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The Effect of Social Security Contributions on Coverage and Wages: A Gender Perspective Using a Natural Experiment from Colombia

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  • Andres J. Vargas

    () (Department of Economics, Texas Tech University, Box 41014, Lubbock, TX, 79409, USA)

Abstract

This article investigates, from a gender and marital status perspective, the effects of pension and health care contributions on the employment and wages of workers covered by social security regulations. To do this, I use as a natural experiment a reform implemented in Colombia during the mid-1990s. In particular I employ a differences-in-differences estimation based on an endogenous switching-regression model that accounts for self-selection into coverage. My results indicate that, for females, a 10% increase in contributions reduces the relative wages of covered workers by 7.2%. On the other hand, for males, the reform increases the relative wages of covered workers by 7.1%. Among females, the effect is predominantly present in single women. Among men, divorced and widowed workers are the only group not to experience an effect on earnings. For most family groups, the social security reform has no significant effect on coverage.

Suggested Citation

  • Andres J. Vargas, 2011. "The Effect of Social Security Contributions on Coverage and Wages: A Gender Perspective Using a Natural Experiment from Colombia," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 476-501, October.
  • Handle: RePEc:sej:ancoec:v:78:2:y:2011:p:476-501
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    File URL: http://dx.doi.org/10.4284/0038-4038-78.2.476
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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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