Advanced Search
MyIDEAS: Login to save this book chapter or follow this series

Pension System Reform: The Mexican Case

In: Privatizing Social Security

Contents:

Author Info

  • Carlos Sales-Sarrapy
  • Fernando Solis-Soberon
  • Alejandro Villagomez-Amezcua

Abstract

The paper analyzes the Mexican pension reform of December 1995. Essentially, the reform substituted a defined-benefit pay-as-you-go system with a fully funded defined contribution system based" on individual accounts with a minimum pension guarantee provided by the government. Total contributions to the accounts will amount to 13.5 percent of the salary for the average worker plus 2.5 percent for disability and life insurance that will still be managed by the government's Social Security Institute (IMSS). The new system shares many common elements with other Latin American experiences. However, it shows some advantages and disadvantages with respect to them. Regarding the advantages, the new system completely substitutes the old system; administrative costs are reduced by limiting the number of transfers between pension fund managers to once per year; pension managers are allowed to operate several funds; the law does not establish a minimum guaranteed rate of return for pension funds; and there is a centralized contributions collector agency. Disadvantages include the prohibition of the funds from investing in foreign securities; the IMSS is the sole provider of disability and life insurance; the IMSS will be able to operate a pension fund manager; the housing subaccount offers low returns; there are market share limits; and the new system still faces some portability problems. Finally, we found that the fiscal cost of the transition to the new system is relatively low compared to similar reforms in other Latin American countries.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/chapters/c6249.pdf
Download Restriction: no

Bibliographic Info

as in new window

This chapter was published in:

  • Martin Feldstein, 1998. "Privatizing Social Security," NBER Books, National Bureau of Economic Research, Inc, number feld98-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6249.

    Handle: RePEc:nbr:nberch:6249

    Contact details of provider:
    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Email:
    Web page: http://www.nber.org
    More information through EDIRC

    Related research

    Keywords:

    Other versions of this item:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
    2. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, American Economic Association, vol. 79(2), pages 177-83, May.
    3. Arrau, Patricio, 1990. "Social security reform : the capital accumulation and intergenerational distribution effect," Policy Research Working Paper Series 512, The World Bank.
    4. Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
    5. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 1-24, March.
    6. Schmidt-Hebbel, Klaus & Serven, Luis & Solimano, Andres, 1996. "Saving and Investment: Paradigms, Puzzles, Policies," World Bank Research Observer, World Bank Group, World Bank Group, vol. 11(1), pages 87-117, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Frías, Judith A & Kumler, Todd & Verhoogen, Eric A, 2013. "Enlisting Employees in Improving Payroll-Tax Compliance: Evidence from Mexico," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9622, C.E.P.R. Discussion Papers.
    2. Fausto Hernández Trillo & Alejandro Villagómez Amezcua, 2000. "La estructura de la deuda pública en México: Lecciones y perspectivas," Research Department Publications, Inter-American Development Bank, Research Department 3104, Inter-American Development Bank, Research Department.
    3. Cerda, Luis & Grandolini & Grandolini, Gloria, 1998. "The 1997 pension reform in Mexico," Policy Research Working Paper Series 1933, The World Bank.
    4. Olivia S. Mitchell & Flavio Ataliba Barreto, 1997. "After Chile, What? Second-Round Pension Reforms in Latin America," NBER Working Papers 6316, National Bureau of Economic Research, Inc.
    5. Marco A. Espinosa-Vega & Tapen Sinha, 2000. "A primer and assessment of social security reform in Mexico," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q1, pages 1-23.
    6. Serrano, Carlos, 1999. "Social security reform, income disribution, fiscal policy, and capital accumulation," Policy Research Working Paper Series 2055, The World Bank.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:6249. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.