Social Security and Labour Supply in Ethiopia

Abstract

This paper examines the effect of social security on labor supply using toe traditional tabor force participation model. Application of a logit regression to the survey data yields results that go counter to theory. That is. the availability of pension income does not reduce labor force participation rates. It is also found, that as age increases, participation in the labor force is significantly reduced for women than men and also for blue-collar jobs than white-collar ones. This result has a policy implication that there is a need for retirement age discrimination act by sex and by type of job. Logit models were estimated for different age groups and it is found that there is no problem arising due to aging or health, which are the main determinants in setting retirement age. until the age of 60 for participation in the labor force. The results also indicate that the probability to participate in the labor force reduces by 0.09 if one goes from age group of 56-60 to the age group of 61-65.