How much do Latin American pension programs promise to pay back?

Alvaro Forteza (alvaro.forteza@cienciassociales.edu.uy) and Guzmán Ourens

No 3109, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: We present a new database of social security indicators for eleven Latin American countries designed to assess pension schemes in terms of the payments they promise in return to contributions. Based on this data, we analyze inequality, insurance and incentives to work. Our results indicate that most programs analyzed are progressive in the sense that, other things equal, they yield higher returns to low than to high income workers. Poor workers, notwithstanding, often have flat age-earnings profiles and lower life expectancy, both of which reduce the rates of return received from social security. The Argentinean and (the pre-2008) Uruguayan programs severely punish short contribution careers, providing strong incentives but poor social protection. The Brazilian and Chilean programs show a better balance between insurance against the risk of short working careers and incentives to work. Argentina, Chile and Uruguay passed reforms to their main pension programs in 2008. Unlike the Argentinean reform, the Chilean and Uruguayan 2008 reforms strengthened the social protection that programs provide, shifting the balance towards more insurance and less incentives to work.

Keywords: Social Security internal rate of return; replacement rates. (search for similar items in EconPapers)
JEL-codes: H55 J14 J26 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: How much do Latin American pension programs promise to pay back? (2009)
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