Pension reform : is there a tradeoff between efficiency and equity?
In the past decade, Latin America has taken the lead in structural pension reform which replaces a publicly managed pay-as-you-go defined-benefit system with a system of privately managed, fully funded defined-contribution accounts supplemented by a social safety net This arrangement is designed to improve efficiency and growth, and preliminary evidence suggest that it has been successful in doing so. But traditional social security systems have been justified on the grounds that they are equitable and redistribute to low income groups. Are we in danger of exchanging equity for efficiency? The author argues that in fact traditional system produce many inequities, both within cohorts and across cohorts. So it is possible for pension reform to improve both equity and efficiency - a win-win situation rather than a tradeoff. The reforms undertake thus far have indeed reduced existing equity problems, but some old equity problems remain and some new ones have been created. The main policy lesson is this: Pension reforms should be carefully designed to improve equity as well as efficiency and growth. Only further empirical analyses will determine whether the redistributional goal has been achieved.
|Date of creation:||31 May 1997|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
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.:
- Haindl Rondanelli, Erik, 1996. "Chilean pension fund reform and its impact on saving," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34299, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Morande, Felipe G., 1998.
"Savings in Chile. What went right?,"
Journal of Development Economics,
Elsevier, vol. 57(1), pages 201-228, October.
- repec:idb:wpaper:322 is not listed on IDEAS
- Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1767. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.