IDEAS home Printed from
   My bibliography  Save this paper

Social security distortions onto the labor market: estimates for Colombia


  • Cuesta, Jose
  • Olivera, Mauricio


This paper identifies and quantifies three distortions caused by the existing social security and social assistance systems in Colombia. These distortions refer to the discrepancy between the cost of formal social security for the employer and the worker's valuation of the received service (social distortion): the differences in social security benefits received by salaried and self-employed formal workers (occupational distortion); and the discrepancy caused by the cost in employing a formal instead of an informal worker (informal distortion). Based on recently collected information concerning Colombian workers'willingness to pay for several packages of social security benefits, the study calculates that social distortions range from 2 to 27 percent of the workers'labor earnings; the occupational distortion amounts to 50 percent of formal salaried workers'earnings; and the informal distortions represent between 45 and 56 percent of formal workers'labor income. Results indicate that valuations of the contributive and noncontributive protection systems play a key role in explaining these distortions. In addition, the Colombian social protection system thereby places a hefty tax on the formal worker (and employer) while transferring resources to the informal worker, but these distortions are not sufficient to revert differentials in earnings among formal and informal workers.

Suggested Citation

  • Cuesta, Jose & Olivera, Mauricio, 2010. "Social security distortions onto the labor market: estimates for Colombia," Policy Research Working Paper Series 5390, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5390

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Moller, Lars Christian, 2012. "Fiscal policy in Colombia : tapping its potential for a more equitable society," Policy Research Working Paper Series 6092, The World Bank.
    2. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 32(5), pages 938-950.
    3. Hamadi Matoussi & Faten Zoghlami, 2007. "Momentum in Emerging Markets: Investigation of Overconfidence and Cognitive BIAS Factors," Working Papers 717, Economic Research Forum, revised 04 Jan 2007.

    More about this item


    Health Monitoring&Evaluation; Labor Markets; Labor Policies; Labor Standards; Population Policies;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5390. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.