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In search of inclusion: informal sector participation in a voluntary, defined contribution pension system

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Author Info

  • Renuka Sane

    ()
    (Indian Statistical Institute, New Delhi)

  • Susan Thomas

    ()
    (Indira Gandhi Institute of Development Research)

Abstract

This paper examines who contributes and who persists in contributing in a national, voluntary, defined contributory pension program, where the government provides the incentive of matching contributions of a minimum amount (USD 16). The paper uses proprietary data from a financial services firm where 12 percent of customers (37000 individuals) chose to participate in this program. The evidence shows that only about 50 percent of contributors reach the minimum amount for the co-contribution, but that participants persist in contributing even if they failed to contribute the minimum amount in a given year. While this paper does not provide causal estimates, it does present evidence of considerable interest among the informal sector in a state-run voluntary pension program in an emerging market where access to formal finance is otherwise poor.

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Bibliographic Info

Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2013-022.

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Length: 33 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:ind:igiwpp:2013-022

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Keywords: informal sector workers; pension accounts; matched defined contribution;

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  1. Alessandra Guariglia & Sheri Markose, 2000. "Voluntary Contributions to Personal Pension Plans: Evidence from the British Household Panel Survey," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 469-488, December.
  2. Gary V. Engelhardt & Anil Kumar, 2004. "Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study," Working Papers, Center for Retirement Research at Boston College, Center for Retirement Research 2004-18, Center for Retirement Research.
  3. Sane, Renuka & Shah, Ajay, 2011. "Civil Service and Military Pensions in India," Working Papers, National Institute of Public Finance and Policy 11/91, National Institute of Public Finance and Policy.
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  7. Bassett, William F. & Fleming, Michael J. & Rodrigues, Anthony P., 1998. "How Workers Use 401(k) Plans: The Participation, Contribution, and Withdrawal Decisions," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 263-89, June.
  8. Viola Angelini, 2007. "The strategic bequest motive: evidence from SHARE," "Marco Fanno" Working Papers, Dipartimento di Scienze Economiche "Marco Fanno" 0062, Dipartimento di Scienze Economiche "Marco Fanno".
  9. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000. "Do the rich save more?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-52, Board of Governors of the Federal Reserve System (U.S.).
  10. Xavier Giné & Robert Townsend & James Vickery, 2008. "Patterns of Rainfall Insurance Participation in Rural India," World Bank Economic Review, World Bank Group, World Bank Group, vol. 22(3), pages 539-566, October.
  11. Gur Huberman & Sheena Iyengar & Wei Jiang, 2007. "Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates," Journal of Financial Services Research, Springer, Springer, vol. 31(1), pages 1-32, February.
  12. Brigitte C. Madrian, 2012. "Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective," NBER Working Papers 18220, National Bureau of Economic Research, Inc.
  13. Saez, Emmanuel, 2007. "Details Matter: The Impact of Presentation and Information on the Take-up of Financial Incentives for Retirement Saving," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6386, C.E.P.R. Discussion Papers.
  14. Beverly, Sondra G. & Sherraden, Michael, 1999. "Institutional determinants of saving: implications for low-income households and public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 28(4), pages 457-473.
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