Zylberstajn, EduardoRobalino, David A.Zylberstajn, HelioAfonso, Luis Eduardo2014-09-172014-09-172008-07https://hdl.handle.net/10986/20196This paper solves and estimates a stochastic model of optimal inter-temporal behavior to assess how changes in the design of the income protection and pension systems in Brazil could affect savings rates, the share of time that individuals spend outside of the formal sector, and retirement decisions. Dynamics depend on five main parameters: preferences regarding consumption and leisure, preferences regarding formal Vs. informal work, attitudes towards risks, the rate of time preference, and the distributions of two exogenous shocks that affect movements in and out of the social security system (independently of individual decisions). The yearly household survey is used to create a pseudo panel by age-cohorts and estimate the joint distribution of model parameters based on a generalized version of the Gibbs sampler. The model does a good job in replicating the distribution of the members of the cohort across states (in or out of them social security / active or retired). Because the parameters are related to individual preferences or exogenous shocks, the joint distribution is unlikely to change when the social insurance system changes. Thus, the model is used to explore how alternative policy interventions could affect behaviors and through this channel benefit levels and fiscal costs. The results from various simulations provide three main insights: (i) the Brazilian SI system today might generate unnecessary distortions (lower savings rates, less formal employment, and more early retirement) that increase the costs of the system and might generate regressive redistribution; (ii) there are important interactions between the income protection and pension systems, which calls for joint policy analysis when considering reforms; and (iii) current distortions could be reduced by creating an actuarial link between contributions and benefits and then giving matching contributions or matching capital to individuals with limited savings capacity, which requires having individual savings accounts that can be funded or notional.en-USCC BY 3.0 IGOADVISORY SERVICEAGE GROUPAGE GROUPSASSET ACCUMULATIONSAVERAGE WAGEBANK LENDINGBENEFICIARYBONDSBUSINESS CYCLECAPITAL ACCUMULATIONCAPITAL ACCUMULATIONSCASH TRANSFERCASH TRANSFERSCHILD LABORCOMMUNITY DEVELOPMENTCONSUMPTION SMOOTHINGCONTRACT LABORCONTRIBUTION RATECREDIT CONSTRAINTSDEMOGRAPHICDEMOGRAPHIC CHANGEDISABLEDDISMISSALDISPLACED WORKERSEARLY CHILDHOODEARLY RETIREMENTEARNINGEARNINGSECONOMIC CHARACTERISTICSECONOMIC DECISIONSECONOMIC GROWTHECONOMIC THEORYEMPLOYEEEMPLOYEREMPLOYERSEMPLOYMENTEMPLOYMENT STATUSEMPOWERMENTEQUILIBRIUM WAGESEXOGENOUS SHOCKSEXPENDITUREEXPENDITURESEXPLICIT SUBSIDIESFINANCIAL SUSTAINABILITYFIRM SIZEFOOD PRICESFORMAL SECTOR WAGEFORMAL SECTOR WORKERSFUND MANAGERSGENDERGENERAL EQUILIBRIUMGLOBALIZATIONGROSS REPLACEMENT RATEGROWTH RATEGUARANTEE FUNDHOLDINGSHOUSEHOLD SURVEYHOUSEHOLD SURVEYSHOUSEHOLDSHUMAN CAPITALHUMAN DEVELOPMENTIMPLICIT SUBSIDIESIMPLICIT TAXINCENTIVE PROBLEMSINCOMEINCOME GROUPSINCOME LEVELINCOME LEVELSINCOME SUPPORTINCOMESINDEXED BONDSINDIVIDUAL RETIREMENTINEQUALITYINFLATIONINFORMAL EMPLOYMENTINFORMAL SECTORINFORMAL SECTOR WORKERSINFORMATION SYSTEMSINNOVATIONINSTITUTION BUILDINGINSTRUMENTINSURANCE POLICIESINTEREST RATEINTEREST RATESINTERNAL RATE OF RETURNINTERNAL RATES OF RETURNINTERNATIONAL BANKINVENTORYJOB CREATIONJOB SECURITYJOBSLABOR DEMANDLABOR ECONOMICSLABOR FORCELABOR FORCE PARTICIPATIONLABOR LAWSLABOR MARKETLABOR MARKET OUTCOMESLABOR MARKET POLICIESLABOR MARKETSLABOR MIGRATIONLABOR MOBILITYLABOR PRODUCTIVITYLABOR REGULATIONLABOR REGULATIONSLABOR SUPPLYLAYOFFLEVEL OF ASSETSLEVEL OF RISKLIFE EXPECTANCYLOCMANDATED BENEFITSMARKET TRENDSMICRO-DATAMICRODATAMINIMUM WAGEOCCUPATIONSOLD-AGE PENSIONSOLDER WORKERSOUTPUTPENSIONPENSION EXPENDITUREPENSION EXPENDITURESPENSION REFORMPENSION RIGHTSPENSION SYSTEMPENSION SYSTEM REFORMSPENSION SYSTEMSPENSIONSPERSONAL SAVINGPRELIMINARY RESULTSPRESENT VALUEPRIVATE SECTORPRIVATE SECTOR WORKERSPUBLIC PENSIONSPUBLIC POLICYRATE OF RETURNRATES OF RETURNREAL INTERESTREAL INTEREST RATEREPLACEMENT RATESRETIREMENTRETIREMENT AGERETIREMENT AGESRISK AVERSIONSAFETYSAFETY NETSAFETY NETSSAVINGSSAVINGS ACCOUNTSSAVINGS CAPACITYSAVINGS RATESSELF-EMPLOYMENTSERVANTSSOCIAL FUNDSOCIAL FUNDSSOCIAL INCLUSIONSOCIAL INSURANCE SYSTEMSOCIAL PROTECTIONSOCIAL SAFETY NETSOCIAL SAFETY NETSSOCIAL SECURITYSOCIAL WELFARESOURCE OF INFORMATIONSUBSTITUTION EFFECTSTRANSITION COUNTRIESTRANSPARENCYTURNOVERUNEMPLOYEDUNEMPLOYED INDIVIDUALSUNEMPLOYED WORKERSUNEMPLOYMENTUNEMPLOYMENT ASSISTANCEUNEMPLOYMENT BENEFITSUNEMPLOYMENT INSURANCEUNEMPLOYMENT INSURANCE BENEFITUNEMPLOYMENT INSURANCE BENEFITSUNEMPLOYMENT INSURANCE SYSTEMUNEMPLOYMENT SPELLUNEMPLOYMENT SPELLSUNFUNDED LIABILITIESUNINTENDED CONSEQUENCESURBAN AREASVALUE OF ASSETSWAGE PREMIUMWAGESWITHDRAWALWORKERYOUTH EMPLOYMENTYOUTH LABOR10.1596/20196