Labor History and Contribution Density in the Pension System of the Dominican Republic

This paper estimates the proportion of workers who would meet the required contribution periods to access a contributory retirement pension in the Dominican Republic. Using microdata from labor histories, the paper proposes a survival model to estimate the hazard rates of entering and exiting the contributory state in the pension system. Furthermore, a Monte Carlo simulation is performed to project contributory histories. The results suggest that the transition rates are relatively high, averaging a probability of exiting the contributory (non-contributory) state of 7 percent (6 percent). Moreover, the hazard rate of transitioning to a different state is negatively associated with the worker’s duration in the current state. These effects are conditioned to the age and income level of the worker. Finally, a simulation of new labor histories estimates that slightly more than 20 percent of the workers would meet the requirement of 30 years of contributions by age 60, and this percentage would exceed 40 percent if the required years of contributions were reduced to 20.