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Redistribution, insurance and incentives to work in Latin-American pension programs

Published online by Cambridge University Press:  16 February 2012

ALVARO FORTEZA  and
GUZMÁN OURENS
ALVARO FORTEZA*
Affiliation:
Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República, Uruguay
GUZMÁN OURENS*
Affiliation:
Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República, Uruguay
*
(e-mail: alvarof@decon.edu.uy)
(e-mail: guzman@decon.edu.uy)
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Abstract

We present a new database of social security indicators for 11 Latin-American countries designed to show how much they promise to pay in return to contributions. These are based on micro-simulations according to existing norms. We use response-surface analysis to characterize simulation results. Our results indicate that most programs are progressive. The length of service (LOS) has a strong impact on the expected returns to contributions. In several programs, the expected rates of return exhibit striking discontinuities in the LOS, mostly due to vesting period conditions. This implies these programs may be exacerbating income risk.

Keywords

H55J14J26Internal rate of returnreplacement rateredistributioninsuranceincentives to work
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 3 , July 2012 , pp. 337 - 364
Copyright
Copyright © Cambridge University Press 2012

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