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

  • Renuka Sane

    ()

    (Indian Statistical Institute, New Delhi)

  • Susan Thomas

    ()

    (Indira Gandhi Institute of Development Research)

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.

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File URL: http://www.igidr.ac.in/pdf/publication/WP-2013-022.pdf
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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2013-022.

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Length: 33 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:ind:igiwpp:2013-022
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  1. Viola Angelini, 2007. "The strategic bequest motive: evidence from SHARE," "Marco Fanno" Working Papers 0062, Dipartimento di Scienze Economiche "Marco Fanno".
  2. Gur Huberman & Sheena Iyengar & Wei Jiang, 2007. "Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates," Journal of Financial Services Research, Springer, vol. 31(1), pages 1-32, February.
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  7. Brigitte C. Madrian, 2012. "Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective," NBER Working Papers 18220, National Bureau of Economic Research, Inc.
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  14. Sane, Renuka & Shah, Ajay, 2011. "Civil Service and Military Pensions in India," Working Papers 11/91, National Institute of Public Finance and Policy.
  15. William F. Bassett & Michael J. Fleming & Anthony P. Rodrigues, 1998. "How workers use 401(k) plans: the participation, contribution, and withdrawal decisions," Staff Reports 38, Federal Reserve Bank of New York.
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