Can a Small Social Pension Promote Labor Force Participation? Evidence from the Colombia Mayor Program

Tobias Pfutze and Carlos Rodríguez-Castelán

Economía Journal, 2019, vol. Volume 20 Number 1, issue Fall 2019, 111-154

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.

Keywords: Pensions; labor force participation; Colombia (search for similar items in EconPapers)
JEL-codes: H55 J08 J26 O15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Working Paper: Can a small social pension promote labor force participation? Evidence from the Colombia mayor program (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:017739

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