel nature and aims to follow each household for five consecutive quarters. I first examine whether eligible industries tend to hire away individuals from

> measurement equipment (industry code 334519). In 2009, manufacture of measurement equipment made up only 4.6 percent of the total number of employees in code 334.

> 11 Less than 1 percent of individuals say they have access to medical care through government institutions other than IMSS or that they don’t know whether they have access to such care.

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