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Social Security Coverage and the Labor Market in Developing Countries

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Author Info

  • Paula Auerbach
  • María Eugenia Genoni
  • Carmen Pagés-Serra

    ()

Abstract

This paper analyzes the reasons behind the low rates of contribution to social security programs in developing countries. Using a large set of harmonized household surveys from Latin America we compare contribution patterns among wage employees, for whom participation is compulsory, with contribution patterns among self-employed workers, for whom participation is often voluntary. In all countries, contribution rates among salaried workers are similarly correlated with education, earnings, size of the employer, household characteristics and age. In addition, contribution patterns among salaried workers are highly correlated with contribution patterns among the self-employed. Our results indicate that on average more than 30 percent of the explained within-country variance in contributions patterns may be accounted for by individuals’ low willingness to participate in old-age pension programs. Nonetheless, we also find evidence suggesting that some workers are rationed out of social security against their will.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4421.

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Date of creation: Sep 2005
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Handle: RePEc:idb:wpaper:4421

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  1. Bosch, Mariano & Maloney, William, 2005. "Labor market dynamics in developing countries: comparative analysis using continuous time Markov processes," Policy Research Working Paper Series 3583, The World Bank.
  2. Sebastian Edwards & Alejandra Cox Edwards, 2002. "Social Security Privatization Reform and Labor Markets: The Case of Chile," NBER Working Papers 8924, National Bureau of Economic Research, Inc.
  3. Gong, Xiaodong & Van Soest, Arthur & Villagomez, Elizabeth, 2004. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 1-36, October.
  4. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
  5. James Heckman & Carmen Pages, 2003. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Working Papers 10129, National Bureau of Economic Research, Inc.
  6. Sara lemos, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," Discussion Papers in Economics 04/8, Department of Economics, University of Leicester.
  7. Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
  8. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
  9. MacIsaac, Donna & Rama, Martin, 1997. "Determinants of Hourly Earnings in Ecuador: The Role of Labor Market Regulations," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S136-65, July.
  10. Barr, Abigail & Packard, Truman, 2002. "Revealed preference and self-insurance - Can we learn from the self-employed in Chile?," Policy Research Working Paper Series 2754, The World Bank.
  11. Sara de la Rica & Thomas Lemieux, 1994. "Does Public Health Insurance Reduce Labor Market Flexibility or Encourage the Underground Economy? Evidence from Spain and the United States," NBER Chapters, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 265-300 National Bureau of Economic Research, Inc.
  12. Jaime Saavedra & Alberto Chong, 1999. "Structural reform, institutions and earnings: Evidence from the formal and informal sectors in urban Peru," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 95-116.
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Cited by:
  1. Marisa Bucheli & Rodrigo Ceni, 2007. "Informality: Sectoral Selection and Earnings in Uruguay," Documentos de Trabajo (working papers) 2007, Department of Economics - dECON.
  2. Marisa Bucheli & Alvaro Forteza & Ianina Rossi, 2007. "Work history and the access to contributory pensions. The case of Uruguay," Documentos de Trabajo (working papers) 1607, Department of Economics - dECON.

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