Social Security Reform, Retirement and Occupational Behavior

In most countries, the rules governing public and private pension systems are different, and so are hiring procedures and job contracts. The tenures of government employees are longer and their wages, in general, higher. This article studies, in a life-cycle economy with three sectors - formal, informal and public – and endogenous retirement, the macroeconomic and occupational impacts of social security reforms in an economy with multiple pension systems. In a model calibrated to Brazil, we simulate and assess the long-run impact of reforms being discussed and/or implemented in different economies. Among them, the unification of pension systems and the increase of minimum retirement age. These reforms are found to affect the decision to apply to a public job, savings during the life cycle and skill composition across sectors. They also lead to higher output, less informality and average welfare gains.