Do pension wealth, pension cost and the nature of pension system affect coverage? Evidence from a country where pay-as-you-go and funded systems coexist

Carpio, Miguel Angel (2011): Do pension wealth, pension cost and the nature of pension system affect coverage? Evidence from a country where pay-as-you-go and funded systems coexist.

Abstract

This paper proposes a nested model, based on an additive random utility model, to analyze whether pension wealth and pension cost affect the probability that a worker affiliates to a pension program, and to observe differentiated effects regarding the nature of the pension system (pay-as-you-go or funded). The analysis focuses on Peru because the peculiar coexistence of a pay-as-you-go and a funded system allows observing first whether a worker is subscribed or not, and then his choice between pay-as-you-go and funded system. The data consists in five cross sections from the ENAHO between 2005 and 2009. Results show that changes on costs have a greater impact over the probability of affiliation than changes on benefits, and that changes affect more when applied to the funded system than when applied to the pay-as-you-go. Variables related with the contracting firm have a large impact. Hence, this paper provides a tool to evaluate measures to solve the coverage problems of pension programs.

• Item Type: MPRA Paper
• Language: English
• Keywords: nested model; pension wealth; coverage; pay-as-you-go; funded
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; J - Labor and Demographic Economics > J8 - Labor Standards: National and International > J82 - Labor Force Composition

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