Models of pension policy and pension reform: Distributional principles, ideas and the three pillar approach

ARZA, CAMILA

Londres

Workshop; ESRC Seminar Social Policy, Stability and Exclusion in Latin America; 2005

Institute for the Study of the Americas

This paper proposes a framework to evaluate the distributional and stratifying potential of different pension arrangements that can overcome the rigidities of regime theory and at the same time evaluate competing models of pension reform not in terms of their effects on public budgets, but in terms of their implicit distributional logic. The paper assesses the new distributional principles that emerged from pension reform practice in Latin America, and the implications (on distributional aims and outcomes) of latest revision of The World Bank?s approach to pension reform, which can have substantial influence on the reform process in latecomer countries in the region. The paper starts by revisiting the contributions of regime theory to identify models of welfare protection, and highlights the main critiques to this approach and its main limitations for pension policy analysis. It secondly presents a framework to classify pension regimes according to the logic of distribution and stratification implicit in pension design. The second part turns to the analysis of Latin American reforms. It first evaluates the distribution pattern of pension reforms under the conceptual framework proposed in Part 1, identifying divergent and shared features in the different versions of the three-pillar model applied in the region. Secondly, it looks at some of the key areas where new intra- and inter-generational inequalities were introduced with the shift to a three-pillar model, and where previously existing inequalities could not be overcome by the reform. Finally, it evaluates the way forward proposed by recently published studies within the World Bank and estimates the distributional impacts of different reform alternatives.