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The impact of a minimum pension on old age poverty and its budgetary cost. Evidence from Latin America

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Author Info

  • Jean-Jacques Dethier

    ()

  • Pierre Pestieau

    ()

  • Rabia Ali

    ()

Abstract

ResumenEste artículo examina el impacto sobre la pobreza y el costo fiscal de una pensión mínima universalpara la población anciana en Latinoamerica usando datos de encuesta de hogares en 18 países. La asistencia a la pobreza de la población anciana necesita de una aproximación diferente a la de otros grupos de edad y la pensión mínima puede ser una opción alternativa viable. En primer lugar se mide la tasa de pobreza en la población de ancianos. En segundo lugar se discute el diseño de un esquema de pensión mínima, con y sin eligibilidad de la asistencia, asi como el efecto desincentivo que se espera sobre el comportamiento social y económico de las familias, incluyendo la oferta laboral ahorros y solidaridad familiar. Tercero, se utilizan las encuestas de hogares para simular el costo fiscal y el impacto sobre las tasas de probreza de un esquema de pensión mínima en los 18 países. El artículo muestra que una pensión mínima universal reduciría ampliamente la pobreza en la población anciana, excepto en Argentina, Brazil, Chile y Uruguay, en donde la pensión mínima ya existe y las tasas de pobreza son bajas. Este tipo de esquemas generan varios comentarios en relación con los incentivos, los efectos de dispersión y simplicidad adminsitrativa, pero tienen altos costos fiscales. Los costos fiscales son función de la edad en la cual los beneficios son asignados, la alta longevidad, la generosidad de los beneficios, la eficacia del mecanismo de eligibilidad y la capacidad fiscal del país.Abstract:This paper examines the impact on old age poverty and the fiscal cost of universal minimum oldage pensions in Latin America using recent household survey data for 18 countries. Alleviatingold age poverty requires different approach from other age groups and a minimum pension is likely to be the only alternative available. First we measure old age poverty rates for all countries. Second we discuss the design of minimum pensions schemes, means-tested or not, as well as the disincentive effects that they are expected to have on the economic and social behavior of households including labor supply, saving and family solidarity. Third we use the household surveys to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. We show that a universal minimum pension would substantially reduce poverty among the elderly except in Argentina, Brazil, Chile and Uruguay where minimum pension systems already exist and poverty rates are low. Such schemes have much to be commended in terms of incentives, spillover effects and administrative simplicity but have a high fiscal cost. The latter is a function of the age at which benefits are awarded, the prevailing longevity, the generosity of benefits, the efficacy of means testing, and naturally the fiscal capacity of the country.

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Bibliographic Info

Article provided by UNIVERSIDAD DEL ROSARIO in its journal REVISTA DE ECONOMÍA DEL ROSARIO.

Volume (Year): (2011)
Issue (Month): ()
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Handle: RePEc:col:000151:009336

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Keywords: Pobreza en la vejez; transferencia de ingreso; sistema de pensiones; ingreso familiar; política fiscal; desarrollo humano.Old age poverty; income transfer; pension systems; family income; fiscal policies; humandevelopment.;

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References

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  1. Rafael Rofman & Leonardo Lucchetti & Guzmán Ourens, 2010. "Pension Systems in Latin America: Concepts and Measurements of Coverage," Documentos de Trabajo (working papers) 0510, Department of Economics - dECON.
  2. Barrientos, Armando & Gorman, Mark & Heslop, Amanda, 2003. "Old Age Poverty in Developing Countries: Contributions and Dependence in Later Life," World Development, Elsevier, vol. 31(3), pages 555-570, March.
  3. Esther Duflo, 2000. "Grandmothers and Granddaughters: Old Age Pension and Intra-household Allocation in South Africa," NBER Working Papers 8061, National Bureau of Economic Research, Inc.
  4. Marianne Bertrand & Douglas Miller & Sendhil Mullainathan, 2000. "Public Policy and Extended Families: Evidence from South Africa," NBER Working Papers 7594, National Bureau of Economic Research, Inc.
  5. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  6. Irineu Evangelista de Carvalho Filho, 2012. "Household Income as a Determinant of Child Labor and School Enrollment in Brazil: Evidence from a Social Security Reform," Economic Development and Cultural Change, University of Chicago Press, vol. 60(2), pages 399 - 435.
  7. Atkinson, Tony, et al, 2002. "Microsimulation of Social Policy in the European Union: Case Study of a European Minimum Pension," Economica, London School of Economics and Political Science, vol. 69(274), pages 229-43, May.
  8. Jean O. Lanjouw & Peter Lanjouw & Branko Milanovic & Stefano Paternostro, 2004. "Relative price shifts, economies of scale and poverty during economic transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(3), pages 509-536, 09.
  9. Deaton, A. & Paxson, C., 1997. "Economies of Scale, Household Size, and the Demand for Food," Papers 178, Princeton, Woodrow Wilson School - Development Studies.
  10. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1.
  11. Larry Willmore, 2004. "Universal Pensions in Mauritius: Lessons for the Rest of Us," Public Economics 0412003, EconWPA.
  12. Larry Willmore, 2004. "Universal Pensions in Low Income Countries," Public Economics 0412002, EconWPA.
  13. Dreze, Jean & Srinivasan, P. V., 1997. "Widowhood and poverty in rural India: Some inferences from household survey data," Journal of Development Economics, Elsevier, vol. 54(2), pages 217-234, December.
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Cited by:
  1. Javier Olivera & Blanca Zuluaga, 2013. "The ex-ante effects of non-contributory pensions in Colombia and Peru," Working Papers 299, ECINEQ, Society for the Study of Economic Inequality.
  2. Kaushal, Neeraj, 2014. "How Public Pension affects Elderly Labor Supply and Well-being: Evidence from India," World Development, Elsevier, vol. 56(C), pages 214-225.

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