The impact of a minimum pension on old age poverty and its budgetary cost. Evidence from Latin America

Jean-Jacques Dethier, Pierre Pestieau and Rabia Ali
Additional contact information
Rabia Ali: The World Bank, Washington DC, USA

No 2010035, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper examines the impact on old age poverty and the fiscal cost of universal minimum old age pensions in Latin America using recent household survey data for 18 countries. Alleviating old age poverty requires different approach from other age groups and a minimum pension is likely to be the only alternative available. First we measure old age poverty rates for all countries. Second we discuss the design of minimum pensions schemes, means-tested or not, as well as the disincentive effects that they are expected to have on the economic and social behavior of households including labor supply, saving and family solidarity. Third we use the household surveys to simulate the fiscal cost and the impact on poverty rates of alternative minimum pension schemes in the 18 countries. We show that a universal minimum pension would substantially reduce poverty among the elderly except in Argentina, Brazil, Chile and Uruguay where minimum pension systems already exist and poverty rates are low. Such schemes have much to be commended in terms of incentives, spillover effects and administrative simplicity but have a high fiscal cost. The latter is a function of the age at which benefits are awarded, the prevailing longevity, the generosity of benefits, the efficacy of means testing, and naturally the fiscal capacity of the country.

Keywords: old age poverty; income transfer; pension systems; family income; fiscal policies; human development (search for similar items in EconPapers)
JEL-codes: D19 D31 H30 I38 O15 (search for similar items in EconPapers)
Date: 2010-07-01
New Economics Papers: this item is included in nep-age and nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The impact of a minimum pension on old age poverty and its budgetary cost. Evidence from Latin America (2011)
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