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In search of inclusion: informal sector participation in a voluntary, defined contribution pension system

Author

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  • Renuka Sane

    () (Indian Statistical Institute, New Delhi)

  • Susan Thomas

    () (Indira Gandhi Institute of Development Research)

Abstract

This paper examines who contributes and who persists in contributing in a national, voluntary, defined contributory pension program, where the government provides the incentive of matching contributions of a minimum amount (USD 16). The paper uses proprietary data from a financial services firm where 12 percent of customers (37000 individuals) chose to participate in this program. The evidence shows that only about 50 percent of contributors reach the minimum amount for the co-contribution, but that participants persist in contributing even if they failed to contribute the minimum amount in a given year. While this paper does not provide causal estimates, it does present evidence of considerable interest among the informal sector in a state-run voluntary pension program in an emerging market where access to formal finance is otherwise poor.

Suggested Citation

  • Renuka Sane & Susan Thomas, 2013. "In search of inclusion: informal sector participation in a voluntary, defined contribution pension system," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-022, Indira Gandhi Institute of Development Research, Mumbai, India.
  • Handle: RePEc:ind:igiwpp:2013-022
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    References listed on IDEAS

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    1. repec:eee:joecag:v:9:y:2017:i:c:p:30-40 is not listed on IDEAS

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    Keywords

    informal sector workers; pension accounts; matched defined contribution;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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