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The ex-ante effects of non-contributory pensions in Colombia and Peru

  • Javier Olivera

    (UCD Geary Institute, PEARL Institute for Research on Social Inequality, University of Luxembourg)

  • Blanca Zuluaga

    (Department of Economics, Icesi University)

The aim of this paper is to study the ex-ante effects of the implementation of a Non Contributory Pension (NCP) program in Colombia and Peru. Relying on household survey data, we simulate the potential impact of the transfer on poverty, inequality, fiscal cost, and the probability of affiliation to the contributory pension system. This last effect is the most direct behavioural effect one can expect from the implementation of a NCP scheme. For the behavioural response we estimate a Nested Logit Model. Our results show that a NCP in Colombia and Peru contributes to the reduction of poverty and inequality among the elderly, particularly in rural areas at affordable fiscal costs. Furthermore, there is not a large impact on the probability of affiliation to contributory pensions when the program is targeted to the poor (and extreme poor), with the exception of Peruvian women.

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Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 201314.

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Length: 32 pages
Date of creation: 10 Sep 2013
Date of revision:
Handle: RePEc:ucd:wpaper:201314
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