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Universal minimum old age pensions : impact on poverty and fiscal cost in 18 Latin American countries

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  • Dethier, Jean-Jacques
  • Pestieau, Pierre
  • Ali, Rabia

Abstract

Alleviating poverty for the elderly requires a different approach from other age groups, and a minimum pension is likely to be the only viable option. This paper examines the impact on old age poverty and the fiscal cost of universal minimum old age pensions in 18 Latin American countries using recent household survey data. First the authors measure old age poverty rates for these countries. Then they discuss the design of minimum pensions schemes -- means-tested or not -- as well as the disincentives they introduce for the economic and social behavior of households including labor supply, saving and family solidarity. Finally, the authors use household survey data to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. They 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 they 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 the fiscal capacity of the country.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5292.

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Date of creation: 01 May 2010
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Handle: RePEc:wbk:wbrwps:5292

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Related research

Keywords: Rural Poverty Reduction; Population Policies; Debt Markets; Regional Economic Development;

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Cited by:
  1. Barrientos, Armando & Niño-Zarazúa, Miguel, 2011. "Social transfers and chronic poverty: objectives, design, reach and impact," MPRA Paper 30465, University Library of Munich, Germany.
  2. AfDB AfDB, 2011. "MDG Report 2011 - Full Report," MDG Report 334, African Development Bank.

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