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A primer and assessment of social security reform in Mexico

  • Marco A. Espinosa-Vega
  • Tapen Sinha

Recent projections of a number of countries with pay-as-you-go pension systems have shown significant future actuarial imbalances. As a consequence, several of these countries, including Mexico, are engaged in redesigning their pension systems. ; From the U.S. perspective, Mexico's reform is of particular interest because of the similarities of its program to some proposals for the U.S. system. The Mexican government claims that it has started a move to a fully funded system. As proof, it points out that since 1997 Mexico has adopted a privately managed defined-contribution system. However, a pension system can be privately administered without being fully funded. It is the adoption of a fully funded system that would have the most significant macroeconomic effects in an economy: an increase in domestic savings and a drop in interest rates. ; The authors of this article contend that after reviewing the new system, one cannot tell whether the government is switching to a fully funded system. They review some potential gains and losses of the change in style of the system. However, they argue that regardless of whether the reform is a change of style or substance, additional information is required to effectively assess its net gains. They conclude that Mexico is in dire need of further research to guide it through its decision of whether and how to switch to a fully funded pension system.

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Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2000)
Issue (Month): Q1 ()
Pages: 1-23

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Handle: RePEc:fip:fedaer:y:2000:i:q1:p:1-23:n:v.85no.1
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  1. von Gersdorff, Hermann, 1997. "Pension reform in Bolivia : innovative solutions to common problems," Policy Research Working Paper Series 1832, The World Bank.
  2. Laurence J. Kotlikoff, 1996. "Privatization of Social Security: How It Works and Why It Matters," NBER Chapters, in: Tax Policy and the Economy, Volume 10, pages 1-32 National Bureau of Economic Research, Inc.
  3. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
  4. Olivia S. Mitchell, 1996. "Administrative Costs in Public and Private Retirement Systems," NBER Working Papers 5734, National Bureau of Economic Research, Inc.
  5. Carlos Sales-Sarrapy & Fernando Solis-Soberon & Alejandro Villagomez-Amez, 1996. "Pension System Reform: The Mexican Case," NBER Working Papers 5780, National Bureau of Economic Research, Inc.
  6. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
  7. HUANG, HE & IMROHOROG[caron]LU, SELAHATTIN & SARGENT, THOMAS J., 1997. "Two Computations To Fund Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 7-44, January.
  8. repec:cup:macdyn:v:1:y:1997:i:1:p:7-44 is not listed on IDEAS
  9. Marco A. Espinosa-Vega & Steven Russell, 1999. "Fully funded social security: Now you see it, now you don't?," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 16-25.
  10. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
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