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Male labor force participation and social security in Mexico

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  • AGUILA, EMMA

Abstract

Labor force participation among Mexican males in their early retirement years (60–64 years of age) has decreased in recent decades, from 94.6% in 1960 to 65.2% in 2010. Similar trends are evident elsewhere in Latin America, and have occurred in the developed world. Such trends pose challenges to the financial sustainability of social security systems as working-age populations decrease and those in retirement increase both because of demographic trends and decisions to take early retirement. In this study, we find that the Mexican social security system provides incentives to retire early. The retirement incentives of the Mexican social security system affect retirement behavior, and may be one of the main contributors to early retirement decisions, particularly for lower-income populations. We simulated the effect of the reform from a pay-as-you-go to the new Personal Retirement Accounts (PRA) system and we find that the PRA system also provides incentives for early retirement. Further analysis is needed to assess the financial sustainability of the social security system and financial security in old age for the largest cohorts in Mexico that will begin to retire by 2040.

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  • Aguila, Emma, 2014. "Male labor force participation and social security in Mexico," Journal of Pension Economics and Finance, Cambridge University Press, vol. 13(2), pages 145-171, April.
    • Handle: RePEc:cup:jpenef:v:13:y:2014:i:02:p:145-171_00
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    2. Jun, Hankyung, 2020. "Social security and retirement in fast-aging middle-income countries: Evidence from Korea," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    3. Hyndman, Rob J. & Lee, Alan J. & Wang, Earo, 2016. "Fast computation of reconciled forecasts for hierarchical and grouped time series," Computational Statistics & Data Analysis, Elsevier, vol. 97(C), pages 16-32.
    4. Queiroz, Bernardo L. & Souza, Laeticia R., 2017. "Retirement incentives and couple’s retirement decisions in Brazil," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 1-13.
    5. Puigvert Jonathan & Juárez-Torres Miriam, 2019. "Labour Force Participation and the Business Cycle in Mexico," Working Papers 2019-04, Banco de México.
    6. Gunes Asik, 2018. "Impact of early retirement incentives on labor supply of young men and women : evidence from Turkey," Working Papers 20180002, UMR Développement et Sociétés, Université Paris 1 Panthéon-Sorbonne, Institut de Recherche pour le Développement.

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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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