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

Author

Listed:
  • DETHIER, Jean - Jacques

    (The World Bank, Washington DC, USA)

  • PESTIEAU, Pierre

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; CREPP, University of Liège, B- 4000 Liège, Belgium)

  • ALI, Rabia

    (The World Bank, Washington DC, USA)

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.

Suggested Citation

  • DETHIER, Jean - Jacques & PESTIEAU, Pierre & ALI, Rabia, 2010. "The impact of a minimum pension on old age poverty and its budgetary cost. Evidence from Latin America," LIDAM Discussion Papers CORE 2010035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2010035
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sergi Jiménez-Martín, 2014. "The Incentive Effects of Minimum Pensions: extended version," Working Papers 2014-04, FEDEA.
    2. Dominic Richardson & UNICEF Office of Research - Innocenti, 2018. "Key Findings on Families, Family Policy and the Sustainable Development Goals: Synthesis Report," Papers inorer948, Innocenti Research Report.
    3. José Luis Iparraguirre, 2020. "Economics and Ageing," Springer Books, Springer, number 978-3-030-29019-1, July.
    4. Maria Jouste & Pia Rattenhuber, 2019. "A Role for Universal Pension? Simulating Universal Pensions in Ecuador, Ghana, Tanzania and South Africa," International Journal of Microsimulation, International Microsimulation Association, vol. 12(1), pages 13-51.
    5. Mariana Infante-Villarroel, 2015. "Framework for the Development of Social Protection Systems," World Bank Publications - Reports 22320, The World Bank Group.
    6. Kaushal, Neeraj, 2014. "How Public Pension affects Elderly Labor Supply and Well-being: Evidence from India," World Development, Elsevier, vol. 56(C), pages 214-225.
    7. Pia Rattenhuber & Maria Jouste, 2018. "A role for universal pension? Simulating universal pensions in Ecuador, Ghana, Tanzania, and South Africa," WIDER Working Paper Series 023, World Institute for Development Economic Research (UNU-WIDER).
    8. Javier Olivera & Jhonatan Clausen, 2014. "Las características del adulto mayor peruano y las políticas de protección social," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 37(73), pages 75-113.
    9. Esteban Calvo, 2014. "Comparative-historical Analysis of Aging Policy Reforms in Argentina, Chile, Costa Rica, and Mexico," Working Papers 61, Facultad de Economía y Empresa, Universidad Diego Portales.
    10. Damilola Olajide & Maria Laura Alzua & Ana Dammert & Olusegun Sotola & Thompson Ayodele, 2016. "Randomized Evaluation of the Unconditional Cash Transfer Scheme for the Elderly in Ekiti State Nigeria," Working Papers PIERI 2016-21, PEP-PIERI.
    11. Javier Olivera & Blanca Zuluaga, 2014. "The Ex‐Ante Effects Of Non‐Contributory Pensions In Colombia And Peru," Journal of International Development, John Wiley & Sons, Ltd., vol. 26(7), pages 949-973, October.
    12. Filgueira, Fernando & Manzi, Pilar, 2017. "Pension and income transfers for old age: Inter- and intra-generational distribution in comparative perspective," Políticas Sociales 42087, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Loumrhari, Ghizlan, 2016. "Pensions sociales et réduction de la pauvreté. Le cas du Maroc [Social pensions and reduction of the poverty. The case of Morocco]," MPRA Paper 74076, University Library of Munich, Germany.
    14. Pia Rattenhuber & Maria Jouste, 2018. "A role for universal pension? : Simulating universal pensions in Ecuador, Ghana, Tanzania, and South Africa," WIDER Working Paper Series wp-2018-23, World Institute for Development Economic Research (UNU-WIDER).
    15. Sergi Jiménez-Martín, 2014. "The incentive effects of minimum pensions," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-84, August.
    16. Jia, Hongbo, 2017. "An evaluation of pension differentials between Chinese private and public sectors from perspective of protection and incentives over the lifecycle," China Economic Review, Elsevier, vol. 44(C), pages 16-29.

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    More about this item

    Keywords

    old age poverty; income transfer; pension systems; family income; fiscal policies; human development;
    All these keywords.

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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