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Can a small social pension promote labor force participation? Evidence from the Colombia mayor program

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  • Pfutze, Tobias
  • Rodríguez-Castelán, Carlos

Abstract

One of the primary motivations behind the establishment of noncontributory pension programs is to allow beneficiaries to retire from the labor force. Yet their aggregate effects may be more complex. One such program, Colombia Mayor, stands out for its low eligibility age. Given that beneficiaries are not required to leave the labor force, it practically constitutes a fixed income—an unconditional cash transfer of sorts—to a still economically active population. Using panel data and instrumental variable techniques, this paper shows that the effect of this program has been to raise the labor force participation of relatively younger, particularly male, beneficiaries. This increase occurred precisely in the occupations with characteristics that are likely to require some up-front investment and for the comparatively poorer. We conclude that the transfer effectively loosened the liquidity constraints to remaining in these occupations. No such effect is found for older beneficiaries.

Suggested Citation

  • Pfutze, Tobias & Rodríguez-Castelán, Carlos, 2019. "Can a small social pension promote labor force participation? Evidence from the Colombia mayor program," LSE Research Online Documents on Economics 123113, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123113
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    2. Ce Shen & Jessica Johnson & Zhenhe Chi & John B. Williamson, 2020. "Does a universal non‐contributory social pension make sense for rural China?," International Social Security Review, John Wiley & Sons, vol. 73(2), pages 3-26, April.

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    More about this item

    Keywords

    pensions; labor force participation; Colombia;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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