Download This PaperMandatory Retirement Savings in the Presence of an Informal Labor Market
20 Pages Posted: 29 Jan 2021
Date Written: November 26, 2020
Abstract
This paper shows how taking a job in the informal economy may help to circumvent the borrowing constraints activated by mandatory retirement savings. Agents with present bias may choose to work informally to avoid the mandatory contributions and increase their present consumption, even if they would be more productive in the formal economy. In this case, decreasing the contribution rate will actually increase their savings and welfare.
Keywords: mandatory savings, contribution rate, present bias, informality, borrowing constraints.
JEL Classification: D14, E21, H55
Suggested Citation: Suggested Citation
Pardo, Oliver, Mandatory Retirement Savings in the Presence of an Informal Labor Market (November 26, 2020). Available at SSRN: https://ssrn.com/abstract=3738300 or http://dx.doi.org/10.2139/ssrn.3738300
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