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The Economy of the Possible: Pensions and Informality in Latin America

Author

Listed:
  • Rita Da Costa

    (OECD)

  • Juan Ramón de Laiglesia

    (OECD)

  • Emmanuelle Martínez
  • Ángel Melguizo

    (OECD)

Abstract

Social protection coverage is quite low in Latin America. This situation, irrespective of the type of pension scheme, represents a challenge for public policy since these low levels of affiliation and irregular contribution histories indicate that pensions will be insufficient in the coming decades. This paper describes the relationship between pension protection and labour informality in Bolivia, Brazil, Chile and Mexico by income level, using several rounds of national household surveys. Our analysis highlights that labour formality is limited, even among the middle and the high income groups. Correspondingly, coverage rates (measured by contributors or affiliates over workers) range between 10% of the labour force in Bolivia to up to 62% in Chile. 76% of formal workers are covered on average, while coverage among the self-employed in agriculture is below 7%. Based on this prognosis, we discuss some alternative pension reforms. La couverture des pensions de retraite est relativement faible en Amérique latine. Indépendamment des types de systèmes de retraite, cette situation représente un défi pour les politiques publiques : aussi bien les faibles niveaux d’affiliation que les historiques de contribution irréguliers indiquent que les retraites des décennies à venir seront insuffisantes. Cet article décrit la relation existant entre les systèmes de couverture retraite et le phénomène d’informalité du marché du travail en Bolivie, au Brésil, au Chili et au Mexique, par niveau de revenu, et à partir des données d’enquêtes de ménage. L’analyse souligne le fait que le nombre de travailleurs formels est limité, et ce même parmi les groupes de revenus moyens et élevés. De même, les taux de couverture (mesurés par la proportion de contribuables ou d’affiliés par rapport au nombre total de travailleurs) varient de 10 % pour la force de travail en Bolivie, à 62 % au Chili. 76 % des travailleurs formels sont couverts en moyenne, tandis que parmi les travailleurs indépendants agricoles ce chiffre ne dépasse pas 7 %. En se basant sur ce pronostique, différentes alternatives de réformes de retraites sont examinées.

Suggested Citation

  • Rita Da Costa & Juan Ramón de Laiglesia & Emmanuelle Martínez & Ángel Melguizo, 2011. "The Economy of the Possible: Pensions and Informality in Latin America," OECD Development Centre Working Papers 295, OECD Publishing.
  • Handle: RePEc:oec:devaaa:295-en
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    File URL: http://dx.doi.org/10.1787/5kgj0vdgrk8v-en
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    Citations

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    Cited by:

    1. International Monetary Fund, 2012. "Nicaragua; Selected Issues," IMF Staff Country Reports 12/257, International Monetary Fund.
    2. David Tuesta, 2015. "The informal economy and the constraints that it imposes on pension contributions in Latin America," Working Papers 1419, BBVA Bank, Economic Research Department.
    3. Luis J. Carranza & Angel Melguizo & David Tuesta, 2012. "Matching Contributions for Pensions in Colombia, Mexico, and Peru: Experiences and Prospects," Working Papers 1232, BBVA Bank, Economic Research Department.

    More about this item

    Keywords

    Amérique latine; informality; informalité; Latin America; old-age pension; pensions de retraite; self-employment; travailleurs indépendants;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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