Non-contributory Pension Research Articles

Small cash transfers to older people: do they reduce poverty?

Abstract The literature has shown that, in developing countries, large cash transfers to older people improve the wellbeing of the recipients and their families. While social pensions have recently emerged in East Asia to deliver small cash benefits to older people, there is little consistent evidence of their effects. We examine the effects of the Basic Pension Scheme, a social pension in South Korea, on income and consumption poverty among older adults. We apply a difference-in-differences event study design and other complementary approaches to data covering the full period of program development from 2006 to 2021. The results show that the social pension decreases income poverty but not consumption poverty. While this study analysed the best data currently available, using better-quality data in future research would enable more robust analysis. Further research is also warranted to find how to improve the effectiveness of a non-contributory pension programme as a tool for reducing income and consumption poverty among older adults.

An Analysis of Thailand’s Social Policies and its Integration with SDG1 “No Poverty” to Achieve Social Inclusion

From a historical standpoint, this study examines the concept of poverty in Thailand. The researcher employed the content analysis of eleven effective articles for the study. Thailand’s employability, economy, and poverty have improved during the last three decades because of the introduction of democratic and social security. Innovative poverty-eradication programmes such as conditional cash transfers and noncontributory pensions for the elderly and poor have been included in social protection measures. The social protection system has reduced poverty and begun the process of social inclusion. Thailand’s social policies have not only decreased poverty and fostered social inclusion but also entailed Sustainable Development Goal 1 of poverty eradication in the global scenario. The current study details these achievements, and it appears that Thailand has increased its efforts towards inclusive development and poverty eradication through effective social policy design and implementation.

Laying Down The Principles: How Local Socialist Achievements Spurred National Bourgeois Support for Noncontributory Pensions

abstract: The authors develop a perspective of locally embedded welfare state development to explain how relatively weak national political actors can, nonetheless, shape national policy over time by pursuing local reforms. Empirically, the authors assess their argument by using municipality-level representative shares, data on noncontributory pension reforms, roll-call votes from parliament, and archival material from early twentieth-century Norway, in which several local governments introduced noncontributory old-age pensions before Norway adopted a national scheme. The authors show, first, how nationally underrepresented but highly institutionalized socialist parties with geographically concentrated support introduced local pensions. Over time, these parties thus shaped the possibility space for national reform, effectively locking the national policy agenda into a pension system preferred by the socialists—namely, noncontributory pensions. Citing high municipality-debt pressures in their constituencies, bourgeois politicians from districts with local pensions eventually supported and promoted national-level pension reform. This support, in turn, spurred the cross-class alliance required to establish a national noncontributory pension system.

Who benefits from the basic old-age insurance contribution subsidy policy for the disabled?

The aim of this paper is to track the whereabouts of basic old-age insurance (BOI) contribution subsidies. Little research has paid attention to the misalignment between the implementation objects of subsidy policies and the actual beneficiaries. In recent years, local governments in China have followed a contribution subsidy policy to help persons with disabilities (PWDs) with lower life expectancies. This study applied an actuarial model to calculate the leakage rate of the BOI contribution subsidy. The primary data are from the life tables of the entire population and PWDs in K province in China in 2015. It was found that, under different booking interest rates, 35.27%–61.26% of the contribution subsidy for PWDs in the individual account will be inherited by their heirs, and under different discount rates, 18.21%–68.74% in the pooling account will be enjoyed by non-disabled participants. The policy of BOI contribution subsidy for PWDs failed to account for the shorter average life expectancy and the lower average income of PWDs and would result in a welfare loss for PWDs. Therefore, it was suggested that it should be replaced by a non-contributory pension policy for PWDs.

Country-level, mandatory, self-financeable pension replacement rates in OECD countries

AbstractThe replacement rate (RR) is a quintessential property of pension systems. Yet, current measures of the RR are plagued with problems. We argue that the concept of RR should be based on the replacement of lifetime permanent income rather than pre-retirement income, and we show that the self-financeable RR with respect to the permanent income has the advantage of being independent of labor income (wages and density of contributions). We define an RR measure, called CRR, as the country-level RR of the permanent labor income that the working-age population could buy with their mandatory pension deposits if they stay constant over time. Pension deposits refer to national mandatory contributions plus the fraction of non-contributory pensions whose financing could be attributed to the working-age population, all as a percentage of the gross domestic product. The CRR is easy to compute and interpret, is nationally representative, and provides an international ranking because it is independent of pension rules, GDP, intertemporal and intergenerational redistributions, and sustainability. The application of the CRR to most OECD countries using the available data shows a 65% average across them, with several countries achieving a 100% RR, all mostly due to their high mandatory contributions as a percentage of GDP.

Social policy expansion and segmentation in the first two decades of the 21st century in Latin America

AbstractLatin American countries saw an important expansion in social policy in the first two decades of the 21st century. Along with this increased inclusion, however, social policy remains segmented. Using recent data from ECLAC, World Bank, and other sources, this paper offers a comprehensive analysis of trends in social policy for the period 2000–2020 for 17 countries in Latin America. Four areas of social policy are assessed in longitudinal and comparative perspectives: transfers, health care, education, and family policies. Conditional cash transfers (CCT) and noncontributory pensions (NCP) are the two main policy innovations that allowed countries in the region to expand social rights to previously excluded populations (outsiders). At the same time, due to their design, these policies have introduced new layers of fragmentation to the welfare mix, without resolving—or even increasing—segmentation in social policy. Segmentation is still the rule for the areas of health care and education, and increasing privatisation went unabated even in the periods of social policy expansion and in the countries governed by left coalitions.

On the Character and Causes of Inequality in Latin America

On the Character and Causes of Inequality in Latin America

Non-Contributory Pensions, Functional Limitations, and Unpaid Family Care for Older Adults in Mexico.

Objectives: We explore the effects of non-contributory pensions on functional limitations and receipt of unpaid family care by gender and frequency of pension payment. Methods: We employ a difference-in-differences estimator to identify the causal effects of non-contributory pension programs disbursed monthly or every two months for adults 70years and older in the state of Yucatan, Mexico. Results:The monthly payment program led to lower difficulties in functional limitations and less receipt of help from family or relatives for older men and women as compared to the bimonthly program. We found a larger decline on receipt of family care for older women than for men. Discussion:Our results suggest that more frequent pension payments may have greater health benefits for recipients. They also highlight the need for greater understanding of policies that prevent or delay functional limitations and that could indirectly alleviate unpaid caregiver burden.

The impact of the Chilean pension withdrawals during the Covid pandemic on the future savings rate

Chile implemented pension withdrawals during the pandemic at a much larger scale than other OECD countries. Estimating a life cycle model with survey data, I find that households consume a significant fraction of their non-contributory pension wealth, implying a tradeoff between improving public pensions and increasing savings. Counterfactual simulations show that the pandemic pension withdrawals may decrease the future savings rate by 1.7%. Furthermore, policy reforms may decrease the aggregate savings rate by 0.2% for each percentage point of solidarity tax from current workers. The solidarity taxes increase substantially the pension income of poor retirees, but their effects decline over time.

Life cycle, financial frictions and informal labor markets: the case of Chile

ABSTRACT We study the implications of economic policies on household’s decisions. We focus on Chile in 2019. Using a life-cycle search model and survey data, we found that an equivalent change in labor tax rates and non-contributory pensions (NCP) have opposite effects on labor markets, specifically on informality and unemployment duration. NCP offers a milder trade-off as it produces a second-order increase in informality. However, due to the presence of informal labor markets and financial frictions, non-retired agents increase their current consumption only after a tax cut. That is, a positive wealth shock can reduce consumption. When we consider the impact on welfare, as households are assumed to value only consumption, cutting taxes seems to be preferred. We characterize labor market and consumption-savings decisions. We found two effects operating in opposite directions: substitution and wealth. The latter prevails suggesting that the life cycle aspects of the labor market are critical.

Another brick on the wall: On the effects of non-contributory pensions on material and subjective well being

Public expenditures on non-contributory pensions are equivalent to at least 1 percent of GDP in several countries in Latin America and is expected to increase. We explore the effect of non-contributory pensions on the well-being of the beneficiary population by studying the Pensiones Alimentarias program established by law in Paraguay, which targets older adults living in poverty. The program improved subjective well-being in 0.48 standard deviations. Households with a beneficiary increased their level of consumption by 44 percent. These effects are consistent with the findings of Bando, Galiani and Gertler (2020) and Galiani, Gertler and Bando (2016) in their studies on the non-contributory pension schemes in Peru and Mexico. Thus, we conclude that the effects of non-contributory pensions on well-being in Paraguay are comparable to those found for Peru and Mexico and add to the construction of external validity.

Urbanised Ageing and Strategic Welfare Space in a Namibian Former Township

ABSTRACT The number of African older people who live permanently in urban areas is growing. This qualitative ethnographic study explores how older people employ welfare strategies, often involving members of the extended family in mutual care and support. These welfare strategies are emplaced; in this case, in different housing types in a former township in Namibia – Kuisebmond in Walvis Bay. Older people stay in former township houses, in backyard shacks or other rentals, or at an old-age home. Government welfare that was adjusted to family needs appeared in similar shapes in these housing types, such as access to better schools. Older people were both caregivers and receivers of care in these efforts. Taking care of grandchildren while their parents migrated for work was a mutuality of informal support that was highly beneficial to all involved. The non-contributory pensions facilitated many strategies by alleviating risks. Access to high quality housing and government healthcare made urban living a feasible alternative that challenged rural living. The study concludes that housing is a strategic welfare space where formal and informal welfare are optimised in various ways. Older individuals contribute to a large extent to the adjustment, maintenance, and development of these joint spaces.

Social protection and informality in Latin America during the COVID-19 pandemic.

Latin American governments swiftly implemented income assistance programs to sustain families' livelihoods during COVID-19 stay-at-home orders. This paper analyzes the potential coverage and generosity of these measures and assesses the suitability of current safety nets to deal with unexpected negative income shocks in 10 Latin American countries. The expansion of pre-existing programs (most notably conditional cash transfers and non-contributory pensions) during the COVID-19 crisis was generally insufficient to compensate for the inability to work among the poorest segments of the population. When COVID-19 ad hoc programs are analyzed, the coverage and replacement rates of regular labor income among households in the first quintile of the country's labor income distribution increase substantially. Yet, these programs present substantial coverage challenges among families composed of fundamentally informal workers who are non-poor, but are at a high risk of poverty. These results highlight the limitations of the fragmented nature of social protection systems in the region.

Challenges for optimizing social protection programmes and reducing vulnerability in Latin America and the Caribbean

This article provides a reflexive analysis of the design and implementation of social protection systems and anti-poverty programmes in Latin America and the Caribbean. It focuses particularly on the expansion of the conditional cash transfer and non-contributory pension programmes implemented over recent decades. The aim of this study is to distil policy lessons and foster debate on the challenges and opportunities that the 2030 Agenda for Sustainable Development currently poses for social protection systems. The article argues that more of the same will not be enough to maintain progress and achieve higher levels of development in the future. Using examples, the discussion turns to the challenges lying ahead under the paradigm of the 2030 Agenda for Sustainable Development. These include excluded groups, life cycle needs, better coordination between sectors and fiscal constraints. It ends with a number of questions to foster discussion and a conclusion with policy recommendations.

The role of non-contributory pensions on internal mobility in Spain

Spain is one of the Southern European nations characterized by very low inter-provincial mobility rates despite large inter-regional unemployment rate differences. We examine whether non-contributory pensions – an increasingly important component of many welfare systems, have curtailed the internal migration of younger cohorts over the past three decades. Using changes in the number of beneficiaries brought about by a policy reform in 1991, we show that old-age non-contributory pensions are associated with reduced internal migration of 25-to-35 year old men and women with less human capital. The effects do not appear to be driven by intergenerational reciprocity or quid pro quo exchanges, and do not extend to other types of pensions, hinting on systematic employment barriers faced by younger, less educated, or unexperienced men and women from lower income households qualifying for these pensions. The ability to rely on the support from older family members residing nearby might provide a lifeline but, simultaneously, curtail their propensity to out-migrate.

The impact of cash transfers on child outcomes in rural Thailand: Evidence from a social pension reform

Previous studies have identified a causal relationship between pension eligibility for the elderly and an improvement in education-related outcomes of co-residing children. In contrast to the often generous schemes considered before, this study investigates the effects of a non-contributory pension scheme in Thailand that grants much smaller benefits. Our empirical analysis exploits a reform which expanded the scheme from a targeted program to universal coverage. Using a generalized difference-in-difference model, we provide evidence that gaining eligibility for the scheme can affect work status and literacy of children living with eligible pensioners, while not actually raising total net household income. The effect sizes we find for older children in our sample are within the range of those estimated from more generous schemes. Younger children do not benefit from the reform.

Stepping up during a crisis: The unintended effects of a noncontributory pension program during the Covid-19 pandemic

We use a regression discontinuity design to study the impacts of a noncontributory pension program covering one-third of Bolivian households during the COVID-19 pandemic. Becoming eligible for the program during the crisis increased the probability that households had a week's worth of food stocked by 25% and decreased the probability of going hungry by 40%. Although the program was not designed to provide emergency assistance, it provided unintended positive impacts during the crisis. The program's effects on hunger were particularly large for households that lost their livelihoods during the crisis and for low-income households. The results suggest that, during a systemic crisis, a preexisting near-universal pension program can quickly deliver positive impacts in line with the primary goals of a social safety net composed of an income-targeted cash transfer and an unemployment insurance program.

Another Brick on the Wall: On the Effects of Non-Contributory Pensions on Material and Subjective Well Being

Another Brick on the Wall: On the Effects of Non-Contributory Pensions on Material and Subjective Well Being

The Impact of the Chilean Pension Reforms on the Savings Rate

Public pensions can be positive for income redistribution, but lower incentives for private savings. Estimating a life cycle model with the Expenditures Survey I find that households consume a significant fraction of their noncontributory pension wealth, implying a tradeoff between improving public pensions and increasing savings. Counterfactual simulations show that the two pension withdrawals of 2020 may decrease the future savings rate by 0.7%. Furthermore, policy reforms may decrease the aggregate savings rate by 0.3% for each percentage point of solidarity rate tax from current workers. The solidarity taxes increase substantially the pension income of poor retirees, but their effects decline over time.

The Contentious Politics of Social Policy expansion in Latin America

Latin America witnessed a resurgence of protests during the 1990s and early 2000s. Citizens took to the streets to protest against the liberalization of public services and rising levels of inequalities and poverty. This situation partly changed in the decade of the 2000s when the region experienced a period of sustained social policy expansion intended to extend protections to formerly excluded groups. Did popular mobilization have an influence on the turn toward universalism in Latin American social policy? This paper explores this question by looking at the relationship between protest, the strength of the Left and the adoption of expansive reforms in healthcare, conditional cash transfers and noncontributory pensions. The findings bring support to the idea that protest is a relevant aspect of the politics of social policy reform, although its effects are both sensitive to other characteristics of the political environment and the particular policy dimension considered.