Universidad de los Andes Facultad de Economía Por: Oscar Becerra
This paper describes how future pension benefits affect labor supply in economies that have an informal sector. From the perspective of the worker, a formal-sector job offers long-run gains, as it increases his likelihood of gaining pension benefits in the future. If workers take those gains into account when they search for formal-sector jobs, the pension system affects formal-sector labor supply. I estimate the causal link between pension incentives and formal-sector labor supply using a cohort-based reform undertaken in Colombia.