Pension System Reform: The Mexican Case
In: Privatizing Social Security
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.)
|This chapter was published in: ||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.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
- Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
- Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
- 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.
- Schmidt-Hebbel, Klaus & Serven, Luis & Solimano, Andres, 1996. "Saving and Investment: Paradigms, Puzzles, Policies," World Bank Research Observer, World Bank Group, vol. 11(1), pages 87-117, February.
- Arrau, Patricio, 1990. "Social security reform : the capital accumulation and intergenerational distribution effect," Policy Research Working Paper Series 512, The World Bank.
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 references are entirely missing, you can add them using this form.