Institutional Design of Pension Systems and Individual Behavior: How do Households Respond?

50 Pages Posted: 1 May 2019

See all articles by Renata Herrerias

Renata Herrerias

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration

Guillermo Zamarripa

Instituto Tecnológico Autónomo de México (ITAM)

Date Written: March 13, 2019

Abstract

Mexico introduced a Defined Contribution (DC) Pension System in 1997. We analyzed the behavior of affiliated workers under the institutional design of the reformed system. Before the reform, 75% of affiliated workers could receive a lifetime annuity upon retirement; we project that under the new rules only 30% of participants will be able to transform savings into pension income. Furthermore, participation is positively related to income and privileged workers (males, living in richer regions and having a mortgage). The new institutional design is not entirely serving as a pension system and may not prevent poverty at old age.

Keywords: Pensions, DC pension system, institutional design, household behavior

JEL Classification: G23, G28, H75, J31

Suggested Citation

Herrerias, Renata and Zamarripa, Guillermo, Institutional Design of Pension Systems and Individual Behavior: How do Households Respond? (March 13, 2019). Available at SSRN: https://ssrn.com/abstract=3352135 or http://dx.doi.org/10.2139/ssrn.3352135

Renata Herrerias (Contact Author)

Instituto Tecnológico Autónomo de México (ITAM) - Department of Business Administration ( email )

Rio Hondo No. 1
Progreso Tizapan
Mexico, D.F. 01080
Mexico
+52(55)56284000 x. 6535 (Phone)

HOME PAGE: http://departamentodeadministracion.itam.mx/es

Guillermo Zamarripa

Instituto Tecnológico Autónomo de México (ITAM) ( email )

Av. Camino a Sta. Teresa 930
Col. Héroes de Padierna
Mexico City, D.F. 01000, Federal District 01080
Mexico
+525556284000 (Phone)

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