Policy Press
Chapter 11 The Redistributional Impact of a World Bank ‘Pension Regime’
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Einar Overbye
Abstract
In 1994 the World Bank launched a blueprint for pension reforms in the world (no less).
The Bank suggested replace pay-as-you-go based public pensions with funded, mandatory defmed contribution-schemes. A shift to funded pensions is supposed to boost savings and economic growth. The proposal has been hugely influential, in particular in Latin America and the new European democracies. However, it has received a less than lukewarm reception f?om social policy researchers. They often assume that such a shift will reduce or even eliminate redistribution to the poorest. This chapter argues, on the contrary, that although effects on savings and economic growth are debatable, the World Bank pension regime is likely to channel increased government revenues to the poor, in particular to those not living in OECD countries. The first reason is that a World Bank pension regime will limit redistribution toward privileged minorities. The second reason is that the World Bank insists on introducing a bottom Pension policies are in flux throughout the world. The most dramatic changes take place outside OECD. Beginning with Chile in 1981, many Latin American and some former communist European countries have downsized their former pay-as-you-go based systems and are replacing them with more-or-less funded pension schemes. This change involves, among other things, a closer link between contributions and benefits. In these new ‘defined contribution’ pension schemes, contributions are typically defined as a percentage of earnings, and benefit levels depend on the number of contributions, plus accrued interests. Peru (1992) Colombia (1993) Argentina (1993) Uruguay (1995) Mexico (199516) Bolivia (1996) and El Salvador (1996) have changed their mandatory pension systems inspired by Chile.
Abstract
In 1994 the World Bank launched a blueprint for pension reforms in the world (no less).
The Bank suggested replace pay-as-you-go based public pensions with funded, mandatory defmed contribution-schemes. A shift to funded pensions is supposed to boost savings and economic growth. The proposal has been hugely influential, in particular in Latin America and the new European democracies. However, it has received a less than lukewarm reception f?om social policy researchers. They often assume that such a shift will reduce or even eliminate redistribution to the poorest. This chapter argues, on the contrary, that although effects on savings and economic growth are debatable, the World Bank pension regime is likely to channel increased government revenues to the poor, in particular to those not living in OECD countries. The first reason is that a World Bank pension regime will limit redistribution toward privileged minorities. The second reason is that the World Bank insists on introducing a bottom Pension policies are in flux throughout the world. The most dramatic changes take place outside OECD. Beginning with Chile in 1981, many Latin American and some former communist European countries have downsized their former pay-as-you-go based systems and are replacing them with more-or-less funded pension schemes. This change involves, among other things, a closer link between contributions and benefits. In these new ‘defined contribution’ pension schemes, contributions are typically defined as a percentage of earnings, and benefit levels depend on the number of contributions, plus accrued interests. Peru (1992) Colombia (1993) Argentina (1993) Uruguay (1995) Mexico (199516) Bolivia (1996) and El Salvador (1996) have changed their mandatory pension systems inspired by Chile.
Chapters in this book
- Front Matter i
- Contents vii
- List of Figures ix
- List of Tables x
- Notes on the Contributors xi
- Social Security in the New Millennium 1
-
Debates
- Rising Tides and Rusty Boats: Economic position of the poor in 1985-1995 15
- Popular Support for Social Security. A sociological perspective’ 33
- Non-Discriminating Social Policy? Policy scenarios for meeting needs without categorisation 53
- Equality, Employment, and State Social Policies: a gendered perspective 69
- Europeanisation and Decentralisation of Welfare ‘Safety Nets’ 88
-
Reforms
-
Reforms in Theoretical Perspective
- Beyond Retrenchment: four problems in current welfare state research and one suggestion how to overcome them 105
- Change without Challenge? Welfare states, social construction of challenge and dynamics of path dependency 121
-
Reforming Pension Systems
- Public Expenditure and Population Ageing: why families of nations are different 141
- Ageing and Public Pension Reforms in Western Europe and North America: patterns and politics 157
- The Redistributional Impact of a World Bank ‘Pension Regime’ 179
-
Activation Reforms
- Activating Welfare States. How social policies can promote employment 197
- Welfare to Work and the Organisation of Opportunity: European and American approaches from a British perspective 211
- Activating the Unemployed: the street-level implementation of UK policy 235
- Bibliography 251
Chapters in this book
- Front Matter i
- Contents vii
- List of Figures ix
- List of Tables x
- Notes on the Contributors xi
- Social Security in the New Millennium 1
-
Debates
- Rising Tides and Rusty Boats: Economic position of the poor in 1985-1995 15
- Popular Support for Social Security. A sociological perspective’ 33
- Non-Discriminating Social Policy? Policy scenarios for meeting needs without categorisation 53
- Equality, Employment, and State Social Policies: a gendered perspective 69
- Europeanisation and Decentralisation of Welfare ‘Safety Nets’ 88
-
Reforms
-
Reforms in Theoretical Perspective
- Beyond Retrenchment: four problems in current welfare state research and one suggestion how to overcome them 105
- Change without Challenge? Welfare states, social construction of challenge and dynamics of path dependency 121
-
Reforming Pension Systems
- Public Expenditure and Population Ageing: why families of nations are different 141
- Ageing and Public Pension Reforms in Western Europe and North America: patterns and politics 157
- The Redistributional Impact of a World Bank ‘Pension Regime’ 179
-
Activation Reforms
- Activating Welfare States. How social policies can promote employment 197
- Welfare to Work and the Organisation of Opportunity: European and American approaches from a British perspective 211
- Activating the Unemployed: the street-level implementation of UK policy 235
- Bibliography 251
