The Microeconomic Determinants of Demand for Social Security: Evidence from the Algerian Labour Market

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Walid Merouani
Nacer Eddine Hammouda
Claire El Moudden

Abstract

The aim of this paper is to identify the determinants of demand for social security. International institutions (World Bank, International Labor Organisation etc.) consider social security to be a human right. However, in Algeria, 73% of workers in the private sector do not have any social insurance coverage (employment survey, ONS, 2013). Risk aversion (Barsky et al., 1997; Freidman, 1973), time discounting (Arrondel et al., 2004; Brown et al., 2013) and the orientation of social value orientations (Murphy et al., 2011) are all potential determinants of demand for social insurance. This paper measures these variables using experimental methods and by means of a survey administered to the active labour force in Algeria. It was found that risk aversion increases demand for social insurance, loss aversion decreases demand, and time discounting has negative effect on the demand for social insurance. In terms of personality, individualistic respondents were less likely to purchase social insurance while pro-social individuals were more likely to demand social insurance.

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