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Social Security Coverage and the Labor Market in Developing Countries

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Author Info

  • Auerbach, Paula

    ()
    (Inter-American Development Bank)

  • Genoni, Maria Eugenia

    ()
    (Duke University)

  • Pagés, Carmen

    ()
    (Inter-American Development Bank)

Abstract

This paper examines the reasons behind the low rates of participation in old age pension programs in developing countries. Using a large set of harmonized household surveys from Latin America we assess how much of the low participation can be explained by involuntary rationing out of jobs with benefits versus how much can be instead explained by workers’ low willingness/ability to contribute towards such programs. 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. For both types of workers the probability of contributing to old age pension programs is similarly correlated with education, earnings, size of the employer, household characteristics and age. Our results indicate that on average at least 20-30 percent of the explained within-country variance in participation patterns can 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2979.

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Length: 46 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2979

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Keywords: informality; old-age pension; social security; self-employment; Latin America;

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References

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  1. Sara De La Rica & Thomas Lemieux, 1993. "Does Public Health Insurance Reduce Labor Market Flexibility or Encourage the Underground Economy? Evidence from Spain and the United States," NBER Working Papers 4402, National Bureau of Economic Research, Inc.
  2. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(3), pages S72-101, July.
  3. Gong, Xiaodong & van Soest, Arthur & Villagomez, Elizabeth, 2000. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," IZA Discussion Papers 213, Institute for the Study of Labor (IZA).
  4. 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.
  5. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute for the Study of Labor (IZA).
  6. 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, World Bank Group, vol. 13(2), pages 275-302, May.
  7. 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.
  8. 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, University of Chicago Press, vol. 15(3), pages S136-65, July.
  9. 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.
  10. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, Elsevier, vol. 32(7), pages 1159-1178, July.
  11. 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, Taylor & Francis Journals, vol. 35(4), pages 95-116.
  12. 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.
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Cited by:
  1. Marisa Bucheli & Rodrigo Ceni, 2010. "Informality Sectoral Selection and Earnings in Uruguay," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 25(2), pages 281-307.
  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), Department of Economics - dECON 1607, Department of Economics - dECON.

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