Contributory pension scheme and formal retirement savings: is there a trade-off? -evidence from India’s Atal Pension Yojna using copula regression methodology

This paper analyses the impact of enrollment in the recently launched contributory pension scheme, Atal Pension Yojana (APY), on formal retirement savings using a unit-level sample of households from an extensive, nationally representative survey for India. We address the endogeneity in the enrollment in APY using a novel semiparametric copula regression methodology. This methodology allows us to address and control for endogeneity due to observed and unobserved confounding, nonlinear covariate effects, and non-Gaussian distributions. Our results indicate that APY positively impacts formal retirement savings. APY crowd-in other forms of formal retirement savings. Our results suggest that marginalized populations, especially the Scheduled Tribe, are more likely to enroll in APY, and digital financial technologies can bring greater financial inclusion in India. The findings have significant policy implications on how households allocate their retirement savings and help us understand the role of APY in bringing additional savings.