Assessing Implicit Redistribution within Social Security Systems in Argentina and Mexico

PEDRO E. MONCARZ

Santiago de Chile

Congreso; XVI Annual Meeting of Latin America and Caribbean Economic Association; 2011

Universidad Alfonso Ibañes y Latin America and Caribbean Economic Association

We assess redistribution in the Argentinean and Mexican pension and unemployment insurance programs on a lifetime basis. Using household surveys, we simulate lifetime declared labor income and flows of contributions and benefits, and compute the expected present values of income and net flows. We find that the Mexican mandatory individual account social security system is almost neutral in terms of income redistribution, while this is not the case for PAYG-DB system in Argentina that appears to be regressive, with an overall increase in the Gini coefficient of around 1.4pp (2.5%). Under alternative scenarios that assume a weak enforcement of the law and different discount rates, the results change and the system becomes less regressive or even slightly progressiv.