IDEAS home Printed from https://ideas.repec.org/a/col/000425/017739.html
   My bibliography  Save this article

Can a Small Social Pension Promote Labor Force Participation? Evidence from the Colombia Mayor Program

Author

Listed:
  • Tobias Pfutze
  • Carlos Rodríguez-Castelán

Abstract

One of the primary motivations behind the establishment of noncontributory pension programs is to allow beneficiaries to retire from the labor force. Yet their aggregate effects may be more complex. One such program, Colombia Mayor, stands out for its low eligibility age. Given that beneficiaries are not required to leave the labor force, it practically constitutes a fixed income—an unconditional cash transfer of sorts—to a still economically active population. Using panel data and instrumental variable techniques, this paper shows that the effect of this program has been to raise the labor force participation of relatively younger, particularly male, beneficiaries. This increase occurred precisely in the occupations with characteristics that are likely to require some up-front investment and for the comparatively poorer. We conclude that the transfer effectively loosened the liquidity constraints to remaining in these occupations. No such effect is found for older beneficiaries.

Suggested Citation

  • Tobias Pfutze & Carlos Rodríguez-Castelán, 2019. "Can a Small Social Pension Promote Labor Force Participation? Evidence from the Colombia Mayor Program," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2019), pages 111-154, October.
    • Handle: RePEc:col:000425:017739
    as

    Download full text from publisher

    File URL: http://economia.lacea.org/contents.htm
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Esther Duflo, 2003. "Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa," The World Bank Economic Review, World Bank, vol. 17(1), pages 1-25, June.
    2. Victoria Hosegood & Anne Case & Cally Ardington, 2009. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 22-48, January.
    3. Calderón, Valentina & Marinescu, Ioana, 2011. "The Impact of Colombia's Pension and Health Insurance Systems on Informality," IDB Publications (Working Papers) 3831, Inter-American Development Bank.
    4. Catalina Amuedo‐Dorantes & Laura Juarez, 2015. "Old‐Age Government Transfers and the Crowding Out of Private Gifts: The 70 and Above Program for the Rural Elderly in Mexico," Southern Economic Journal, John Wiley & Sons, vol. 81(3), pages 782-802, January.
    5. Galiani, Sebastian & Gertler, Paul & Bando, Rosangela, 2016. "Non-contributory pensions," Labour Economics, Elsevier, vol. 38(C), pages 47-58.
    6. Armando Barrientos, 2003. "Pensions and Development in the South," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 28(4), pages 696-711, October.
    7. Nora Lustig & Carola Pessino, 2014. "Social Spending and Income Redistribution in Argentina during the 2000s: The Increasing Role of Noncontributory Pensions," Public Finance Review, , vol. 42(3), pages 304-325, May.
    8. Mariano Bosch & Raymundo M. Campos-Vázquez, 2010. "The trade-offs of social assistance programs in the labor market: The case of the “Seguro Popular” program in Mexico," Serie documentos de trabajo del Centro de Estudios Económicos 2010-12, El Colegio de México, Centro de Estudios Económicos.
    9. Laura Juarez & Tobias Pfutze, 2015. "The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 63(4), pages 685-713.
    10. Raymundo M. Campos-Vázquez & Melissa A. Knox, 2013. "Social Protection Programs and Employment: The Case of Mexico's Seguro Popular Program," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 403-448, July-Dece.
    11. Berg, Erlend, 2013. "Are poor people credit-constrained or myopic? Evidence from a South African panel," Journal of Development Economics, Elsevier, vol. 101(C), pages 195-205.
    12. Emmanuel Skoufias & Vincenzo Di Maro, 2008. "Conditional Cash Transfers, Adult Work Incentives, and Poverty," Journal of Development Studies, Taylor & Francis Journals, vol. 44(7), pages 935-960.
    13. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 32(5), pages 938-950.
    14. Amarante, Verónica & Manacorda, Marco & Miguel, Edward & Vigorito, Andrea, 2011. "Social Assistance and Birth Outcomes: Evidence from the Uruguayan PANES," IDB Publications (Working Papers) 3108, Inter-American Development Bank.
    15. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    16. Adriana Camacho & Emily Conover & Alejandro Hoyos, 2014. "Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment," The World Bank Economic Review, World Bank, vol. 28(3), pages 446-466.
    17. Grant Miller & Diana Pinto & Marcos Vera-Hernández, 2013. "Risk Protection, Service Use, and Health Outcomes under Colombia's Health Insurance Program for the Poor," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 61-91, October.
    18. Catalina Amuedo‐Dorantes & Laura Juarez & Jorge Alonso, 2019. "The Effect Of Noncontributory Pensions On Saving In Mexico," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 931-952, April.
    19. Adams, Renée & Almeida, Heitor & Ferreira, Daniel, 2009. "Understanding the relationship between founder-CEOs and firm performance," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 136-150, January.
    20. Jorge Alonso & Catalina Amuedo-Dorantes & Laura Juárez, 2016. "The Effect of Non-contributory Pensions on Saving in Mexico," IDB Publications (Working Papers) 95976, Inter-American Development Bank.
    21. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    22. J.C. Herbert Emery & Jesse A. Matheson, 2012. "Should income transfers be targeted or universal? Insights from public pension influences on elderly mortality in Canada, 1921–1966," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 247-269, February.
    23. Paul J. Gertler & Sebastian W. Martinez & Marta Rubio-Codina, 2012. "Investing Cash Transfers to Raise Long-Term Living Standards," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 164-192, January.
    24. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    25. Emmanuel Skoufias & Mishel Unar & Teresa Gonzalez de Cossio, 2013. "The poverty impacts of cash and in-kind transfers: experimental evidence from rural Mexico," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 5(4), pages 401-429, December.
    26. repec:idb:brikps:462 is not listed on IDEAS
    27. Barrientos, Armando, 2003. "What Is the Impact of Non-Contributory Pensions on Poverty? Estimates from Brazil and South Africa," Development Economics and Public Policy Working Papers 30556, University of Manchester, Institute for Development Policy and Management (IDPM).
    28. Rafael Rofman & Ignacio Apella & Evelyn Vezza, 2015. "Beyond Contributory Pensions : Fourteen Experiences with Coverage Expansion in Latin America," World Bank Publications - Books, The World Bank Group, number 20602.
    29. Abhijit V. Banerjee & Rema Hanna & Gabriel E. Kreindler & Benjamin A. Olken, 2017. "Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs," The World Bank Research Observer, World Bank, vol. 32(2), pages 155-184.
    30. Aterido, Reyes & Hallward-Driemeier, Mary & Pages, Carmen, 2011. "Does expanding health insurance beyond formal-sector workers encourage informality ? measuring the impact of Mexico's Seguro Popular," Policy Research Working Paper Series 5785, The World Bank.
    31. repec:wly:soecon:v:81:3:y:2015:p:782-802 is not listed on IDEAS
    32. Emma Aguila & Arie Kapteyn & Rosalba Robles & Beverly A. Weidmer, 2011. "Experimental Analysis of the Health and Well-being Effects of a Non-contributory Social Security Program," Working Papers 903, RAND Corporation.
    33. Posel, Dorrit & Fairburn, James A. & Lund, Frances, 2006. "Labour migration and households: A reconsideration of the effects of the social pension on labour supply in South Africa," Economic Modelling, Elsevier, vol. 23(5), pages 836-853, September.
    34. Ribas, Rafael P., 2014. "Direct and Indirect Effects of Cash Transfers on Entrepreneurship," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 167368, Agricultural and Applied Economics Association.
    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


    Cited by:

    1. Ce Shen & Jessica Johnson & Zhenhe Chi & John B. Williamson, 2020. "Does a universal non‐contributory social pension make sense for rural China?," International Social Security Review, John Wiley & Sons, vol. 73(2), pages 3-26, April.
    2. José Luis Iparraguirre, 2020. "Economics and Ageing," Springer Books, Springer, number 978-3-030-29019-1, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bosch, Mariano & Manacorda, Marco, 2012. "Social policies and labor market outcomes in Latin America and the Caribbean: a review of the existing evidence," LSE Research Online Documents on Economics 58003, London School of Economics and Political Science, LSE Library.
    2. Miguel Ángel Borrella Mas & Mariano Bosch Mossi & Marcello Sartarelli, 2016. "Non-Contributory Pensions Number-Gender Effects on Poverty and Household Decisions," Working Papers. Serie AD 2016-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Armando Barrientos & Daniele Malerba, 2020. "Social assistance and inclusive growth," International Social Security Review, John Wiley & Sons, vol. 73(3), pages 33-53, July.
    4. Adriana Camacho & Emily Conover & Alejandro Hoyos, 2014. "Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment," The World Bank Economic Review, World Bank, vol. 28(3), pages 446-466.
    5. Herrmann, Tabea & Leckcivilize, Attakrit & Zenker, Juliane, 2021. "The impact of cash transfers on child outcomes in rural Thailand: Evidence from a social pension reform," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    6. Miguel Niño‐Zarazúa, 2019. "Welfare and Redistributive Effects of Social Assistance in the Global South," Population and Development Review, The Population Council, Inc., vol. 45(S1), pages 3-22, December.
    7. François Gerard & Gustavo Gonzaga, 2013. "Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil," Textos para discussão 608, Department of Economics PUC-Rio (Brazil).
    8. Abhijit V. Banerjee & Rema Hanna & Gabriel E. Kreindler & Benjamin A. Olken, 2017. "Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs," The World Bank Research Observer, World Bank, vol. 32(2), pages 155-184.
    9. Juliana Mesén Vargas, 2018. "Income Effect on Labor Outcomes for People Living in Poverty: the case of PROGRESA," LIDAM Discussion Papers IRES 2018015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Bando, Rosangela & Galiani, Sebastian & Gertler, Paul, 2022. "Another brick on the wall: On the effects of non-contributory pensions on material and subjective well being," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 16-26.
    11. Miguel Angel Borrella-Mas & Mariano Bosch & Marcello Sartarelli, 2019. "Heterogeneous Effect of a Non-contributory Pension. Evidence from Bolivia," Documentos de Trabajo del ICAE 2019-35, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    12. Inés Berniell & Dolores de la Mata & Matilde Pinto Machado, 2020. "The Impact of a Permanent Income Shock on the Situation of Women in the Household: The Case of a Pension Reform in Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 68(4), pages 1295-1343.
    13. Unnikrishnan, Vidhya & Imai, Katsushi S., 2020. "Does the old-age pension scheme improve household welfare? Evidence from India," World Development, Elsevier, vol. 134(C).
    14. Margherita Scarlato & Giorgio d'Agostino, 2019. "Cash Transfers, Labor Supply, and Gender Inequality: Evidence from South Africa," Feminist Economics, Taylor & Francis Journals, vol. 25(4), pages 159-184, October.
    15. Carla Canelas & Miguel Niño-Zarazúa, 2022. "Informality and Pension Reforms in Bolivia: The Case of Renta Dignidad," Journal of Development Studies, Taylor & Francis Journals, vol. 58(7), pages 1436-1458, July.
    16. Garganta, Santiago & Gasparini, Leonardo, 2015. "The impact of a social program on labor informality: The case of AUH in Argentina," Journal of Development Economics, Elsevier, vol. 115(C), pages 99-110.
    17. Eric Ekobor-Ackah Mochiah & Robert Darko Osei & Isaac Osei Akoto, 2014. "The Impact of Conditional Cash Transfer Programmes on Household Work Decisions in Ghana," WIDER Working Paper Series wp-2014-116, World Institute for Development Economic Research (UNU-WIDER).
    18. Nga Le Thi Quynh & Groot, Wim & Tomini, Sonila M. & Tomini, Florian, 2017. "Effects of health insurance on labour supply: A systematic review," MERIT Working Papers 2017-017, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Santiago Garganta & Leonardo Gasparini & Mariana Marchionni, 2017. "Cash transfers and female labor force participation: the case of AUH in Argentina," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-22, December.
    20. Clemente Ávila‐Parra & David Escamilla‐Guerrero & Oscar Gálvez‐Soriano, 2024. "Minimum eligibility age for social pensions and household poverty: Evidence from Mexico," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 175-196, January.

    More about this item

    Keywords

    Pensions; labor force participation; Colombia;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:col:000425:017739. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LACEA (email available below). General contact details of provider: https://edirc.repec.org/data/laceaea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.