Search

Aging populations and the prevalence of poverty in old age have led to the introduction of noncontributory pensions in many countries. We consider a number of alternative targeting approaches and simulate their effects in an empirical application in the State of Yucatan, Mexico. We compare the approaches with respect to leakage, under-coverage, and their effects on government budgets. We are also able to compare the simulated effects of one alternative with the observed effect of a recently introduced demogrant and find that the simulation is a close approximation of the empirical outcomes. We discuss issues of implementation and political feasibility.

We study health effects of financial inclusion, particularly ownership of a checking account of older minorities, with focus on Hispanics. Using data from the Health and Retirement Study from 2000 to 2012, we find that, for Hispanics, being banked has a positive effect on mental health but is not associated with effects on physical health. Mental health benefits are likely to be larger for those who face greater hurdles to access formal financial institutions. Hispanics in less well-off neighborhoods and with below-median wealth appear to experience the greatest mental-health benefits associated with ownership of a checking account.

Background We documented results from a cluster-randomized controlled trial we designed to supplement incomes in poor towns among adults 70 or older. We analyzed effects on health by gender, persistence over time, and variation by payment frequency. Methods We compared supplemental income effects over an 18-month period for two towns in Yucatan, Mexico: Valladolid, where eligible individuals received a monthly income supplement over the entire analysis period, and Motul, a demographically matched control town, where eligible individuals received a bimonthly income supplement over the last 12 months of the analysis period. While differing in frequency of payment, supplements provided similar levels of income. We conducted three surveys of recipients: (1) at baseline, (2) six months after baseline, and (3) 18 months after baseline. Results The primary outcomes we examined were peak expiratory flow, hemoglobin level, and verbal recall. The secondary outcomes were health care use and food availability. We found health benefits persisted for at least eighteen months for the monthly income supplement, with both males and females benefiting. Bimonthly income supplements had smaller health benefits. Conclusions Older people in the developing world who lack social security benefits and health care may benefit most from monthly income programs. The greater payment frequency of monthly programs may influence how household resources are allocated. Supplemental income programs are common in low- and middle-income countries; hence, our results have implications for program design in many nations.

For decades scholars have attempted to understand the effects of immigration on the U.S. Social Security system. To date, this research has been primarily limited to migrants in the U.S. and does not consider those who return to their countries of origin. Immigrants often pay OASDI taxes using illegitimate Social Security numbers and may return to their home countries without collecting U.S. Social Security benefits. In this study, we analyze the socioeconomic and labor characteristics, health, migration histories, and transitions to retirement of male Mexican return migrants who contributed to the U.S. Social Security system. Using the 2003 and 2012 Mexican Health and Aging Study (MHAS), we find that in 2012, 32 percent of male return migrants reported having contributed to the U.S. Social Security system but only five percent of those who contributed, received or expected to receive benefits. Those who reported having contributed were more likely to have completed college, spent more years in the U.S., and were more likely to be U.S. citizens or legal permanent residents than those who did not contribute. We also find that return migrants who spent one to nine years in the U.S. had a lower probability of transitioning to retirement between 2003 and 2012 than those had never been to the U.S. In contrast, those who spent 20 or more years in the U.S. had a higher probability of transitioning to retirement.

The goal of this study is to deepen the understanding of how middle age and older Hispanics plan for retirement, where we conducted four focus groups in the Los Angeles area with a total of 38 participants. Our study provides interesting findings, specifically for women since 84 percent of the participants were female. We find that that most participants, whether they were already retired or not, are not well prepared for retirement since they have been unable to save for retirement and have not made specific retirement plans, such as determining desired retirement age, estimating retirement budget, and collecting information about expected retirement benefits. In relation to saving on a regular basis, results were mixed. Some participants are able to save on a regular basis, but others cannot save because they live day to day. Our study contributes to the literature by showing how family experiences and religion play a significant role in retirement planning among this population. We found that the majority of the participants had parents who did not plan for retirement, and very few had parents who were able to save. We also found that many participants do now worry about retirement because they believe “God will provide.” We also found an interesting shift in relation to intergenerational transfers and family networks. While many participants help their parents, most of them do not want to ask children for help and do not expect getting help from them.

El envejecimiento es un fenomeno mundial con implicaciones en diversos rubros y del cual Mexico no esta exento. Este estudio analiza la sostenibilidad financiera del programa federal de pension no contributiva de atencion a adultos mayores en Mexico. La expansion del programa -- con la finalidad de cubrir a una mayor cantidad de localidades y poblacion -- tiene el objetivo de disminuir la vulnerabilidad de los adultos mayores, sin embargo, esto puede representar un reto en terminos del costo fiscal. Utilizando proyecciones de poblacion para las proximas decadas se calculan diversos escenarios para determinar los costos del programa. Se estima tambien la cantidad de poblacion sin cobertura de seguridad social y los costos de otorgar una pension no contributiva en las proximas decadas. Los resultados muestran los importantes incrementos en el costo del programa en el corto, mediano y largo plazos.This paper analyzes the financial sustainability of the non-contributory pension program for older persons in Mexico. The expansion of the program, with the aim of covering a larger number of localities and beneficiaries, focuses on diminishing the vulnerability of the older population. However, this expansion represents a challenge in terms of the fiscal cost of the program. Using population projections for the next decades, it calculates different scenarios to determine the costs of the program. It also estimates the amount of population without social security coverage, and the costs of providing a non-contributory pension in the next decades. The results indicate large increases in the cost of the program, in the short, medium and long terms.

In 1997, Mexico transformed its pay-as-you-go social-security system to a fully funded system with personal retirement accounts, including management fees. This paper examines changes in retirement wealth resulting from this new system. It found management fees drained a significant proportion of individuals’ retirement wealth and had the effect of increasing the number of persons claiming a government-subsidized minimum pension, particularly from the time the system was introduced in 1997 until adjustment to management fees in 2008. Since 2008, retirement wealth accumulation has been similar to that of the previous system.

Targeting based on individuals or households needs instead of applying universal programs helps distribute scarce resources to those who need it most, avoiding “leakage” of the poverty budget to non-poor households. In this paper, the authors explore the use of different household and individual characteristics for targeting needy households. They estimate a Heckman selection model to explain household income and use the estimated model to simulate the effects of different means testing schemes. Their analysis focuses on the evaluation of cash transfer programs for older populations. Using data from the Survey of Household Socioeconomic Characteristics in the State of Yucatan, Mexico, they evaluate the feasibility and target efficiency of different possible means-tested programs. Their analysis shows that a means-tested “flat rate” option would be more effective in alleviating poverty than the less costly option of a sliding scale. The tradeoff between raising welfare for the poor, thereby prioritizing low under coverage rates; and allocating limited resources, thus prioritizing low overall costs of a program, remains however a political challenge for all administrations designing poverty alleviation programs.

This paper compares the differences of individual coverage in the fully-funded social security systems of three Latin American countries. Chile, Columbia, and Mexico each have defined contributions social security systems, yet there are significant differences in system design and incentive that may affect individuals’ participation. Here, we examine social security coverage by comparing the system design, economic performance, and labor market structure of each country. We consider the different macroeconomic paths and labor markets structures of each country, especially those regarding the informal labor sector. Micro-data is also used to examine how personal and household characteristics affect the social security system participation. For Colombia, only cross-section estimations are carried out, while panel data for Chile and Mexico allows control for unobserved heterogeneity. Our study reveals the low coverage rates of each social security system is strongly related to economic cycles and the lack of compulsory contributions to the system by self-employed workers. We find a higher probability to contribute to the system for men, head of households, higher number of household members, married, and higher levels of education. Also, females with high levels of education are more likely to contribute to the social security system.Este estudio compara las diferencias de cobertura en los sistemas de pensiones de capitalizacion individual en tres paises de Latinoamerica. En Chile, Colombia y Mexico, aun cuando cada uno de ellos tiene sistema de pensiones de contribuciones definidas, hay diferencias significativas en el diseno e incentivos de cada sistema que pueden afectar la participacion de los individuos en el mismo. El presente estudio examina la cobertura del sistema de pensiones comparando el diseno de los sistemas, el desempeno economico y la estructura del mercado laboral de cada pais. Se consideraron las diferentes trayectorias macroeconomicas y las estructuras de los mercados laborales de cada pais, especialmente las relativas al sector laboral informal. Adicionalmente, utilizamos micro-datos para examinar como las caracteristicas personales y del hogar afectan la participacion en el sistema de pensiones. En el caso de Colombia, solo se llevan a cabo estimaciones de corte transversal, mientras que para Chile y Mexico los datos longitudinales permiten controlar la heterogeneidad no observada. Nuestro estudio revela que las bajas tasas de cobertura de cada sistema de pensiones esta estrechamente relacionada con los ciclos economicos y la falta de contribuciones obligatorias al sistema por los trabajadores independientes. Encontramos que los hombres, jefes de familia, con un mayor numero de miembros en el hogar, casados y con mayores niveles educativos tiene una mayor probabilidad de contribuir al sistema. Asimismo, las mujeres con altos niveles de educacion tienen mas probabilidad de contribuir al sistema de pensiones.

Analyzes the retirement behavior of Mexican return migrants from the United States and non-migrants.

����Previous empirical literature has found a sharp decline in consumption during the first years of retirement implying that individuals do not save enough for their retirement. This phenomenon has been called the retirement consumption puzzle. In contrast to some of the previous studies, the authors find no evidence of the retirement consumption puzzle during the first years of retirement. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many previous studies. Food expenditure at retirement decreases. The latter could be explained by a reallocation of the budget shares after retirement to adjust to a new stage in the life cycle. These results suggest that food expenditure is not an accurate measure to test the Life Cycle Model.

In 1997 Mexico introduced Personal Retirement Accounts (PRAs) which, after a transition phase, will completely replace the pay-as-you-go (PAYG) system. We give a detailed overview of the relevant institutional framework, the market of PRA providers and how it has evolved since the 1997 reform. We use administrative data obtained from CONSAR, the regulatory agency of the PRA system to assess how pension fund management fees affect pension accumulations. We find that fees can drain up to a quarter of individuals' pension savings.

Many countries are including personal retirement accounts (PRAs) as part of their social security systems. PRA systems boost private savings at the macro level by converting a government financial liability into private wealth. At the micro-level, however, crowding-out effects on household savings could be offsetting some of this increase in private savings and may lead to inadequate preparedness for retirement. The author tests this hypothesis by using the Mexican social security reform of 1997 as a natural experiment, because only part of that system was changed from pay-as-you-go to PRAs. She finds that social security reform with PRAs does indeed crowd out household savings and recommends strengthening voluntary savings for retirement along with social security reform.