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This paper solves and estimates a stochastic model of optimal inter-temporal behavior to assess how changes in the design of the unemployment benefits 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 distribution of an exogenous shock that affects movements in and out of the social security system (given 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 a given cohort across states (in or out of the 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 distortions (lower savings rates and less formal employment) that increase the costs of the system and might generate regressive redistribution; (ii) there are important interactions between the unemployment benefits 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 combining matching contributions and anti-poverty targeted transfers to cover individuals with limited or no savings capacity.

Access to Finance --- Compensation and Benefits --- Debt Markets --- Economic Theory and Research --- Emerging Markets --- Employment levels --- Exogenous shock --- Exogenous shocks --- Finance and Financial Sector Development --- Gender --- Gender and Law --- Household survey --- Informal sector --- Jobs --- Labor demand --- Labor force --- Labor market --- Labor Markets --- Labor Policies --- Labor supply --- Law and Development --- Macroeconomics and Economic Growth --- Pensions and Retirement Systems --- Private sector --- Private Sector Development --- Private sector workers --- Program costs --- Retirement --- Social Protections and Labor --- Unemployment --- Unemployment benefits --- Unemployment insurance --- Unemployment insurance system --- Unemployment spell --- Unintended consequences --- Wages --- Youth and Government

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This paper investigates the occupational mobility and job quality of young people in Indonesia and relates this to the concept of "scarring." The concept of labor market scarring in this paper is the occurrence of low or zero returns to certain types of work (for example, self-employment). Scarring is expected to occur whenever an individual spends periods working in occupations in which their human capital is either stagnant or deteriorating. Fixed effects estimations using panel data from the Indonesian Family Life Survey reveal that a period in self-employment is associated with negative returns for youth (about 3 to 4 percent per year penalty), but not for older adults. In addition, there are clear patterns of persistence in self-employment over time with few individuals progressing from petty self-employment to businesses with permanent workers.

Adult males --- Aggregate unemployment --- Casual worker --- College graduate --- Contingent workers --- Displaced workers --- Earning --- Earnings losses --- Educational attainment --- Employee --- Employment outcomes --- Employment probability --- Employment prospects --- Employment status --- Expected wages --- Family labor --- Full time job --- Health insurance --- Household characteristics --- Human capital --- Human resource --- Informal employment --- Informal sector --- Job --- Job creation --- Job match --- Job search --- Job security --- Job separation --- Job status --- Job training --- Labor --- Labor contract --- Labor economics --- Labor force --- Labor management & relations --- Labor market --- Labor market characteristics --- Labor market experience --- Labor market outcomes --- Labor market segmentation --- Labor markets --- Labor policies --- Labor productivity --- Labor relations --- Labor standards --- Labour --- Labour market --- Long term wage --- Occupational mobility --- Older workers --- Permanent employment --- Permanent worker --- Permanent workers --- Private sector --- Private sector workers --- Public sector employment --- Safety net --- Salaried employment --- Self-employed --- Self-employment --- Social protections and labor --- Temporary work --- Temporary workers --- Unemployed --- Unemployed individual --- Unemployed youth --- Unemployment --- Unemployment rate --- Wage differentials --- Wage effects --- Wage employment --- Wage growth --- Wage impact --- Wage rates --- Wage sector --- Wage subsidies --- Work experience --- Worker --- Workers --- Working conditions --- Youth employment --- Youth unemployment