Pay-as-you-go Research Articles

Pay As You Go (PAYG) Pension Scheme and Employee Performance in Anambra State Local Government System (2012 - 2021)

Pay As You Go (PAYG) Pension Scheme and Employee Performance in Anambra State Local Government System (2012 - 2021)

Financial impact of pandemics on pension sustainability: an application for Spain

AbstractEpidemiologists are warning that the next pandemic is almost around the corner. As we have seen during the COVID-19 pandemic, the death toll was at the highest for over 60th, transforming the population pyramids. In times of pandemics, two effects on sustainability of the pay-as-you-go (PAYG) pension scheme go in different directions: the increase in old-age mortality (leading to a decrease in pension spending) and the increase in unemployment (leading to a decline in income from contributions). In this paper, we investigate the long-term effects of pandemics on the financial sustainability of PAYG pension schemes, taking into account changes in both mortality and unemployment factors. Using functional data analysis we develop projections of population pyramids and allow for anticipated mortality jumps as a result of future pandemics. An application is carried out using mortality and fertility data from Spain. Given some plausible assumptions, our findings indicate, firstly, that the financial sustainability of the Spanish pension system is compromised. Secondly, in the event of a pandemic, we observe that financial sustainability is primarily driven by the mortality effect—resulting in a decrease in pension expenditure—while the impact of unemployment is almost negligible.

Gendered financial & nutritional benefits from access to pay-as-you-go LPG for cooking in an informal settlement in Nairobi, Kenya

This study investigates the association between adoption of pay-as-you-go (PAYG) liquefied petroleum gas (LPG), an emerging alternative to full cylinder LPG, and women's economic empowerment in an informal settlement in Nairobi, Kenya. From December 2021-January 2022, 293 customers of a PAYG LPG company (PayGo Energy) were surveyed on their cooking patterns, financial savings and shifts in dietary behaviors following uptake of the technology. Among PayGo Energy customers that previously cooked only with polluting fuels (N = 78; 27 % of customers), daily cooking time was reduced by an average of 42 min/day; 82 % of PayGo Energy customers that previously cooked with full cylinder LPG (N = 216; 73 % of customers) also decreased their cooking time (average of 20 min/day) when switching to PAYG LPG. The majority (58 %; N = 70) of female household heads took on additional employment after switching to PAYG LPG, compared with 36 % (N = 55) of females living in male-headed households. Among female household heads, the proportion of informal sector workers earning wages on an irregular (71 %) or daily basis (61 %) that took on new income-generating activities after transitioning to PAYG LPG was over 20 % higher than those earning monthly salaries (39 %). Increased dietary diversity and consumption of protein-rich foods (legumes, meat, fish) from cooking with PAYG LPG was reported by 15 % of female household heads compared with 5 % of those living in male-headed households. While nearly three-quarters (73 %) of PayGo Energy customers would recommend the service to others because of the added convenience it provides, only one-third (29 %) reported associated health benefits as a key reason for promoting use of PAYG LPG to community members. Female household heads were more likely than non-household heads to be socioeconomically empowered when adopting PAYG LPG, illustrating that women's agency may influence the associated benefits of clean energy transitions. Nonetheless, the time savings reported by nearly all women who switched to PAYG LPG for cooking suggests that promoting the increased convenience of cooking with PAYG LPG may be useful for accelerating its adoption..

Demography, Economy and Policy Choices: The Three Corners of the Pension Conundrum

Abstract NDC (notional defined contribution) pension systems are usually considered the best in the PAYGO (pay-as-you-go) category: they mimic funding, seem to be well balanced, and have very limited distortionary effects on the labour market. In this paper, after highlighting of few of their weaknesses, I suggest an alternative solution to the pension problem: IPAYGO, or improved PAYGO. Its guiding principle, “everything is relative”, is applied consistently to both the economic and the demographic part of the problem: this makes the system viable in all possible demographic and economic scenarios. Depending on a few explicit policy (parametric) choices, IPAYGO may take very different shapes, and adapt to national preferences, such as early or late retirement, generous or limited pension benefits, and greater or lesser emphasis on actuarial equity. A properly designed IPAYGO, even in its basic form (the only one discussed here), can tackle issues such as inequities deriving from differential mortality (with the richer living longer), pension-induced low fertility, and quasi-capital gains and losses. While IPAYGO is conceived to be an operative instrument, it can also be used to evaluate existing pensions systems, and the phase a population is going through, with a novel measure of the so-called “demographic bonus” (or “malus”).

Optimization and Impact Assessment of Technology Management of Solar Energy in Rwanda

There is a rarity of research about technology management in the solar energy industry in Rwanda and very little analysis is available on the effectiveness of the technology used in solar home systems (SHSs). Using a binary logistic regression to primary data collected through Kobo Collect, this study assesses the factors that are involved in SHS business in Rwanda. The findings reveal a difference in successfully collecting money from customers who purchase SHSs on an installment payment plan concerning the type of SHS (i.e. pay-as-you-go (PAYG) and non-pay-as-you-go (non-PAYG)). In terms of the odds ratio concept, a statistical interpretation was provided. If the customer has a non-PAYG SHS, getting a reminder from the solar energy company’s agent will increase by 9.52 times. That means, it is 9.52 times higher for the non-PAYG SHS as compared to a customer with PAYG SHS. The results also show that the multicollinearity assumptions for the economic, social, technological, and management models are not violated and are optimal because each of the variance inflation factors (VIFs) was close to unity. However, only the socialization predictors were not significant enhancements in the goodness-of-fit relative to the intercept-only model. The Nagelkerke R2 indicates only an average (49.5%) relationship between the prediction and grouping of the modified economic pricing model. The Hosmer–Lemeshow measures indicate that the models in this research are optimal and good fits for the data studied. Furthermore, the predicted success overall performance for the economic, social, technological, and managerial models was 73.2% on average. The Wald criterion equally demonstrated that only the monthly installment amount (with and without outliers), type of SHS, and payment channel made significant contributions to the prediction optimization problem. Therefore, the solar energy companies in Rwanda need to rely on the findings of studies like this to successfully manage customers’ accounts optimally.

Pay-as-they-get-in: attitudes toward migrants and pension systems

Abstract We study whether a better knowledge of the functioning of pay-as-you-go (PAYG) pension systems and recent demographic trends affects natives’ attitudes toward immigration. In two online experiments conducted in Italy and Spain, we randomly treated participants with a video explaining how, in PAYG systems, the payment of current pensions depends on the contributions paid by current workers. The video also informs participants about population aging trends in their countries. The treatment increases knowledge of PAYG systems and future demographic trends for all participants. However, it improves attitudes toward migrants only for treated participants who do not support populist and anti-immigrant parties.

The ICT-Artefact in Capability Approach: Analysing an ICT-enabled, Renewable Energy Intervention, in Rural Kenya

This paper proposes a novel conceptualisation that holistically places the Information and Communication Technology (ICT) Artefact in Capability Approach (CA). The conceptualisation harmonises the different views about technology within CA-based frameworks in ICT4D, in order to address the inconsistencies. To demonstrate the utility of the conceptualisation, while simultaneously addressing the highest thematic research gap among post-2015 ICT4D research priorities, the study collected primary data from users of Pay-As-You-Go (PAYGO) solar kits who reside in rural Kenya. Using the conceptualisation, the study demonstrated that the ICT-artefact can holistically be placed within three of CA’s concepts: under material resources as a capability input; as a new category of conversion factors (technological factors); and as a component within the structural context. The study further demonstrated how the same ICT artefact could play out in the three different conceptualisations, resulting in different development outcomes. The study finally presents the implications for policy and practice.

Socioeconomic impacts of solar home systems in rural Ethiopia

Off grid solar electrification of remote, rural communities that are difficult to reach cost-effectively through grid extension is a core component of Ethiopia’s energy access strategy. One emerging business model in such locations, which aims to maintain affordability and access for customers with severe liquidity constraints, is the Pay-as-you-go (PAYGO) approach to solar home system (SHS) sales. This study focuses on the socioeconomic impacts of PAYGO SHS that are currently being marketed by a private supplier in the Amhara region of Ethiopia. The study employs descriptive and propensity score matching analysis to examine a range of impacts on those adopting this technology. The use of PAYGO SHS is shown to have no discernible impact on household income, but it does reduce monthly energy expenditure. Use of a PAYGO SHS also allows school-aged children to extend their study hours into the night, improves the self-reported health of family members, allows women to re-allocate their time across various activities, and enhances perceived safety and security. The role of SHS in financial inclusion and access to information is also discussed. Achieving wider dissemination of SHS to target populations will require more appropriate and effective intervention and marketing effort.

Health perceptions of smart meter liquefied petroleum gas users in Nairobi's Informal Settlement

Introduction : Household air pollution (HAP) from cooking with polluting fuels increases the risk of developing respiratory diseases. The use of a smart-meter liquefied petroleum gas (LPG); Pay-as-you-go (PAYG) model that eliminates cost barriers may increase the use of LPG, reduce HAP exposure, and lower the burden of respiratory diseases. Lack of awareness of the effects of HAP is a barrier to the exclusive use of LPG. This cross-sectional study examined smart meter users' awareness of air quality and perception of health risks associated with HAP among PAYG customers in Mukuru informal settlement, Nairobi Kenya.
 Materials and Methods : The study targeted household customers who have been cooking with PAYG LPG for at least two years. Surveys (n=330) and focus group discussions (FGDs) (n=32) participants were selected using multistage and purposive sampling techniques respectively. Quantitative and qualitative data were descriptively and thematically analyzed using STATA and NVIVO respectively.
 Results : The majority, who cooked with no separate kitchen room 147(60%) were worried about kitchen smoke (p-value=0.038). Also, 129(65%) of those who used smart meter LPG with other polluting fuels (p-value =0.021), and most 79(63%) who had experienced respiratory symptoms were concerned about kitchen smoke (p-value<0.05). Results further revealed participants' overall low awareness of indoor/outdoor pollution and little concern about respiratory health risks associated with HAP, due to a focus on more immediate issues, like; food security. The motivation to use LPG was more linked to economic considerations than health benefits.
 Conclusion/Recommendation : Results highlighted the potential for the smart-meter LPG (PAYG) model for exclusive adoption of LPG especially in the informal settlement and recommended the need to create awareness of the negative effects of HAP.

Unlocking the nexus potential: A techno-economic analysis of joint deployment of minigrids with smallholder irrigation

Sub-Saharan Africa (SSA) has the lowest rate of electricity access and irrigation in the world, at 45% and 5% respectively. The problem is in part due to the low economic viability of rural electrification, particularly through grid extension, lack of low-cost irrigation energy, and limited access to finance for the high cost of irrigation infrastructure. Despite their promising potential, minigrids’ deployment has been rather slow in SSA, partly due to the lack of viable business models for the dispersed low-income rural population. In this paper, we present an integrated model that couples a minigrid model with a crop model to explore the nexus potential of joint deployment of minigrids with smallholder irrigation to alleviate barriers to both minigrid scale-up and irrigation adoption. We apply the proposed model to three rural case studies in different geographical contexts in SSA. Our simulation results show the potential of irrigation loads to lower the unit cost of minigrid energy (LCOE) by up to 47%, depending on the quantity of irrigable land and its spatial distribution. A further scenario-based sensitivity analysis of the minigrid with and without aggregate irrigation load shows wide variations in LCOE–between a minimum of $0.24/kWh and a maximum of $1.2/kWh–with changes in the cost of capital and technology cost. Regarding irrigation viability, our model results show that irrigation profitability is a function of a complex interplay of factors, including crop type, soil fertility, infrastructure costs, energy prices, fertiliser application rate, and crop farm gate prices. We further test the effects of pay-as-you-go (PAYGo) business model incentives on the profitability of irrigation with minigrids; our results show that various incentives that alleviate either all or a fraction of upfront capital cost do not only mitigate irrigation adoption barrier but also enhances its profitability on the part of the farmer. Finally, our model results underscore that the economic viability of joint deployment of minigrids with smallholder irrigation depends on the optimal combination of agro-ecological factors of production (location suitability), type of crop (on a descending order, onion, tomato, and potato are the most profitable crops in our model), fertiliser application rate (near-optimal to optimal soil fertility is recommended) and cost scenarios (low cost of capital and technology preferred). In the main, our model and the results thereof highlight the potential benefits of co-planning minigrids and irrigation projects. Our model and results presented in this paper can be used as high-level decision-making pointers on the nexus planning of minigrids with smallholder irrigation farming.

Optimal mix among PAYGO, EET and individual savings

In order to deal with the aging problem, the pension system is actively transformed into the funded scheme. However, the funded scheme does not completely replace PAYGO (Pay as You Go) scheme and there exist heterogeneous mixes among PAYGO, EET (Exempt, Exempt, Taxed) and individual savings in different countries. In this paper, we establish the optimal mix by solving a Nash equilibrium between the pension participants and the government. Given the obligatory PAYGO and EET contribution rates, the participants choose the optimal asset allocation of the individual savings and the consumption policies to achieve the objective. The results extend the ‘Samuelson-Aaron’ criterion to age-dependent preference orderings. Under the baseline model, we identify three critical ages to distinguish the multiple outcomes of preference orderings based on heterogeneous characteristic parameters. The government is fully aware of the optimal feedback of the participants. It chooses the optimal PAYGO and EET contribution rates to maximize the overall utility of the participants weighted by each cohort's population. As such, the negative population growth rate leads to the decline of the PAYGO attractiveness as well as the increase of the older cohorts' weight in the government's decision-making. The optimal mix is the comprehensive result of the two effects.

How do they pay as they go?: Learning payment patterns from solar home system users data in Rwanda and Kenya

Pay-as-you-go (PAYGo) financing models play a vital role in boosting the distribution of solar-home-systems (SHSs) to electrify rural Sub-Saharan Africa. This financing model improves the affordability of SHSs by supporting the payment flexibility required in these contexts. Such flexibility comes at a cost, and yet the assumptions that guide the PAYGo model design remain largely untested. To close the gap, this paper proposes a methodology based on unsupervised machine learning algorithms to analyse the payment records of over 32,000 Rwandan and 25,000 Kenyan SHS users from Bboxx Ltd., and in so doing gain detailed insights into users' payment behavioural patterns. More precisely, the method first applies three clustering algorithms to automatically learn the main payment behavioural groups in each country separately; it then determines the preferred customer segmentation through a validation procedure which combines quantitative and qualitative insights. The results highlight six behavioural groups in Rwanda and four in Kenya; however, several parallels can be made between the two country profiles. These groups highlight the diversity of payment patterns found in the PAYGo model. Further analysis of their payment performance suggests that a one-size-fits-all approach leads to inefficiencies and that tailored plans should be considered to effectively cater to all SHS users.

Nudging Payment Behavior: Evidence from a Field Experiment on Pay-as-You-Go Off-Grid Electricity

Abstract This paper reports results from a randomized control trial with a pay-as-you-go (PAYG) solar system provider in Pakistan. In the default treatment, customers are told the amount to pay every month to keep the system active. In a first treatment, customers are assisted in planning this monthly payment. A second treatment discloses that payments can be made flexibly within the month. This disclosure may reduce contract cancellation by helping minimize transaction costs but may increase contract complexity and reduce discipline. A third treatment combines flexibility with assistance in planning payments. Disclosing flexibility increases contract cancellation relative to the default, but combining flexibility with planning offsets this effect. Treatment effects appear stronger among users facing high mental constraints and transaction costs. These findings support the idea that behavioral factors, such as inattention and commitment problems, lay behind the negative impact of flexibility on cancellation. The results suggest that providers of PAYG systems may face a trade-off between disclosing complex contractual features and customer retention. Planning helps customers handle the added complexity.

Financializing water service provision with digital devices: pro-commercialization alliances and the securitization of revenue from the unbankable in Mathare, Nairobi

ABSTRACT This article analyses the ‘inclusive and sustainable’ financialized commercialization of water service provision with digital devices in informal areas in the Global South. It ethnographically traces the implementation of PAYGo (pay-as-you-go) water dispensers by the Nairobi City Water and Sewerage Company (NCWSC) in Mathare/Nairobi, Kenya, to reach customers in areas previously considered unbankable; expel illegal water vendors; and demonstrate revenue streams to attract global financial capital. As a result of the depoliticization of local and global inequalities through PAYGo dispensers and the following redistributive battles, the NCWSC was forced to reintegrate the former vendors and their high price setting, and ultimately ‘blended’ financial capital with the informal economies of the poor to ‘securitize’ revenue. In contrast to the 1990s privatization initiatives, the current commercialization of water is more encompassing: Public-private alliances profit from attracting informal residents as customers, while residents remain largely excluded from the benefits of formal service delivery.

A Worker’s Backpack as an Alternative to PAYG Pension Systems

Abstract Facing an ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired, can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform (measured by average social welfare in the economy) existing PAYG systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing the effect of its ageing transition under these different pension systems and by showing how a front-loaded transition from the PAYG to the BP system can be Pareto improving, while minimizing the cost of the reform.

Demographic change and the rate of return in pay-as-you-go pension systems

The ongoing demographic change in most developed countries consists of two coinciding independent developments that differ in structure and persistence: A slow, monotonic and (presumably) permanent longevity effect caused by an increasing life expectancy; and a more rapidly changing, non-monotonic and less permanent cohort effect caused by fluctuations in the size of cohorts. This paper shows the longevity effect has a positive impact on the rates of return households generate within a pay-as-you-go (PAYG) pension system. The cohort effect, by contrast, results in winners and losers in PAYG systems. The paper additionally shows that the type of PAYG pension system alters the results significantly. Taking the remarkable demographic change in Germany as an example, a large-scale overlapping generation model quantifies rates of return within the PAYG pension system for every cohort. The results show that the two effects combined cause return differentials of almost 1.3 percentage points between generations.

The 2022 Greek pension reform: The rebirth of carve‐out privatization in Eastern Europe

AbstractAfter a decade of unprecedented austerity, Greece abruptly changed the course of pension consolidation in 2022 and implemented the controversial carve‐out pension funding approach, whereby a portion of existing pay‐as‐you‐go (PAYG) contributions are diverted to fund individual pension savings, thus undermining the financing of existing PAYG pensions. Although inspired by the World Bank’s 1994 pension privatization blueprint, the Greek 2022 reform features a major policy shift by entrusting the management of individual pension savings to a dedicated government body, ostensibly to try to remedy inherent market failures in private pension provision. Like earlier reforms in Eastern Europe, the multi‐decade transition costs of carve‐out funding have been vastly underestimated in Greece, which will give rise to fiscal distress in the coming years when annual transition costs become sizeable and favourable international financing terms start to change. Unless firm political commitment is established to implement the measures necessary to finance the transition costs, Greece may have to resort to reform reversals similar to those already implemented across Eastern Europe.

Changes in the tax structure and their impact on economic growth in the Republic of Croatia based on the VAR model

In Croatia, the social security system is based on generational solidarity, i.e. payment of contributions, which is known as pay as you go (PAYG), but the balance of its functioning is permanently and significantly disturbed by long-term unfavourable demographic processes. Projections show that the worrying demographic situation will deteriorate even further and that, with low birth and fertility rates and negative natural growth, negative net migration will contribute to further depopulation. In addition, contributions directly burden labour, i.e. they increase labour costs for employers and reduce their competitiveness in the marketplace, affecting economic growth. The paper reviews empirical research on the impact of different tax structures on economic growth, the sublimated conclusion of which is that direct taxes have a negative effect on growth, while indirect taxes are neutral. The Croatian tax system, with VAT as the main factor in the tax structure, is focused on taxing consumption, but is also characterized by a high level of levies. In this paper, the authors use the vector autoregression model to analyse the relationship between economic growth and the changed tax structure of the Republic of Croatia, in which the role of indirect taxes would be more emphasized. Data in model are consist of different types of taxes, GDPpc, population growth, gross fixed capital formation, unemployment rate and cover the time period from 2004 to 2019. The authors prove that the reduction of the tax burden through direct taxes has positive economic, demographic and fiscal effects.

Pension, possible phaseout, and endogenous fertility in general equilibrium

AbstractThe rich literature on Pay‐As‐You‐Go (PAYG)‐type pensions provides a notion that when pension return is dominated by the market return, generally it is impossible to phase pension out without hurting any generation. We show that PAYG pensions can indeed be phased out in a much richer framework where fertility is endogenous and general equilibrium effects are present. Interestingly, the factor that helps us to phase the pension out in a Pareto way is hidden in the structure of PAYG pension itself. Individualistic agents fail to recognize the benefits of their fertility decision on these programs and, therefore, end up in an allocation that is strictly dominated by the allocations that internalize this externality. Exploiting this positive externality, competitive economy can improve its allocations and can reach the planner's steady‐state in finite time where each generation secures as much utility as in the competitive equilibrium. Clearly, it is possible to transition in a Pareto way to an economy either with no pension or with pensions whose return is not dominated by market return.

Blended finance, transparent data, and the complications of waters' multiple ontologies

Abstract. In this article, I will utilize the elusive and fluid identity and texture of water to complicate an essentialist view of modern water that finds new relevance in claims to close the financing gap to provide safely managed water for all by the year 2030. To close this gap, models of blended finance are pursued that rely on transparent and auditable performance data of digital systems. Tracing the implementation of pay-as-you-go (PAYGo) water dispensers in off-grid areas in the Global South, I will demonstrate that the supposedly transparent and objective data generated from remote monitoring systems form part of the enactment of only one water reality amidst the multiple enactments of waters in relation to their sociotechnical environments, non-human encounters, and human bodies. Drawing on ethnographic material from two different settings in Kenya – the so-called informal Nairobi settlement of Mathare and a village called Kondo – I will show that, on the one hand, waters' multiplicity proliferates and, on the other hand, multiple waters and alternative water realities are deliberately undone. The paper closes with a call for the attentiveness to multiple waters.