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Transfers and Labor Market Behavior of the Elderly in Developing Countries: Theory and Evidence from Vietnam

Author

Listed:
  • Juergen Jung

    (Department of Economics, Towson University)

  • Chung Tran

    (Research School of Economics, The Australian National University)

Abstract

In this paper we argue that the strategic interaction between the labor supply decision of the elderly and private transfers from their children lowers the opportunity cost of leisure of the elderly. This in turn magnifies the crowding-out effect of public pensions on the labor supply of the elderly. We show that this mechanism has implications for evaluating the crowding-out effect of public pensions in developing countries. That is, a misspecified econometric model that does not control for the endogeneity of private transfers leads to a biased estimate of the crowding-out effect of public pensions. Using data from a household survey in Vietnam we find that the effect of public pensions on the probability of retirement is 2.5 times larger when explicitly accounting for the interaction between private transfers and the labor supply decision of elderly individuals.

Suggested Citation

  • Juergen Jung & Chung Tran, 2009. "Transfers and Labor Market Behavior of the Elderly in Developing Countries: Theory and Evidence from Vietnam," Working Papers 2009-01, Towson University, Department of Economics, revised Oct 2009.
  • Handle: RePEc:tow:wpaper:2009-01
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    File URL: http://webapps.towson.edu/cbe/economics/workingpapers/2009-01.pdf
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    References listed on IDEAS

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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Jung, Juergen & Tran, Chung, 2012. "The extension of social security coverage in developing countries," Journal of Development Economics, Elsevier, vol. 99(2), pages 439-458.
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    Cited by:

    1. Juergen Jung & Chung Tran, 2015. "Social Health Insurance: A Quantitative Exploration," ANU Working Papers in Economics and Econometrics 2015-629, Australian National University, College of Business and Economics, School of Economics.
    2. Jung, Juergen & Tran, Chung, 2012. "The extension of social security coverage in developing countries," Journal of Development Economics, Elsevier, vol. 99(2), pages 439-458.

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    More about this item

    Keywords

    Altruism; crowding-out; social security; retirement; transfers.;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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