The effects of a multi-pillar pension reform: The case of Peru

Javier Olivera

No 21, Working Papers from Peruvian Economic Association

Abstract: In this paper we study the consequences of a hypothetical multi-pillar pension system in Peru. We use unique administrative records of workers to estimate distributions of future pensions for the actual and multi-pillar system and assess the effects on pension inequality, pension liability and overall welfare for the insured population. Our results show that the large pension inequality and liability of the actual pension system can be substantially reduced with welfare preserving policies. As we consider different types of social welfare functions, our simulations illustrates, that when one considers welfare, it is important to define the implied value judgments, which are not universally agreed upon. Thus, the goal of this study is not to advice for a particular scenario of reform, but highlight the trade-offs that have to be made explicit in order to take the best possible option, which can be useful for policy-makers who intend to carry out a next generation of pension reforms in Latin America in the near future.

Keywords: Pension reform; pension inequality; social security; Latin America; Peru; economic policy (search for similar items in EconPapers)
JEL-codes: G23 H55 H63 I30 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-age and nep-lam
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Persistent link: https://EconPapers.repec.org/RePEc:apc:wpaper:2014-021

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