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Impact of the COVID-19 Pandemic on the Formal Labor Market and the Pension System in El Salvador

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  • Fuentes, Nelson
  • Aguilar, Gonzalo
  • Trillos, Camila

Abstract

Using an impact evaluation methodology for interrupted time-series and the IDB Pension Projection Model, this study estimates that the COVID-19 pandemic could have notably effects on the private pension system in El Salvador as a consequence of the relaxation of requirements to repay early withdrawals that was established in the context of the pandemic. This fact could negatively affect passive coverage rate, system incomes, short-run system surplus and replacement rates, generating an increase in the fiscal cost. The problems of the Salvadoran pension system are structural, and the COVID-19 pandemic has exacerbated them. Consequently, although it is possible to discuss policies to reduce these effects, it is necessary to frame this discussion in the context of a comprehensive reform of the system.

Suggested Citation

  • Fuentes, Nelson & Aguilar, Gonzalo & Trillos, Camila, 2022. "Impact of the COVID-19 Pandemic on the Formal Labor Market and the Pension System in El Salvador," IDB Publications (Working Papers) 12490, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:12490
    DOI: http://dx.doi.org/10.18235/0004523
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    References listed on IDEAS

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    1. Almudena Sevilla & Sarah Smith, 2020. "Baby steps: the gender division of childcare during the COVID-19 pandemic," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(Supplemen), pages 169-186.
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    More about this item

    Keywords

    COVID-19; Salvadoran pension system; Early Withdrawals; Impact evaluation; Pension reform;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • 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

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