“Pension design with a large informal labor market: Evidence from Chile”
The effects of pension programs on labor supply and savings depend on the nature of informal labor markets
(``residual''?, ``competitive''?), with large fiscal implications. Linked administrative and self-reported
panel data from Chile are used to estimate a dynamic household labor supply and saving decision model with
a formal and an informal sector. Parameter estimates suggest that: lack of access to formal jobs accounts
for only 14\% of informal work; avoidance of mandatory pension contributions is limited; minimum pension
benefits can reduce female pension coverage significantly regardless of their design but different designs
have very different fiscal costs.
“How the Design of a Pension System Influences Old Age Poverty and Gender Equity: A Study of Chile's Private Retirement Accounts System” (with Petra Todd)
This paper develops and estimates a dynamic model of individual's and couples' labor supply and saving decisions to examine how the design of a individual retirement accounts pension system influences retirement decisions, pension accumulations and consumption levels of men and women. Chile has one of the longest-running nationwide private retirements accounts systems, operating since 1980, and its pension system served as a model for many other Latin American countries. In 2008, Chile undertook a major reform of its pension system with a focus on alleviating old age poverty and promoting gender equity. Women can be particularly vulnerable to poverty under a private retirements account system, because they typically have less regular labor force participation than men, lower average wages and longer life spans. The behavioral model is estimated using household survery data from the Encuesta de Proteccion Social merged with administrative data from the pension regulatory agency, the Superintendencia de Pensiones. The estimated model is used to simulate the short-term and long-term effects of the 2008 pension reform and to compare with alternative pension system designs.
“Overeducation and skill mismatch: a dynamic analysis” (with Brian Clark and Arnaud Maurel)
Half of American workers have a level of education that does not match the level of education required for their job. Of these, a majority are overeducated,
i.e. have more schooling than necessary to perform their job (see, e.g., Leuven & Oosterbeek, 2011). In this paper, we use data from the National Longitudinal
Survey of Youth 1979 (NLSY79) combined with the pooled 1989-1991 waves of the CPS to provide some of the first evidence regarding the dynamics of overeducation
over the life cyle. Shedding light on this question is key to disentangle the role played by labor market frictions versus other factors such as selection on
unobservables, compensating differentials or career mobility prospects. Overall, our results suggest that overeducation is a fairly persistent phenomenon, with
79% of workers remaining overeducated after one year. Initial overeducation also has an impact on wages much later in the career, which points to the existence
of scarring effects. Finally, we find some evidence of duration dependence, with a 6.5 point decrease in the exit rate from overeducation after having spent five
“The value of remarriage: welfare effects of divorce legalization” (with Sekyu Choi)
Until 2004, divorce in Chile was illegal and separated individuals were unable to remarry. This paper examines
who benefits or looses from the option of exiting a marriage and remarrying. Using longitudinal survey data,
we first document the effects of the reform on couples formation and separation. We then use this variation
in the data to structurally estimate a dynamic equilibrium model of marriage and remarriage over the life
cycle and estimate the welfare impacts of legal divorce across genders, schooling levels and ages.
Preliminary estimates suggest that divorce legalization operated an important transfer of welfare from men
to women. This is due to the fact that separation is estimated to be a very detrimental state for women,
the threat of which allowed husbands to extract a large portion of the gains from marriage before divorce
Here's a preliminary draft with early estimation results (do not cite!): pdf
WORK IN PROGRESS:
“A structural dynamic analysis of overeducation and mismatch” (with Arnaud Maurel)
This paper investigates the determinants of educational mismatch and its effect on wages. We specify and estimate, using data from the National Longitudinal Survey of Youth 1979 (NLSY79), a dynamic structural model of schooling and career choice that incorporates search frictions, endogenous human capital accumulation, compensating wage differentials and unobserved heterogeneity in skills. Notably, this framework allows us to quantify the relative importance of different theories that have been used separately in the literature to explain why a substantial fraction of workers are more qualified than necessary to perform their job, despite low returns to surplus schooling. We argue that telling apart the role played by search frictions, versus other factors such as unobserved ability, non-pecuniary job benefits or career mobility prospects, is crucial to understand the welfare and policy implications of the overeducation phenomenon.
“Divorce, remarriage and old age poverty” (with Maria Casanova)