Universal Minimum Old Age Pensions: Impact on Poverty and Fiscal Cost in 18 Latin American Countries

46 Pages Posted: 20 Apr 2016

See all articles by Jean-Jacques Dethier

Jean-Jacques Dethier

World Bank

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Rabia Ali

World Bank

Date Written: May 1, 2010

Abstract

Alleviating poverty for the elderly requires a different approach from other age groups, and a minimum pension is likely to be the only viable option. This paper examines the impact on old age poverty and the fiscal cost of universal minimum old age pensions in 18 Latin American countries using recent household survey data. First the authors measure old age poverty rates for these countries. Then they discuss the design of minimum pensions schemes -- means-tested or not -- as well as the disincentives they introduce for the economic and social behavior of households including labor supply, saving and family solidarity. Finally, the authors use household survey data to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. They show that a universal minimum pension would substantially reduce poverty among the elderly (except in Argentina, Brazil, Chile and Uruguay where minimum pension systems already exist and poverty rates are low). Such schemes have much to be commended in terms of incentives, spillover effects and administrative simplicity, but they have a high fiscal cost. The latter is a function of the age at which benefits are awarded, the prevailing longevity, the generosity of benefits, the efficacy of means testing, and the fiscal capacity of the country.

Keywords: Rural Poverty Reduction, Population Policies, Debt Markets, Regional Economic Development

Suggested Citation

Dethier, Jean-Jacques and Pestieau, Pierre and Ali, Rabia, Universal Minimum Old Age Pensions: Impact on Poverty and Fiscal Cost in 18 Latin American Countries (May 1, 2010). World Bank Policy Research Working Paper No. 5292. Available at SSRN: https://ssrn.com/abstract=1601133

Jean-Jacques Dethier (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jdethier

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium
+32 4 366 3108 (Phone)
+32 4 366 3106 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Vopie Roman Pays
Louvain la Neuve
Belgium

Rabia Ali

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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