Page 138 - IJPS-3-1

Public pensions, economic development, and the labor force participation of older adults in Latin America in 1990–2010

pooled data with the country fixed effect. These models did not include any other
variables. Panel A only provides estimates for intercountry variation.
For older men aged 65 and above, the result indicates that a 10% increase in GDP
per capita would lead to a 1.26% reduction in the labor force participation in (Panel
A). The trend was also observed for younger age groups, but with a much smaller
magnitude. For the older age group, a larger proportion of the variation was also
explained by the variation in income level. The results were very similar to what Clark
et al. (1999) showed for a larger sample of countries in the 1990s. This indicates that
the labor force participation rates of the older adults in Latin American countries tends
to be lower as income level rises.
Panel B shows the results for the fixed-effects model. The results are not statistically
significant except for age group 65 and above. The results indicate that, for the age
group 65 and above, an increase of 10% in per capita GDP level would reduce the
labor force participation by 0.34%. The fixed effect results indicate that the impact
of income level on the labor force participation was smaller compared to the cross-
country variation. That is, the pace of change observed in the analytical period was
slower than what one could conclude from analyzing only cross-sectional estimate.
The GDP per capita regression model explained a significant portion of the observed
variation, especially for older workers, but it is important to consider other variables
related to economic development, demographic and labor market changes, and the
structure of old-age pension programs.
3.4.3 Statistical Modeling – Full Model

Table 6 shows the results of using the pooled data for all countries, all periods, and
four different age groups, controlling for other covariates noted earlier. The results
indicate that the labor force participation rates of males aged 60 and above in countries
with a relatively matured pension system (measured by the time they exist) declined in
1990–2010, and that the labor force participation rate of males aged 55–59 in countries
with a relatively matured system was higher than that in countries where the systems
were less matured. The results also indicate that in more urbanized countries, older
males’ labor force participation rates were lower than those in less urbanized countries.
This is probably related to the composition of the industry, with greater concentration
of workers in the industry and services for more urbanized countries. Along these lines,
results show that as the share of workers in the informal sector increased, the labor
force participation of older males also increased. In general, those workers are not
covered by the public pension system and need to remain in the labor force for longer
periods of time to accumulate sufficient fund for their retirement life. Finally, results
indicate that the age structure of the population played an important role in the overall
rate of labor force participation of older males. An increase in the share of working-
age population significantly reduced the labor force participation of older males.
For example, for males aged 60–64, a 1% increase in the share of the working age
population reduced the labor force participation rate of that group by 1.16 percentage
points.
In the fixed-effect model, all variables lost statistical significance and some
changed the direction. Only for age groups 60–65 and 65 and above the coefficient
of the degree of coverage of the public pension program was statistically significant.
This result indicates that countries with a relatively mature public pension program
might be creating incentives and opportunities for workers to leave the labor force at
earlier ages, whereas in countries with small pension programs, older adults need to
remain in the labor force until very old ages. This indicates that unobserved country
characteristics might play a significant role on determining elderly labor force
participation.
In summary, the multivariable analyses on the determinants of labor force
participation rates of older males in Latin America in the period 1990–2010 show that
economic development, population aging, and variables related to the structure of the
old-age pension system had important impacts on older males’ labor force participation

132 International Journal of Population Studies 2017, Volume 3, Issue 1