Advanced Search
MyIDEAS: Login

The Extension of Social Security Coverage in Developing Countries

Contents:

Author Info

  • Juergen Jung

    ()
    (Department of Economics, Towson University)

  • Chung Tran

    ()
    (Research School of Economics, The Australian National University)

Abstract

We study the dynamic general equilibrium effects of introducing a social pension program to elderly informal sector workers in developing countries who lack formal risk sharing mechanisms against income and longevity risk. To this end, we formulate a stochastic dynamic general equilibrium model that incorporates defining features of developing countries: a large informal sector, private transfers as an informal safety net, and a non-universal social security system. We find that the extension of retirement benefits to informal sector workers results in efficiency losses due to adverse effects on capital accumulation and the allocation of resources across formal and informal sectors. Despite these losses recipients of social pensions experience welfare gains as the positive insurance effects attributed to the extension of a social insurance system dominate. The welfare gains crucially depend on the skill distribution, private intra-family transfers and the specific tax used to finance the expansion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.towson.edu/cbe/economics/workingpapers/2011-06.pdf
File Function: First version, 2011
Download Restriction: no

Bibliographic Info

Paper provided by Towson University, Department of Economics in its series Working Papers with number 2011-06.

as in new window
Length: 48 pages
Date of creation: Nov 2011
Date of revision: Nov 2011
Handle: RePEc:tow:wpaper:2011-06

Contact details of provider:
Postal: Towson, Maryland 21252-0001
Phone: 410-704-2959
Fax: 410-704-3424
Web page: http://www.towson.edu/cbe/economics/
More information through EDIRC

Related research

Keywords: Informal Sector; Family Social Safety Nets; Social Pension; General Equi-librium; and Welfare.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  2. Leonardo Soriano de Alencar & Márcio I. Nakane, 2003. "Real Balances in the Utility Function: Evidence for Brazil," Working Papers Series 68, Central Bank of Brazil, Research Department.
  3. Dessy, Sylvain & Pallage, Stéphane, 2001. "Taxes, Inequality and the Size of the Informal Sector," Cahiers de recherche 0112, Université Laval - Département d'économique.
  4. Krueger, Dirk & Perri, Fabrizio, 2010. "Public versus Private Risk Sharing," CEPR Discussion Papers 7625, C.E.P.R. Discussion Papers.
  5. Pratap, Sangeeta & Quintin, Erwan, 2006. "Are labor markets segmented in developing countries? A semiparametric approach," European Economic Review, Elsevier, vol. 50(7), pages 1817-1841, October.
  6. Daron Acemoglu, 2010. "Theory, General Equilibrium and Political Economy in Development Economics," NBER Working Papers 15944, National Bureau of Economic Research, Inc.
  7. Cox, Donald C & Jimenez, Emmanuel, 1992. "Social Security and Private Transfers in Developing Countries: The Case of Peru," World Bank Economic Review, World Bank Group, vol. 6(1), pages 155-69, January.
  8. Juergen Jung & Chung Tran, 2009. "Transfers and Labor Market Behavior of the Elderly in Developing Countries: Theory and Evidence from Vietnam," Working Papers 2009-01, Towson University, Department of Economics, revised Oct 2009.
  9. Sergio Madrid, 2005. "Discussion," Environment, Development and Sustainability, Springer, vol. 7(3), pages 401-415, 09.
  10. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
  11. Donald Cox & Emmanuel Jiminez, 1993. "Private Transfers And The Effectiveness Of Public Income Redistribution In The Philippines," Boston College Working Papers in Economics 236, Boston College Department of Economics.
  12. T.H. Gindling & Katherine Terrell, 2004. "Legal Minimum Wages and the Wages of Formal and Informal Sector Workers in Costa Rica," William Davidson Institute Working Papers Series 2004-647, William Davidson Institute at the University of Michigan.
  13. Juergen Jung & Chung Tran, 2008. "The Macroeconomics of Health Savings Accounts," Caepr Working Papers 2007-023, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  14. Rosenzweig, Mark R., 1986. "Risk, Implicit Contracts and the Family in Rural Areas of Low-Income Countries," Bulletins 7518, University of Minnesota, Economic Development Center.
  15. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
  16. Chetty, Raj & Looney, Adam, 2006. "Consumption smoothing and the welfare consequences of social insurance in developing economies," Journal of Public Economics, Elsevier, vol. 90(12), pages 2351-2356, December.
  17. Luisa Fuster, 1997. "Is altruism important for understanding the long-run effects of social security?," Economics Working Papers 234, Department of Economics and Business, Universitat Pompeu Fabra.
  18. de Carvalho Filho, Irineu Evangelista, 2008. "Old-age benefits and retirement decisions of rural elderly in Brazil," Journal of Development Economics, Elsevier, vol. 86(1), pages 129-146, April.
  19. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
  20. Packard, Truman G., 2002. "Are there positive incentives from privatizing social security? A panel analysis of pension reform in Latin America," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(02), pages 89-109, July.
  21. Herwig Immervoll & Horacio Levy & José Ricardo Nogueira & Cathal O´Donoghue & Rozane Bezerra de Siqueira, 2005. "The Impact of Brazil´s Tax-Benefit System on Inequality and Poverty," Ibero America Institute for Econ. Research (IAI) Discussion Papers 117, Ibero-America Institute for Economic Research.
  22. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
  23. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2004. "Elimination of Social Security in a Dynastic Framework," Macroeconomics 0402008, EconWPA.
  24. Rofman, Rafael, 2005. "Social security coverage in Latin America," Social Protection Discussion Papers 32754, The World Bank.
  25. Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
  26. Rosenzweig, Mark R, 1988. "Risk, Private Information, and the Family," American Economic Review, American Economic Association, vol. 78(2), pages 245-50, May.
  27. Low, Hamish & Maldoom, Daniel, 2004. "Optimal taxation, prudence and risk-sharing," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 443-464, March.
  28. Francisco H. G. Ferreira & Peter Lanjouw & Marcelo Côrtes Neri, 2003. "A Robust Poverty Profile for Brazil Using Multiple Data Sources," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(1), pages 59-92, January.
  29. Sergio G. Ferreira, 2005. "Pension Reform in Brazil: Transitional Issues in a Model with Endogenous Labor Supply," IBMEC RJ Economics Discussion Papers 2005-02, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  30. Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
  31. Glomm, Gerhard & Jung, Juergen & Tran, Chung, 2009. "Macroeconomic implications of early retirement in the public sector: The case of Brazil," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 777-797, April.
  32. Fabio Giambiagi & Luiz de Mello, 2006. "Social Security Reform in Brazil: Achievements and Remaining Challenges," OECD Economics Department Working Papers 534, OECD Publishing.
  33. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins 7487, University of Minnesota, Economic Development Center.
  34. Corak,Miles (ed.), 2004. "Generational Income Mobility in North America and Europe," Cambridge Books, Cambridge University Press, number 9780521827607, December.
  35. Ferreira, Pedro Cavalcanti Gomes & Nascimento, Leandro Gonçalves do, 2005. "Welfare and Growth Effects of Alternative Fiscal Rules for Infrastructure Investment in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 604, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  36. Salvador Valdés, 2008. "A Theory of Noncontributory Pension Design," Documentos de Trabajo 335, Instituto de Economia. Pontificia Universidad Católica de Chile..
  37. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 1999. "Social Security in an Overlapping Generations Economy with Land," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 638-665, July.
  38. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
  39. Donald Cox & Emanuela Galasso & Emmauel Jiminez, 2006. "Private Transfers in a Cross Section of Developing Countries," Working Papers, Center for Retirement Research at Boston College wp2006-1, Center for Retirement Research, revised Jan 2006.
  40. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
  41. Marcouiller, Douglas & Ruiz de Castilla, Veronica & Woodruff, Christopher, 1997. "Formal Measures of the Informal-Sector Wage Gap in Mexico, El Salvador, and Peru," Economic Development and Cultural Change, University of Chicago Press, vol. 45(2), pages 367-92, January.
  42. Sebastian Edwards & Alejandra Cox Edwards, 2000. "Economic reforms and labour markets: policy issues and lessons from Chile," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 181-230, 04.
  43. 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.
  44. Anna Christina D'Addio, 2007. "Intergenerational Transmission of Disadvantage: Mobility or Immobility Across Generations?," OECD Social, Employment and Migration Working Papers 52, OECD Publishing.
  45. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection Discussion Papers 36237, The World Bank.
  46. Menezes-Filho, Naercio & Scorzafave, Luiz, 2009. "Employment and Inequality of Outcomes in Brazil," Insper Working Papers wpe_200, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  47. Magnac, Th, 1991. "Segmented or Competitive Labor Markets," Econometrica, Econometric Society, vol. 59(1), pages 165-87, January.
  48. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
  49. King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002. "Production, Growth and Business Cycles: Technical Appendix," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Santiago Levy & Norbert Schady, 2013. "Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 193-218, Spring.
  2. Chung Tran, 2008. "Transfers and Labor Market Behavior of the Elderly in Developing Countries: Theory and Evidence from Vietnam," Caepr Working Papers 2008-018, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tow:wpaper:2011-06. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Juergen Jung).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.