| Resumen: |
This paper examines the implicit subsidies within pension systems across Latin America and the Caribbean (LAC) region. We first calculate the theoretical benefits of pension for hypothetical workers in 25 countries in LAC. We show that, on average, LAC's pension systems are subsidized, as they provide pensions above what workers would have obtained by investing pension contributions in a safe asset. Similarly, pension systems are designed to be progressive by offering higher replacement rates (pensions relative to earnings) for low-income workers. Despite this progressivity, in some countries, absolute subsidies could be higher for high-income workers. This occurs because the cost of one percentage point of the replacement increases with the average pension. Second, using data from social protection surveys, we estimate the incidence of pension systems in five LAC countries. We show that, on average, all five systems provide important subsidies to those workers who obtain a pension. However, given the high levels of informal work, in some countries, those subsidies are highly concentrated among high-income workers. Variation is large across countries. |
