Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America
There is increasing concern among policymakers that social security reforms that involve a transition to individual retirement savings accounts may exclude certain groups of workers from coverage against the risk of poverty in old age. While most p...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/11/1643366/positive-incentive-effect-privatizing-social-security-evidence-latin-america http://hdl.handle.net/10986/19421 |
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okr-10986-19421 |
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oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AFFILIATES AGING BENEFIT FORMULA CONTRIBUTION RATE DEBT DEFICITS DEMAND ELASTICITY DEMOGRAPHIC TRANSITION DISCOUNT RATES ECONOMIC DEVELOPMENT ECONOMICS ELASTICITIES EMPIRICAL ANALYSIS EMPLOYMENT EQUILIBRIUM FAMILIES FINANCIAL MARKETS HEALTH INSURANCE HUMAN DEVELOPMENT INCOME INDIVIDUAL ACCOUNTS INDIVIDUAL RETIREMENT ACCOUNTS INFORMAL SECTOR INSURANCE LABOR COSTS LABOR FORCE LABOR SUPPLY LEGISLATION LIFE EXPECTANCY MARKET DISTORTIONS MARKET INCENTIVES MARKET INSTITUTIONS MIGRATION MULTI-PILLAR SYSTEMS NET WAGE NEW ENTRANTS OPERATING EXPENSES PAYROLL TAX PENSION FUND PENSION FUND MANAGERS PENSION SYSTEM PENSION SYSTEMS PENSIONERS PENSIONS POLICY MAKERS POLICY RESEARCH PRIVATE PENSION PRIVATE SECTOR PRIVATIZATION PUBLIC HEALTH PUBLIC SECTOR PUBLIC SYSTEM RESOURCE ALLOCATION RETIREMENT RETIREMENT ACCOUNTS RETIREMENT BENEFITS RETIREMENT INCOME RETIREMENT INCOME SECURITY RETIREMENT SAVINGS RISK AVERSION SAVINGS SAVINGS ACCOUNTS SOCIAL INSURANCE SOCIAL SECURITY SOCIAL SECURITY REFORM SOCIAL SECURITY SYSTEMS STRUCTURAL ADJUSTMENT TAX RATE TAXATION UNEMPLOYMENT WAGES WORKERS |
| spellingShingle |
AFFILIATES AGING BENEFIT FORMULA CONTRIBUTION RATE DEBT DEFICITS DEMAND ELASTICITY DEMOGRAPHIC TRANSITION DISCOUNT RATES ECONOMIC DEVELOPMENT ECONOMICS ELASTICITIES EMPIRICAL ANALYSIS EMPLOYMENT EQUILIBRIUM FAMILIES FINANCIAL MARKETS HEALTH INSURANCE HUMAN DEVELOPMENT INCOME INDIVIDUAL ACCOUNTS INDIVIDUAL RETIREMENT ACCOUNTS INFORMAL SECTOR INSURANCE LABOR COSTS LABOR FORCE LABOR SUPPLY LEGISLATION LIFE EXPECTANCY MARKET DISTORTIONS MARKET INCENTIVES MARKET INSTITUTIONS MIGRATION MULTI-PILLAR SYSTEMS NET WAGE NEW ENTRANTS OPERATING EXPENSES PAYROLL TAX PENSION FUND PENSION FUND MANAGERS PENSION SYSTEM PENSION SYSTEMS PENSIONERS PENSIONS POLICY MAKERS POLICY RESEARCH PRIVATE PENSION PRIVATE SECTOR PRIVATIZATION PUBLIC HEALTH PUBLIC SECTOR PUBLIC SYSTEM RESOURCE ALLOCATION RETIREMENT RETIREMENT ACCOUNTS RETIREMENT BENEFITS RETIREMENT INCOME RETIREMENT INCOME SECURITY RETIREMENT SAVINGS RISK AVERSION SAVINGS SAVINGS ACCOUNTS SOCIAL INSURANCE SOCIAL SECURITY SOCIAL SECURITY REFORM SOCIAL SECURITY SYSTEMS STRUCTURAL ADJUSTMENT TAX RATE TAXATION UNEMPLOYMENT WAGES WORKERS Packard, Truman G. Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| geographic_facet |
Latin America & Caribbean |
| relation |
Policy Research Working Paper;No. 2719 |
| description |
There is increasing concern among
policymakers that social security reforms that involve a
transition to individual retirement savings accounts may
exclude certain groups of workers from coverage against the
risk of poverty in old age. While most public pay-as-you-go
systems pool the risk of interrupted careers and periods of
low earnings over the covered population, the reformed
systems shift the burden of these risks to the individual.
Adequate coverage under a system of individual retirement
accounts depends critically on accumulating sufficient
savings through regular contributions. In developing
countries where opportunities for unregulated employment
abound and workers can easily escape mandated social
insurance, theory suggests that reforms will increase the
number of contributors to social security by reducing
distortions and improving incentives in the labor market.
Motivated primarily by fiscal pressures stemming from the
deficits of overly generous, poorly administered public
pension systems, many governments are going ahead with
reforms as if this theory is correct. Does a shift to
individual retirement accounts improve the incentives to
contribute to social security? Almost a decade after reforms
to national social security systems in Latin America (two
decades, in the case of Chile), existing evidence is mixed.
Several studies have found that the share of the Chilean
workforce covered by the national pension system has
increased since individual retirement accounts were
installed in 1981; others have shown that there has been no
change in this share. But these studies rely on simulations
or on casual observation of data on the sectoral allocation
of the labor force and relate only to Chile. Sufficient time
has now passed since reforms in several Latin American
countries to allow more rigorous testing of the theory. The
author estimates the impact of social security
reform-specifically, the transition from a purely public
pay-as-you-go system to one with private individual
retirement accounts-on the share of the workforce that
contributes to formal retirement security systems. To test
the predictions of a simple model of a segmented labor
market, he exploits variation in data from a panel of 18
Latin American countries, observed from 1980 to 1999.
Results show that introducing individual retirement accounts
has a positive incentive effect that, other things equal,
increases the share of the economically active population
contributing to the reformed system. But this effect occurs
only gradually as employers and workers become familiar with
the new set of social security institutions put in place by reform. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Packard, Truman G. |
| author_facet |
Packard, Truman G. |
| author_sort |
Packard, Truman G. |
| title |
Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| title_short |
Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| title_full |
Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| title_fullStr |
Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| title_full_unstemmed |
Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America |
| title_sort |
is there a positive incentive effect from privatizing social security : evidence from latin america |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/11/1643366/positive-incentive-effect-privatizing-social-security-evidence-latin-america http://hdl.handle.net/10986/19421 |
| _version_ |
1764439821017677824 |
| spelling |
okr-10986-194212021-04-23T14:03:43Z Is There a Positive Incentive Effect from Privatizing Social Security : Evidence from Latin America Packard, Truman G. AFFILIATES AGING BENEFIT FORMULA CONTRIBUTION RATE DEBT DEFICITS DEMAND ELASTICITY DEMOGRAPHIC TRANSITION DISCOUNT RATES ECONOMIC DEVELOPMENT ECONOMICS ELASTICITIES EMPIRICAL ANALYSIS EMPLOYMENT EQUILIBRIUM FAMILIES FINANCIAL MARKETS HEALTH INSURANCE HUMAN DEVELOPMENT INCOME INDIVIDUAL ACCOUNTS INDIVIDUAL RETIREMENT ACCOUNTS INFORMAL SECTOR INSURANCE LABOR COSTS LABOR FORCE LABOR SUPPLY LEGISLATION LIFE EXPECTANCY MARKET DISTORTIONS MARKET INCENTIVES MARKET INSTITUTIONS MIGRATION MULTI-PILLAR SYSTEMS NET WAGE NEW ENTRANTS OPERATING EXPENSES PAYROLL TAX PENSION FUND PENSION FUND MANAGERS PENSION SYSTEM PENSION SYSTEMS PENSIONERS PENSIONS POLICY MAKERS POLICY RESEARCH PRIVATE PENSION PRIVATE SECTOR PRIVATIZATION PUBLIC HEALTH PUBLIC SECTOR PUBLIC SYSTEM RESOURCE ALLOCATION RETIREMENT RETIREMENT ACCOUNTS RETIREMENT BENEFITS RETIREMENT INCOME RETIREMENT INCOME SECURITY RETIREMENT SAVINGS RISK AVERSION SAVINGS SAVINGS ACCOUNTS SOCIAL INSURANCE SOCIAL SECURITY SOCIAL SECURITY REFORM SOCIAL SECURITY SYSTEMS STRUCTURAL ADJUSTMENT TAX RATE TAXATION UNEMPLOYMENT WAGES WORKERS There is increasing concern among policymakers that social security reforms that involve a transition to individual retirement savings accounts may exclude certain groups of workers from coverage against the risk of poverty in old age. While most public pay-as-you-go systems pool the risk of interrupted careers and periods of low earnings over the covered population, the reformed systems shift the burden of these risks to the individual. Adequate coverage under a system of individual retirement accounts depends critically on accumulating sufficient savings through regular contributions. In developing countries where opportunities for unregulated employment abound and workers can easily escape mandated social insurance, theory suggests that reforms will increase the number of contributors to social security by reducing distortions and improving incentives in the labor market. Motivated primarily by fiscal pressures stemming from the deficits of overly generous, poorly administered public pension systems, many governments are going ahead with reforms as if this theory is correct. Does a shift to individual retirement accounts improve the incentives to contribute to social security? Almost a decade after reforms to national social security systems in Latin America (two decades, in the case of Chile), existing evidence is mixed. Several studies have found that the share of the Chilean workforce covered by the national pension system has increased since individual retirement accounts were installed in 1981; others have shown that there has been no change in this share. But these studies rely on simulations or on casual observation of data on the sectoral allocation of the labor force and relate only to Chile. Sufficient time has now passed since reforms in several Latin American countries to allow more rigorous testing of the theory. The author estimates the impact of social security reform-specifically, the transition from a purely public pay-as-you-go system to one with private individual retirement accounts-on the share of the workforce that contributes to formal retirement security systems. To test the predictions of a simple model of a segmented labor market, he exploits variation in data from a panel of 18 Latin American countries, observed from 1980 to 1999. Results show that introducing individual retirement accounts has a positive incentive effect that, other things equal, increases the share of the economically active population contributing to the reformed system. But this effect occurs only gradually as employers and workers become familiar with the new set of social security institutions put in place by reform. 2014-08-19T16:46:18Z 2014-08-19T16:46:18Z 2001-11 http://documents.worldbank.org/curated/en/2001/11/1643366/positive-incentive-effect-privatizing-social-security-evidence-latin-america http://hdl.handle.net/10986/19421 English en_US Policy Research Working Paper;No. 2719 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean |