Social Security Reforms, Retirement and Sectoral Decisions
IMF Working Papers, January 31, 2025
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Bibliographic details
- Authors: Bruno R. Delalibera, Pedro Cavalcanti Ferreira, Rafael Machado Parente
- Published: January 31, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229000222.001
Research question and context
- Investigates how social security reforms affect retirement decisions and sectoral choices in economies with multiple pension systems.
- Context: Regulations for pension systems, hiring procedures, and job contracts often differ between public and private sectors; public sector employees tend to have longer tenures and higher wages compared to workers in the private sector.
- Focus reforms: unification of pension systems and increasing the minimum retirement age.
- Geographic calibration: model calibrated to Brazil, where several retirement conditions resemble those of other countries.
Model and methodology
- General equilibrium life-cycle model with heterogeneous agents.
- Three employment sectors modeled: private formal, private informal, and public.
- Endogenous retirement decision incorporated.
- Quantitative assessment of long-run effects of reforms discussed and implemented globally.
Key quantitative and structural features preserved from the source
- Pages: 50
- Volume: 2025
- Issue: 032
- Series: Working Paper No. 2025/032
- DOI: https://doi.org/10.5089/9798229000222.001
- Stock No: WPIEA2025032
- ISBN: 9798229000222
- ISSN: 1018-5941
- Publication date: January 31, 2025
Main findings
- Reforms lower the likelihood of individuals to apply to a public job.
- Reforms increase the profile of savings over the life cycle.
- In the long run, reforms lead to:
- Higher output.
- Higher capital.
- Reduced informality.
- Average welfare gains.
- Reforms drastically reduce the social security deficit.
Policy implications and relevance
- Unifying pension systems and raising minimum retirement ages can shift labor supply and sectoral composition away from public employment toward private sectors.
- Increased lifetime savings profiles imply changes in capital accumulation and long-run macroeconomic outcomes.
- Reduction in informality suggests potential gains in formal sector employment and public revenue bases.
- Drastic reduction in social security deficit highlights fiscal benefits of the studied reforms.
This summary is drawn from "Social Security Reforms, Retirement and Sectoral Decisions" by Bruno R. Delalibera, Pedro Cavalcanti Ferreira, and Rafael Machado Parente, IMF Working Papers 2025, 032 (January 31, 2025).
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