The Effect of Noncontributory Pensions on Saving in Mexico

22 Pages Posted: 27 Feb 2019

See all articles by Catalina Amuedo-Dorantes

Catalina Amuedo-Dorantes

San Diego State University - Department of Economics; IZA Institute of Labor Economics

Laura Juarez

Bank of Mexico

Jorge Alonso Ortiz

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica

Date Written: April 2019

Abstract

This paper examines the effects of noncontributory pension programs at the federal and state levels on Mexican households' saving patterns using micro data from the Mexican Income and Expenditure Survey. We find that the federal program curtails saving among households whose oldest member is either 18–54 or 65–69 years old, possibly through anticipation effects, a decrease in the longevity risk faced by households, and a redistribution of income between households of different generations. Specifically, these households appear to be reallocating income away from saving into human capital investments, like education and health. Generally, state programs have neither significant effects on household saving, nor does the combination of federal and state programs. Finally, with a few exceptions, noncontributory pensions have no significant impact on the saving of households with members 70 years of age or older—individuals eligible for those pensions, plausibly because of their dissaving stage in the lifecycle.

JEL Classification: D14, J26, O12, H55

Suggested Citation

Amuedo-Dorantes, Catalina and Juarez, Laura and Alonso Ortiz, Jorge, The Effect of Noncontributory Pensions on Saving in Mexico (April 2019). Economic Inquiry, Vol. 57, Issue 2, pp. 931-952, 2019. Available at SSRN: https://ssrn.com/abstract=3342659 or http://dx.doi.org/10.1111/ecin.12750

Catalina Amuedo-Dorantes (Contact Author)

San Diego State University - Department of Economics ( email )

5500 Campanile Drive
San Diego, CA 92182
United States
619-594-1663 (Phone)
619-594-5062 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Laura Juarez

Bank of Mexico ( email )

No Address Available

Jorge Alonso Ortiz

Instituto Tecnológico Autónomo de México (ITAM) - Centro de Investigacion Economica ( email )

Av. Camino a Santa Teresa #930
Col. Heroes de Padierna
Mexico City, D.F. 10370
Mexico

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