Pensions for the Poor: the Effects of Non-contributory Pensions in El Salvador

Sebastian Martinez (), Michelle Pérez (), Luis Tejerina and Anastasiya Yarygina
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Sebastian Martinez: Inter-American Development Bank
Michelle Pérez: Inter-American Development Bank

Journal of Economics, Race, and Policy, 2020, vol. 3, issue 1, No 6, 96-115

Abstract: Abstract Most Salvadorans reach retirement age without a formal pension, resulting in increased financial vulnerability and poverty in old age. Moreover, fewer women qualify for a formal pension and the average amounts for women are smaller. In this paper, we study gender-disaggregated effects of the Universal Basic Pension (UBP), a non-contributory pension of $50 per month for individuals aged 70 years and over in extreme poverty. We analyze a purpose-specific sample of 2256 households with adults between 66 and 74 years of age in the 32 poorest municipalities in the country using an instrumental variables approach. We contribute to the literature on non-contributory pensions by exploring new outcomes and analyzing gender differentiated effects. Independent of the recipient’s gender, we find that the pension increases non-labor income by 53% on average, lowering the probability that a beneficiary household lives below the extreme poverty line by 17 percentage points for males and 8.1 percentage points for females. Increases in food consumption and medical attention, and reductions in remittances are qualitatively larger for male pensioners. Pensioners appear to have gender-specific preferences with regard to investments in children, with increases in school enrollment and attendance for boys aged 11 to 18 years in households with a male pensioner and of girls of the same age in households with a female pensioner.

Keywords: Non-contributory pensions; Universal basic pension; Gender gaps; Impact evaluation; El salvador (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s41996-019-00032-2

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