include vacations, service premiums and severance payments, captured by the variable “V”. Three additional benefits, known as _parafiscales_ , are borne entirely by employers but enjoyed by all types of workers: training programs provided by SENA, “E”; family allowances, “B”; and family compensation funds, “F”. Social assistance programs provided by the public agency Acción Social refer to Familias en Accion, a conditional cash transfer, “AS”. For analytical purposes, we allow for different categories of workers to have different valuations of their benefit packages, “ β j”. Variations in the benefits received, contributions incurred and valuations-based adjustments constitute the distortions analytically mapped in Table 2. Next section details the magnitudes of such benefits, costs and valuations.

# **4. Calculation of Distortions in the Labor Market Caused by the Social Protection System in Colombia**

In order to calculate those distortions, this section firstly maps in detail the set of wages, benefits and contributions relevant for each representative worker. Secondly, statutory benefits and contributions associated with each worker category and social scheme are calculated and adjusted by socioeconomic levels, as required. Thirdly, the distribution of net benefits is further adjusted to account for each representative worker’s valuation. Ideally, the exercise should be conducted for each individual worker. In practice, the analysis concentrates on the representative worker of each category as it is not possible to estimate a distribution of complete benefits and contributions at the individual level from available sources. Instead, the analysis combines the statutory allocation of net benefits sanctioned by the Colombian legislation with available individual information on valuation from the Fedesarrollo (2008)’s ELS survey.

The 2008 Longitudinal Social Survey, Fedesarrollo (2008) ( _Encuesta Social Longitudinal_ in Spanish) is since 2004 the only household panel for Colombia. The survey monitors a group of households for four years through a rotating panel. The current stage corresponds to samples taken in 2008 and constitutes the panel’s fifth round. As part of this research project, Fedesarrollo agreed to extend the survey in 2008 in various dimensions: in the geographic dimension, the new survey provides information about the 13 principal metropolitan areas of the country, and not just about three cities, as the ELS had previously done. In the sample dimension, the number of households surveyed increased from 1,900 to 4,500, and in the conceptual dimension additional modules about motives, preferences, accidents, risks, and employment history were included. Unlike other household surveys of living conditions that inquire about social programs, and existing surveys on social security, ELS (2008) asks all workers the following, irrespective of their employment category or the provisions they receive: how much they would be willing to pay per month to be affiliated to the subsidized healthcare regime, to a contributive health care scheme, and for an insurance package that included the complete package of benefits from the social protection system (in terms of health care, pensions, severance pay, holidays, service premium, and affiliation to a family compensation fund). This approach eliminates self-selection errors in the information on willingness that would occur if information were collected solely from the current beneficiaries. Unfortunately, the survey does not ask informants to report the actual amount of benefits received or the exact payment contributed. Appendix 1 describes the survey and provides main statistics in detail.

Table 3 reports the statutory benefits and contributions, and the conditions required to have access to several programs by worker type and socioeconomic level – which for conceptual purposes, are categorized as high and low income categories. In general, Sisben categories determine the package of assistance benefits, with benefits targeted to individuals pertaining to households categorized as 10