The Extension of Social Security Coverage in Developing Countries

Chung Tran and Juergen Jung

No 2007-026, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We investigate the effects of extending the coverage of social security to uncovered elderly individuals in the informal sector in developing countries. We use a stochastic overlapping generations framework and incorporate important characteristics of developing countries including family transfers and a sizeable informal sector. Our calibrated model predicts that the introduction of a moderately sized social assistance program decreases steady state output by up to 3.25% and labor supply by up to 2.5%. In contrast to literature focusing on developed countries, the model predicts that extending the coverage of the social security system results in welfare gains for low income households. This result indicates that the insurance function and the redistribution function of the social assistance program dominate the distortionary effects in an environment without adequate risk sharing mechanisms and high inequality.

Keywords: Social Security Reform; Altruism; Informal Sector; Private Transfers; Savings; Labor Supply and Welfare (search for similar items in EconPapers)
JEL-codes: E21 E26 E6 H30 H53 H55 I38 O17 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2007-11
New Economics Papers: this item is included in nep-dev, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The extension of social security coverage in developing countries (2012)
Working Paper: The Extension of Social Security Coverage in Developing Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:inu:caeprp:2007026

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