Diego Vera Cossio, BID

Paper: Public Pensions and the Strategic Timing of Formal Employment

Abstract: We study how public pensions impact lifecycle labor supply decisions. Our analysis centers on pension eligibility rules in Ecuador. We first use administrative data to document and unpack retirement spikes at eligibility ages. Next, we use survey data and regression discontinuity to investigate whether eligibility rules influence earlier-in-life decisions about when to work formally versus informally. We find discontinuous increases in transitions to formal employment at 50, consistent with forward-looking people timing employment to minimize social security contributions while maintaining benefit eligibility. Evidence suggests that small and family firms, where employees and employers may readily coordinate, help facilitate these transitions.