Social Security Reforms, Retirement and Sectoral Decisions

2025/01/01 by Bruno R. Delalibera, Bruno Delalibera, Pedro Cavalcanti Ferreira +1
Social Sciences · #Retirement, Disability, and Employment

paper · doi:10.1111/iere.70083

Abstract

ABSTRACT We study social security reforms in economies with segmented labor markets and pension systems. We develop a life‐cycle general equilibrium model with heterogeneous agents and endogenous retirement and sectoral choice across public, formal, and informal jobs. Calibrated to Brazil, the model shows that unifying pension systems and raising the minimum retirement age reduce the pension deficit by nearly 40 percent, while increasing output, capital accumulation, and welfare, despite redistributive effects across age groups, sectors, and along the transition path. Sectoral reallocation plays a central role in shaping reform effects, and ignoring these margins substantially underestimates the macroeconomic consequences of pension reforms.

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