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Do pension wealth, pension cost and the nature of pension system affect coverage? Evidence from a country where pay-as-you-go and funded systems coexist

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  • Carpio, Miguel Angel

Abstract

This paper proposes a nested model, based on an additive random utility model, to analyze whether pension wealth and pension cost affect the probability that a worker affiliates to a pension program, and to observe differentiated effects regarding the nature of the pension system (pay-as-you-go or funded). The analysis focuses on Peru because the peculiar coexistence of a pay-as-you-go and a funded system allows observing first whether a worker is subscribed or not, and then his choice between pay-as-you-go and funded system. The data consists in five cross sections from the ENAHO between 2005 and 2009. Results show that changes on costs have a greater impact over the probability of affiliation than changes on benefits, and that changes affect more when applied to the funded system than when applied to the pay-as-you-go. Variables related with the contracting firm have a large impact. Hence, this paper provides a tool to evaluate measures to solve the coverage problems of pension programs.

Suggested Citation

  • Carpio, Miguel Angel, 2011. "Do pension wealth, pension cost and the nature of pension system affect coverage? Evidence from a country where pay-as-you-go and funded systems coexist," MPRA Paper 34926, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:34926
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    References listed on IDEAS

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    More about this item

    Keywords

    nested model; pension wealth; coverage; pay-as-you-go; funded;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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