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Social Security Reforms, Retirement and Sectoral Decisions
Author:
Bruno R. Delalibera
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,
Pedro Cavalcanti Ferreira
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, and
Rafael Machado Parente
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Series:
IMF Working Papers
Volume/Issue:
Volume 2025: Issue 032
Language:
English
Publication Date:
31 Jan 2025
DOI:
https://doi.org/10.5089/9798229000222.001
ISBN:
9798229000222
ISSN:
1018-5941
Pages:
50
Keywords:
Social security reform; Public employment; Public deficit; Informality; reform experiment; retirement condition; social security deficit; retirement decision; Retirement; Aging; Public sector; East Asia; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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In many countries, the regulations governing pension systems, hiring procedures, and job contracts differ between the public and private sectors. Public sector employees tend to have longer tenures and higher wages compared to workers in the private sector. As such, social security reforms can affect both retirement decisions and sectoral choices. We study the effects of social security reforms on retirement and sectoral behavior in an economy with multiple pension systems. We develop a general equilibrium life-cycle model with heterogeneous agents, three sectors - private formal, private informal and public - and endogenous retirement. We quantitatively assess the long-run effects of reforms being discussed and implemented around the world. Among them, we study the unification of pension systems and increasing the minimum retirement age. We calibrate our model to Brazil, where several of the retirement conditions resemble those of other countries. We find that these reforms lower the likelihood of individuals to apply to a public job and increase the profile of savings over the life cycle. In the long run, these reforms lead to higher output and capital, reduced informality, and average welfare gains. They also drastically reduce the social security deficit.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund