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

Produced by: 
The World Bank
Available from: 
December 2015
Paper author(s): 
Tobias Pfutze
Carlos Rodríguez-Castelán
Topic: 
Demographic Economics - Migration
Labor
Year: 
2016

One of the primary motivations behind the establishment of noncontributory pension programs is to allow beneficiaries to retire from the labor force. Yet, as with other unconditional cash transfer schemes, their aggregate effects may be more complex. Using panel data and instrumental variable techniques, this paper shows that the effect of one such program, Colombia Mayor, has been to raise the labor force participation of relatively younger male beneficiaries. This increase occurred precisely in the occupations with characteristics that are likely to require some up-front investment. The paper concludes that the transfer effectively loosened the liquidity constraints to remaining in these occupations. However, no such effect is found among women or older beneficiaries.

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