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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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    File URL: https://mpra.ub.uni-muenchen.de/34926/1/MPRA_paper_34926.pdf
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    References listed on IDEAS

    as
    1. Rafael Rofman & Leonardo Lucchetti & Guzmán Ourens, 2010. "Pension Systems in Latin America: Concepts and Measurements of Coverage," Documentos de Trabajo (working papers) 0510, Department of Economics - dECON.
    2. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages 153-170, March.
    3. James Banks & Carl Emmerson & Gemma Tetlow, 2005. "Estimating pension wealth of ELSA respondents," IFS Working Papers W05/09, Institute for Fiscal Studies.
    4. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    5. Gustavo Yamada, 2006. "Retornos a la educación superior en el mercado laboral: ¿Vale la pena el esfuerzo?," Working Papers 06-13, Centro de Investigación, Universidad del Pacífico.
    6. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
    7. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
    8. Sebastian Galiani & Federico Weinschelbaum, 2012. "Modeling Informality Formally: Households And Firms," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 821-838, July.
    9. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    10. Jacob Mincer & Haim Ofek, 1982. "Interrupted Work Careers: Depreciation and Restoration of Human Capital," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 3-24.
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    More about this item

    Keywords

    nested model; pension wealth; coverage; pay-as-you-go; funded;

    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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