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Parametric Pension Reform and the Intensive Margin of Labor Supply, Evidence from Colombia

Author

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  • Darwin Cortés
  • Darío Maldonado
  • Giselle Vesga

Abstract

We analyze the effect of a parametric reform of the fully-funded pension regime in Colombia on the intensive margin of the labor supply. We take advantage of a threshold defined by law in order to identify the causal effect using a regression discontinuity design. We find that a pension system that increases retirement age and the minimum weeks during which workers must contribute to claim pension benefits causes an increase of around 2 hours on the number of weekly worked hours; this corresponds to 4% of the average number of weekly worked hours or around 14% of a standard deviation of weekly worked hours. The effect is robust to different specifications, polynomial orders and sample sizes.

Suggested Citation

  • 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.
    • Handle: RePEc:col:000092:012476
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    File URL: http://repository.urosario.edu.co/bitstream/handle/10336/10823/12476.pdf
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    References listed on IDEAS

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    1. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-2226, December.
    2. Calderón, Valentina & Marinescu, Ioana, 2011. "The Impact of Colombia's Pension and Health Insurance Systems on Informality," IDB Publications (Working Papers) 3831, Inter-American Development Bank.
    3. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
    4. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
    5. 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.
    6. Gary Burtless, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(5), pages 781-805.
    7. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
    8. Danzer, Alexander M., 2010. "Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe," IZA Discussion Papers 4726, Institute of Labor Economics (IZA).
    9. Börsch-Supan, Axel, 1998. "Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe," Sonderforschungsbereich 504 Publications 98-29, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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    More about this item

    Keywords

    Labor supply; Regression discontinuity; pension system reform; Colombia;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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