Extending the 'Social Safety Net': Female Labor Supply and Pension Eligibility

Abstract

A 1991 legal change extended the coverage of pensions in rural Brazil to include large numbers of previously uncovered women, conditional on subjective work requirements. This change was accompanied by an increase in female employment, in particular among newly covered women. This paper analyzes the extent to which a causal relationship existed between these two phenomena; specifically, the extent to which women increased their labor supply in response to future pension eligibility. Using a differences-in-differences approach, I find evidence that pension eligibility increased the labor supply of rural women in two ways. First, I find that rural women made immediately eligible by age temporarily increased labor supply, and second, I find that at least some cohorts of younger rural women eligible in the future also increased labor supply, presumably as an anticipatory response. These results shed light on the capacity of elderly workers to respond to financial incentives for old-age labor supply participation, in addition to the extent to which younger workers might be forward-looking in their responses to retirement incentives.

Keywords: Public pensions, retirement, labor supply

JEL Classification: H55, J26, O54