The effect of temporary formal employment on financial well-being: evidence from multiple lotteries

This paper examines the effects of a public works program in Uruguay on individuals' financial well-being. Leveraging lottery-based random assignment to enter the program and a high-quality credit panel from the Central Bank of Uruguay, we estimate the intention-to-treat effects of the program on consumer credit outcomes. Preliminary findings show that applicants who receive an initial offer to enter the program improve credit use (by 3.8 percentage points) and credit scores without increasing delinquency rates, overall pointing to positive contemporaneous effects on financial well-being. After the program ends credit use remains higher; however delinquency rates increase in the short (5.6pp) and medium (3.1pp) run. These findings suggest that in a setting of low credit use and high labor informality, brief episodes of formal employment can facilitate use of formal credit, though repayment may pose challenges once the program ends.