Rethinking Social Security in Latin America

26 Pages Posted: 15 Jun 2005

See all articles by Indermit S. Gill

Indermit S. Gill

Duke University

Truman G. Packard

World Bank - Europe and Central Asia Region; University of Oxford - Department of Economics

Todd Pugatch

Oregon State University; IZA

Juan Yermo

Organization for Economic Co-Operation and Development (OECD)


In the past decade, many Latin American governments have radically restructured their old age income security systems, following the lead of Chile, which undertook its major pension reform in 1981. The defining characteristic of the reforms has been a shift in the basis of public pensions from social to individual responsibility: instead of the widely used system that 'collectivized' or pooled the risk of being without the capacity to earn while aged, numerous countries in the region have adopted a system that relies on individual savings accounts. The reforms have maintained a role for a modified version of public pooling; this combination of individual and social savings to finance pensions is known as the 'multipillar' approach. This article is based on a report prepared for the Office of the Chief Economist of the Latin America and Caribbean Region of the World Bank (Gill, Packard and Yermo, 2004). The report recognizes that the system of individual accounts, the essential aspect of the reform, has been a necessary and positive development, and one that is consistent with the economics of insurance and social welfare objectives. Beyond this recognition, however, the results of reform are much more complex. Each country has implemented its own version of the multipillar system. The article therefore draws on country evidence in order to determine: How has the new approach to public pensions in Latin America fared? In particular, have the changes left workers and their families in reform countries better off? The first section provides a brief description of the reforms. The second discusses the main macroeconomic concerns and effects. The third describes the impact on coverage levels, and other social welfare implications. The fourth evaluates the stagnation of coverage levels and presents various possible explanations. The fifth makes specific proposals to improve the multipillar pension system in Latin America. The last section concludes.

Suggested Citation

Gill, Indermit S. and Packard, Truman G. and Pugatch, Todd and Yermo, Juan, Rethinking Social Security in Latin America. International Social Security Review, Vol. 58, No. 2-3, pp. 71-96, July 2005. Available at SSRN:

Indermit S. Gill (Contact Author)

Duke University ( email )

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Durham, NC 27708-0204
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Truman G. Packard

World Bank - Europe and Central Asia Region ( email )

1818 H Street
Washington, DC 20433
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University of Oxford - Department of Economics ( email )

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Todd Pugatch

Oregon State University ( email )

Corvallis, OR 97331
United States

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IZA ( email )

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Juan Yermo

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775

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