IDEAS home Printed from https://ideas.repec.org/a/spr/joprea/v41y2024i3d10.1007_s12546-024-09334-1.html
   My bibliography  Save this article

How life-table right-censoring affected the Brazilian social security factor: an application of the gamma-Gompertz-Makeham model

Author

Listed:
  • Filipe Costa Souza

    (Universidade Federal de Pernambuco)

  • Wilton Bernardino

    (Universidade Federal de Pernambuco)

  • Silvio C. Patricio

    (University of Southern Denmark)

Abstract

Automatic Adjustment Mechanisms (AAMs) are legal instruments that help social security systems respond to demographic and economic changes. In Brazil, the Social Security Factor (SSF) was introduced in the late 1990s as an AAM to link retirement benefits to life expectancy at the retirement age, hoping to promote contributory justice and discourage early retirement. Recent research has highlighted the limitations of right-censored life tables, such as those used in Brazil. It has recommended using the gamma-Gompertz-Makeham ( $$\Gamma GM$$ Γ G M ) model to estimate adult and old-age mortality. This study investigated the impact of right-censoring on the SSF by comparing the official SSF and other social security metrics with a counterfactual scenario computed based on fitted $$\Gamma GM$$ Γ G M models. The results indicate that from 2004 to 2012, official life tables may have negatively impacted retirees’ income, particularly for those who delayed their retirement. Furthermore, the $$\Gamma GM$$ Γ G M fitted models’ life expectancies had more stable paths over time, which could have helped with long-term planning. Our findings are significant for policymakers as they highlight the importance of using appropriate mortality metrics in AAMs to ensure accurate retirement benefit payments. They also underscore the need to consider the potential impacts of seemingly innocuous hypotheses on public action outcomes. Overall, this study provides valuable insights for policymakers looking to enhance the effectiveness and fairness of social security systems.

Suggested Citation

  • Filipe Costa Souza & Wilton Bernardino & Silvio C. Patricio, 2024. "How life-table right-censoring affected the Brazilian social security factor: an application of the gamma-Gompertz-Makeham model," Journal of Population Research, Springer, vol. 41(3), pages 1-38, September.
    • Handle: RePEc:spr:joprea:v:41:y:2024:i:3:d:10.1007_s12546-024-09334-1
    DOI: 10.1007/s12546-024-09334-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12546-024-09334-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s12546-024-09334-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lanza Queiroz, Bernardo & Lobo Alves Ferreira, Matheus, 2021. "The evolution of labor force participation and the expected length of retirement in Brazil," The Journal of the Economics of Ageing, Elsevier, vol. 18(C).
    2. Alvarez, Jesús-Adrián & Kallestrup-Lamb, Malene & Kjærgaard, Søren, 2021. "Linking retirement age to life expectancy does not lessen the demographic implications of unequal lifespans," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 363-375.
    3. Robert Holzmann, 2017. "The ABCs of nonfinancial defined contribution (NDC) schemes," International Social Security Review, John Wiley & Sons, vol. 70(3), pages 53-77, July.
    4. Mullen, Katharine M. & Ardia, David & Gil, David L. & Windover, Donald & Cline, James, 2011. "DEoptim: An R Package for Global Optimization by Differential Evolution," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 40(i06).
    5. Haan, Peter & Kemptner, Daniel & Lüthen, Holger, 2020. "The rising longevity gap by lifetime earnings – Distributional implications for the pension system," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    6. Trifon I Missov & László Németh & Maciej J Dańko, 2016. "How much can we trust life tables? Sensitivity of mortality measures to right-censoring treatment," Palgrave Communications, Palgrave Macmillan, vol. 2(1), pages 1-10, December.
    7. Josep Lledó & Jose M. Pavía & Francisco G. Morillas, 2017. "Assessing implicit hypotheses in life table construction," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2017(6), pages 495-518, July.
    8. Marcelo Abi-Ramia Caetano, 2006. "Subsídios Cruzados na Previdência Social Brasileira Sociais: 1995-2004," Discussion Papers 1211, Instituto de Pesquisa Econômica Aplicada - IPEA.
    9. Sanchez-Romero, Miguel & Lee, Ronald D. & Prskawetz, Alexia, 2020. "Redistributive effects of different pension systems when longevity varies by socioeconomic status," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    10. Bravo, Jorge M. & Ayuso, Mercedes & Holzmann, Robert & Palmer, Edward, 2021. "Addressing the life expectancy gap in pension policy," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 200-221.
    11. de Freitas, Carlos Eduardo & Paes, Nelson Leitão, 2019. "The collapse of Brazilian Social Security: Macroeconomic impacts of the increase of the minimum age of PEC nº 287/2016 reform," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 39(1), July.
    12. Butt, Zoltan & Haberman, Steven, 2004. "Application of Frailty-Based Mortality Models Using Generalized Linear Models," ASTIN Bulletin, Cambridge University Press, vol. 34(1), pages 175-197, May.
    13. Carlos Patrick Alves da Silva & Claudio Alberto Castelo Branco Puty & Marcelino Silva da Silva & Solon Venâncio de Carvalho & Carlos Renato Lisboa Francês, 2017. "Financial forecasts accuracy in Brazil’s social security system," PLOS ONE, Public Library of Science, vol. 12(8), pages 1-20, August.
    14. De Souza, Laeticia R. & Queiroz, Bernardo L. & Skirbekk, Vegard F., 2019. "Trends in health and retirement in Latin America: Are older workers healthy enough to extend their working lives?," The Journal of the Economics of Ageing, Elsevier, vol. 13(C), pages 72-83.
    15. Marcelo Abi-Ramia Caetano & Leonardo Alves Rangel & Eduardo da Silva Pereira & Graziela Ansiliero & Henrique Paiva, 2016. "O Fim do Fator Previdenciário e a Introdução da Idade Mínima: questões para a previdência social no Brasil," Discussion Papers 2230, Instituto de Pesquisa Econômica Aplicada - IPEA.
    16. Ayuso, Mercedes & Bravo, Jorge M. & Holzmann, Robert, 2021. "Getting life expectancy estimates right for pension policy: period versus cohort approach," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(2), pages 212-231, April.
    17. Marília R. Nepomuceno & Cássio M. Turra, 2020. "The Population of Centenarians in Brazil: Historical Estimates from 1900 to 2000," Population and Development Review, The Population Council, Inc., vol. 46(4), pages 813-833, December.
    18. Pitacco, Ermanno & Denuit, Michel & Haberman, Steven & Olivieri, Annamaria, 2009. "Modelling Longevity Dynamics for Pensions and Annuity Business," OUP Catalogue, Oxford University Press, number 9780199547272.
    19. Hendrik Wolff & Howard Chong & Maximilian Auffhammer, 2011. "Classification, Detection and Consequences of Data Error: Evidence from the Human Development Index," Economic Journal, Royal Economic Society, vol. 121(553), pages 843-870, June.
    20. Macdonald,Angus S. & Richards,Stephen J. & Currie,Iain D., 2018. "Modelling Mortality with Actuarial Applications," Cambridge Books, Cambridge University Press, number 9781107045415.
    21. Angelo José Zanella & João Vinícius De França Carvalho & Luís Eduardo Afonso, 2014. "Quais Os Impactos Da Desaposentação? Um Estudo Para As Aposentadorias Por Tempo De Contribuição Do Regime Geral De Previdência Social," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 064, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    22. Guilherme C. Delgado & Ana Carolina Querino & Leonardo Rangel & Matheus Stivali, 2006. "Avaliação de Resultados da Lei do Fator Previdenciário (1999-2004)," Discussion Papers 1161, Instituto de Pesquisa Econômica Aplicada - IPEA.
    23. Vladimir Canudas-Romo & Stan Becker, 2011. "The crossover between life expectancies at birth and at age one: The imbalance in the life table," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 24(4), pages 113-144.
    24. Dalkhat M. Ediev, 2018. "Constrained Mortality Extrapolation to Old Age: An Empirical Assessment," European Journal of Population, Springer;European Association for Population Studies, vol. 34(3), pages 441-457, August.
    25. Castellares, Fredy & Patrício, Silvio C. & Lemonte, Artur J. & Queiroz, Bernardo L., 2020. "On closed-form expressions to Gompertz–Makeham life expectancy," Theoretical Population Biology, Elsevier, vol. 134(C), pages 53-60.
    26. Marilia Miranda Fortes Gomes & Cássio M. Turra, 2009. "The number of centenarians in Brazil: Indirect estimates based on death certificates," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 20(20), pages 495-502.
    27. Nicholas Barr & Peter Diamond, 2010. "Reforming Pensions: Lessons from Economic Theory and Some Policy Directions," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2010), pages 1-23, August.
    28. Paul D. Collins & Andrew Podger & Keyong Dong & Kaizo Beltrao & Monica Pinhanez, 2014. "Brazil'S Social Security System: Prospective Trajectory And Reform Alternatives," Public Administration & Development, Blackwell Publishing, vol. 34(4), pages 305-319, October.
    29. Mercedes Ayuso & Jorge M. Bravo & Robert Holzmann & Edward Palmer, 2021. "Automatic Indexation of the Pension Age to Life Expectancy: When Policy Design Matters," Risks, MDPI, vol. 9(5), pages 1-28, May.
    30. Dennis M. Feehan, 2018. "Separating the Signal From the Noise: Evidence for Deceleration in Old-Age Death Rates," Demography, Springer;Population Association of America (PAA), vol. 55(6), pages 2025-2044, December.
    31. James Vaupel & Kenneth Manton & Eric Stallard, 1979. "The impact of heterogeneity in individual frailty on the dynamics of mortality," Demography, Springer;Population Association of America (PAA), vol. 16(3), pages 439-454, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Annamaria Olivieri & Ermanno Pitacco, 2016. "Frailty and Risk Classification for Life Annuity Portfolios," Risks, MDPI, vol. 4(4), pages 1-23, October.
    2. Cláudia Simões & Luís Oliveira & Jorge M. Bravo, 2021. "Immunization Strategies for Funding Multiple Inflation-Linked Retirement Income Benefits," Risks, MDPI, vol. 9(4), pages 1-28, March.
    3. Bravo, Jorge M. & Ayuso, Mercedes & Holzmann, Robert & Palmer, Edward, 2021. "Addressing the life expectancy gap in pension policy," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 200-221.
    4. Jonas Šiaulys & Rokas Puišys, 2022. "Survival with Random Effect," Mathematics, MDPI, vol. 10(7), pages 1-17, March.
    5. Keivan Diakite & Pierre Devolder, 2021. "Progressive Pension Formula and Life Expectancy Heterogeneity," Risks, MDPI, vol. 9(7), pages 1-19, July.
    6. Maria Carannante & Valeria D’amato & Steven Haberman & Massimiliano Menzietti, 2024. "Frailty-based mortality models and reserving for longevity risk," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(2), pages 320-339, April.
    7. Lanza Queiroz, Bernardo & Lobo Alves Ferreira, Matheus, 2021. "The evolution of labor force participation and the expected length of retirement in Brazil," The Journal of the Economics of Ageing, Elsevier, vol. 18(C).
    8. Volker Grossmann & Johannes Schünemann & Holger Strulik, 2024. "Fair Pension Policies with Occupation-Specific Ageing," The Economic Journal, Royal Economic Society, vol. 134(663), pages 2835-2875.
    9. Dana Glei & Andres Barajas Paz & Jose Manuel Aburto & Magali Barbieri, 2021. "Mexican mortality 1990‒2016: Comparison of unadjusted and adjusted estimates," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 44(30), pages 719-758.
    10. Rocha de Jesus Fernandes, Anderson & Lanza Queiroz, Bernardo, 2024. "Aging, education and some other implications for the silver dividend in developing countries: Evidence from Brazil," The Journal of the Economics of Ageing, Elsevier, vol. 27(C).
    11. Annamaria Olivieri & Ermanno Pitacco, 2012. "Life tables in actuarial models: from the deterministic setting to a Bayesian approach," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 96(2), pages 127-153, June.
    12. Roozbeh Hosseini, 2015. "Adverse Selection in the Annuity Market and the Role for Social Security," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 941-984.
    13. Ahcan, Ales & Medved, Darko & Olivieri, Annamaria & Pitacco, Ermanno, 2014. "Forecasting mortality for small populations by mixing mortality data," Insurance: Mathematics and Economics, Elsevier, vol. 54(C), pages 12-27.
    14. Sánchez-Romero, Miguel & Schuster, Philip & Prskawetz, Alexia, 2024. "Redistributive effects of pension reforms: who are the winners and losers?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 23(2), pages 294-320, April.
    15. Hartemink, Nienke & Missov, Trifon I. & Caswell, Hal, 2017. "Stochasticity, heterogeneity, and variance in longevity in human populations," Theoretical Population Biology, Elsevier, vol. 114(C), pages 107-116.
    16. Volker Grossmann & Johannes Schünemann & Holger Strulik, 2024. "Fair Pension Policies with Occupation-Specific Ageing," The Economic Journal, Royal Economic Society, vol. 134(663), pages 2835-2875.
    17. Gordana Matković & Katarina Stanić, 2020. "The Serbian Pension System In Transition: A Silent Break With Bismarck," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(225), pages 105-134, April – J.
    18. Strozza, Cosmo & Vigezzi, Serena & Callaway, Julia & Kashnitsky, Ilya & Aleksandrovs, Aleksandrs & Vaupel, James W, 2022. "Socioeconomic inequalities in survival to retirement age or shortly afterwards: a register-based analysis," OSF Preprints 8wbdv, Center for Open Science.
    19. Fabrizio Culotta, 2021. "Life Expectancy Heterogeneity and Pension Fairness: An Italian North-South Divide," Risks, MDPI, vol. 9(3), pages 1-22, March.
    20. Mercedes Ayuso & Jorge M. Bravo & Robert Holzmann & Edward Palmer, 2021. "Automatic Indexation of the Pension Age to Life Expectancy: When Policy Design Matters," Risks, MDPI, vol. 9(5), pages 1-28, May.

    Corrections

    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:spr:joprea:v:41:y:2024:i:3:d:10.1007_s12546-024-09334-1. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.