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How Mandatory Pensions Affect Labor Supply Decisions and Human Capital Accumulation? Options to Bridge the Gap between Economic Theory and Policy Analysis

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  • Bodor, Andras
  • Robalino, David
  • Rutkowski, Michal

Abstract

Mandatory pension systems can have a negative impact on individual savings and labor supply decisions. In particular, defined benefit pension schemes that are not actuarially fair, can create incentives for early retirement, and therefore, reduce labor supply and the stock of human capital. After a review of frequently applied approaches to assess the incentives generated by a pension system, the paper develops an indicator to predict the age-specific retirement probabilities induced by a particular pension system given heterogeneous individual preferences. The paper then describes how this indicator could be used to project the size of the labor force by gender, age and skill level, and correspondingly, the dynamics of human capital accumulation. Finally, the paper develops a set of life-cycle income measures to assess how the pension system affects decisions regarding the supply of labor in the public and private sectors. The methods are illustrated in the case of Morocco.

Suggested Citation

  • Bodor, Andras & Robalino, David & Rutkowski, Michal, 2008. "How Mandatory Pensions Affect Labor Supply Decisions and Human Capital Accumulation? Options to Bridge the Gap between Economic Theory and Policy Analysis," MPRA Paper 12046, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12046
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    File URL: https://mpra.ub.uni-muenchen.de/12046/1/MPRA_paper_12046.pdf
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    References listed on IDEAS

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    1. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
    2. repec:dau:papers:123456789/11049 is not listed on IDEAS
    3. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1.
    4. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
    5. Cörvers,Frank & Heijke,Hans, 2005. "Forecasting the labour market by occupation and education: Some key issues," ROA Working Paper 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    6. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-178, May.
    7. Monika Queisser & Edward Whitehouse, 2006. "Neutral or Fair?: Actuarial Concepts and Pension-System Design," OECD Social, Employment and Migration Working Papers 40, OECD Publishing.
    8. Joaquim Oliveira Martins & Frédéric Gonand & Pablo Antolín & Christine de la Maisonneuve & Kwang-Yeol Yoo, 2005. "The Impact of Ageing on Demand, Factor Markets and Growth," OECD Economics Department Working Papers 420, OECD Publishing.
    9. Herbertsson, Tryggvi Thor & Orszag, Mike, 2003. "The Early Retirement Burden: Assessing the Costs of the Continued Prevalence of Early Retirement in OECD Countries," IZA Discussion Papers 816, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Darwin Cortés & Darío Maldonado & Giselle Vesga, 2015. "Parametric Pension Reform and the Intensive Margin of Labor Supply, Evidence from Colombia," Documentos de Trabajo 12476, Universidad del Rosario.
    2. Robalino, David A. & Zylberstajn, Helio, 2009. "Ex-ante methods to assess the impact of social insurance policies on labor supply with an application to Brazil," Policy Research Working Paper Series 5027, The World Bank.
    3. Marouani, Mohamed A. & Robalino, David A., 2008. "Assessing interactions among education, social insurance, and labor market policies in a general equilibrium framework: an application to Morocco," Policy Research Working Paper Series 4681, The World Bank.
    4. Robalino, David A. & Zylberstajn, Eduardo & Zylberstajn, Helio & Afonso, Luis Eduardo, 2008. "An ex-ante evaluation of the impact of social insurance policies on labor supply in Brazil : the case for explicit over implicit redistribution," Social Protection Discussion Papers and Notes 90342, The World Bank.
    5. Mohamed A. Marouani & David A. Robalino, 2012. "Assessing interactions among education, social insurance and labour market policies in Morocco," Applied Economics, Taylor & Francis Journals, vol. 44(24), pages 3149-3167, August.
    6. Steffen Hertog, 2016. "Is There an Arab Variety of Capitalism?," Working Papers 1068, Economic Research Forum, revised 12 Jun 2016.

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    More about this item

    Keywords

    life cycle models; labor supply; human capital; retirement policies; job and occupational mobility;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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