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The redistributive effect of pensions. The case of Uruguay

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  • Alvaro Forteza

  • Diego Tuzman

Abstract

In this paper, we present estimations of the distribution and redistribution of per-period income that can be associated to social security using two approaches, one that follows the conventional practice of treating pensions as government transfers and an- other one that proposes to measure pension income as the return of pension wealth. Using data for Uruguay, we find that the former approach estimates less inequality in the presence of pensions and much larger decrease in inequality due to pensions than the latter. We show that the implicit assumption that individuals would not increase voluntary savings in the absence of pensions contributes to a strong apparent equalizing effect of pensions. As several scholars have warned, this assumption is not warranted.

Suggested Citation

  • Alvaro Forteza & Diego Tuzman, 2024. "The redistributive effect of pensions. The case of Uruguay," Documentos de Trabajo (working papers) 0924, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:0924
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    File URL: https://hdl.handle.net/20.500.12008/45754
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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