Next generation of individual account pension reforms in Latin America

Latin America led the world in introducing individual retirement accounts intended to complement or replace defined benefit state-sponsored, pay-as-you-go systems. After Chile implemented the first system in 1981, a number of other Latin American countries incorporated privately managed individual accounts as part of their retirement income systems beginning in the 1990s. This article examines the subsequent "reform of the reform" of these pension systems, with a focus on the recent overhaul of the Chilean system and major reforms in Mexico, Peru, and Colombia. The authors analyze key elements of pension reform in the region relating to individual accounts: system coverage, fees, competition, investment, the impact of gender on benefits, financial education, voluntary savings, and payouts.     

Institutional and policy issues experienced in the implementation of Botswana's national disability policy

People with disabilities (PWDs) are often subjected to economic and social exclusion. Despite the Government of Botswana's efforts to uplift marginalised and vulnerable groups, PWDs remain disenfranchised as a result of social, physical, and legislative barriers. This paper assesses policy and institutional factors that contribute to and or hinder the implementation of Botswana's national disability policy. Data were collected using secondary data sources and analysed using thematic analysis. The analysis of determinants of policy impact (ADEPT) approach, which aims to explain and influence policy development and policy impact implementation with four determinants (goals, obligations, resources, and opportunities), was adopted. The study's findings show that 22 years after its adoption, the National Policy on Care for People with Disabilities has not resulted in the desired policy outcomes, let alone achieved its objective of improving the lives of PWDs. Although the policy has the potential to be an important tool in achieving social inclusion and protecting the rights of PWDs, implementation gaps remain, essentially limiting its effectiveness.     

Public pension reform in Japan

The March 2000 pension reform in Japan focused on the long-term financial sustainability of the country's two-tiered public pension system. The government opted for incremental changes in order to maintain pension solvency through 2060. Those changes could reduce future pension funding liability by an estimated one-third. Further, the decision to avoid structural reforms of its pension programs was based on fiscal considerations. Expanding general revenue funding for the first tier from the current share of one-third to cover the entire cost would require increases in the consumption tax that proved to be politically unacceptable. Fully privatizing the second, earnings-related tier would entail transition costs too great to bear at a time of rising budget deficits. In addition, the Japanese public generally supported the sharing of financial burden for public pension programs through a combination of benefit cuts, a raise in the pensionable age, and contribution rate increases. If current cost projections prove to be inaccurate, future pension reviews (scheduled every 5 years) will give the government further opportunity to fine-tune program changes.     

Participation in voluntary individual savings accounts: an analysis of IRAs, 401(k)s, and the TSP

New voluntary individual savings accounts have been proposed by some as a part of, or in addition to, Social Security. The success of these proposals would depend greatly on how many workers participate. This paper compares participation rates in three existing voluntary individual account-type plans--Individual Retirement Accounts (IRAs), 401(k)s, and the federal Thrift Savings Plan (TSP)--to clarify expectations about who might participate in a voluntary individual account system. It finds that participants in IRAs, 401(k)s, and the TSP tend to be disproportionately male, higher earners, older, full-time workers, and either white or nonblack minorities compared with the population at large. Differences in earnings explain much of the difference between participation rates of men and women, however, but less of the difference between participation rates of workers of different races. Whether participation in a new system of voluntary individual accounts would resemble participation in IRAs, 401(k)s, or the TSP would depend on a number of factors. For instance, the population covered by 401(k)s and the TSP is much smaller than that covered by Social Security. Average earnings are also higher among 401(k) and TSP participants than for workers covered by Social Security, which, based on these findings, suggests that participation rates could be lower in a universal system. Participation would also depend on many other factors, however, such as the extent of matching contributions or other financial incentives, the investment options available, and the amount of education provided to potential participants.     

Measuring intra-generational redistribution in PAYG pension schemes

Public Choice - Voters in ageing societies expect pension reforms to be both inter-generationally and intra-generationally fair. In this paper, we propose a global measure of intra-generational...     

Winners and losers under medical savings accounts

As legislators wait to see how the MSA approach to health care reform plays out in the laboratory of the states, authors Marilyn Moon, Len M. Nichols and Susan Wall have put the numbers to work. The researchers simulated the effects of introducing MSAs into the health insurance market. What they found is what critics of MSAs suspected: As the young and healthy shift to MSAs, the premiums for those left in the remaining insurance pool will escalate. However, the authors conclude that if you are male, young and healthy, you stand to gain a lot from the MSA experiment.     

The functioning and regulation of escrow accounts

Abstract

About 40 million Americans have mortgages serviced by escrow accounts. Yet escrow accounts are rarely covered by an explicit agreement between borrower and lender and are often poorly understood. As a result, escrow accounts have become the subject of growing controversy. Federal regulation of escrow accounts has become increasingly detailed and intrusive during the past two decades, and the subject is under almost continuous regulatory review. In the 1990s, the attorneys general of at least 10 states have sued large escrow account servicers over administration of accounts.

The purposes of this article are to explain briefly how escrow accounts work, benefit relevant parties, and are regulated by federal agencies, and to evaluate alternative regulatory programs. Most of the legitimate social goals of federal regulation could be achieved by requiring an explicit escrow agreement at the time of closing on a mortgage. A second‐best requirement would be that interest be paid on escrow balances.     

State and local pension plans' equity holdings and returns

This article explores recent trends in the size and performance of the equity investments of state and local pension plans. It also provides a context for the discussion about investing Social Security trust fund reserves in private equities. Equity holdings and returns for five of the largest private pension plans were compared with those of state and local pension plans. Key findings discussed in the article include: Equities were the largest investment in the aggregate portfolio of state and local pension plans in 1999 and represented 67 percent of the $3 trillion in aggregate state and local pension assets. Equity allocation of the five private plans resembled that of the aggregate. About 80 percent of state and local pension plan holdings were domestic equities in 1999. The five largest plans had about the same domestic/foreign allocation of equity investments during that same period. In 1999, state and local pension plans held about 11 percent of the U.S. equity market, which includes foreign equities held in the United States. State and local pension plans held about 10 percent of domestic equities in the U.S. equities market that same year. Returns on equity investments over a 10-year period were more than 17 percent for both private pensions and state and local pension plans. Although private plans tend to have slightly higher total returns, the difference stems from the higher equity asset allocation of the private pensions that were studied.     

Commuting and Citizen Participation in Swedish City-Regions

Commuting has become an increasingly important feature of modern life. Theories of public participation, such as the civic voluntarism model, claim that commuting is likely to reduce the time available for political activism. Based on data from an American context, Robert Putnam in Bowling Alone has concluded that this is exactly what happens. However, empirical studies based on European data on how commuting may affect political participation are rare. This article aims to address this question with regard to Swedish city-regions. Is there also a negative relationship between commuting and citizen participation in Sweden?
The analysis is based on survey data for 7,200 citizens from seven Swedish city-regions belonging to three different size categories. The relationship between commuting and several different forms of public participation is investigated, controlling for the variables suggested by the civic voluntarism model. The analysis indicates that there are no signs of a negative relationship and some aspects of participation are actually positively linked to commuting. These findings suggest that the civic voluntarism model needs to be revised, at least in a European context. The article ends with a discussion about how differences between Sweden and the US can be accounted for and what the more general consequences for democracy may be.     

Power in the Swedish Parliament

This article is based on a mail questionnaire sent to members of the Swedish parliament (the Riksdag) in 1988. To increase our understanding of how the institution works, an analysis of members' perceptions of the distribution of power within the Riksdag is undertaken. Members were asked (1) how influential various groups and bodies are, and (2) how influential these groups and bodies should be. The results show that members want more power to be given to parliamentary party groups, committees and MPs as individuals, and less power to the party leaders and the chiefs of staff, Differences in perceptions along partisan lines are small. However, members of the Greens - an anti-establishment party - are more oriented toward strengthening the influence of individual MPs and toward weakening the power of party leaders than are members of the established parties.     

Diversity and Community Trust in Swedish Local Communities

This article analyses the effect of immigration-related diversity on different forms of trust through the hierarchical analysis of three levels of approximately 5,000 respondents nested in over 800 neighbourhoods and 33 municipalities. The data set is based on a unique survey that was specially designed to measure different forms of trust and to test the effects of context. Building on previous findings about the effect of diversity on various forms of trust in Sweden, we discuss three mechanisms through which diversity may drive down community trust in diverse settings – dissimilarity, perceptions of unfairness and asymmetry of information and norms – and explore these empirically. In particular, we examine under which conditions asymmetry of information and norms and perceptions of unfairness affect community trust, and how it interacts with diversity. Our analysis reveals that norm asymmetry and perceptions of unfairness affect community trust negatively but the negative effects are more pronounced in the most diverse local communities.     

Partisan Differences in Swedish Macroeconomic Policy

The purpose of this paper is to trace partisan differencesamong Swedish governments during the period 1958-2000. According tothe Partisan Theory of macroeconomic policy left-wing governmentsare relatively more concerned with the performance of the realside of the economy (real output and unemployment) as compared toright-wing governments, that place a higher weight on the nominalvariables (inflation). Left-wing governments would therefore pursue moreexpansionary aggregate demand policy, and thereby be willingto risk a higher inflation, in order to improve real economicperformance. In this paper we apply the model developed in Hibbs (1994) onSwedish data. Our empirical results support the partisan theory,showing that, ceteris paribus, aggregate demand policy under left-winggovernments is relatively more expansionary than under right-wing governments, even if the expansionary policysometimes leads to higher inflation.     

Corporatism and the Microeconomic Foundations of Swedish Social Democracy: The Swedish Model Revisited*

The aim of this paper is to advance the research into the workings of ‘corporatist’ societies by adding a microeconomic dimension and outlining how such a revised model is applicable to recent Swedish experience. Sweden is often regarded as a corporatist society., that is, one in which policy is the outcome of a ‘social partnership’ between encompassing groups coordinated by government. This corporatist approach, resting on the existence of a macro-economic social contract between peak organizations, is complemented here by an analysis of the micro-level incentives and mechanisms conducive to operating within the corporatist cooperative framework. These characteristics are seen as together constituting what I term the solidaristic market economy, a system of economic relations different in fundamental respects from the two with which we are familiar. While Swedish reality docs not correspond exactly to the economic model set out, the case is made that it is as reasonable to extrapolate from Swedish experience to the solidaristic market economy (and vice versa) as to learn from U.S. experience about the competitive market economy and from the Soviet Union about the command economy. Complemented by these micro-characteristics, corporatist analysis of economic relations under social-democratic regimes is thus seen as explaining the resilience of the ‘Swedish model’. Rather than in constant peril as critics suggest, the encompassing interest organizations and the patterns of relations among them are characterized by continued solidity in keeping with the operating principles of the solidaristic market economy.     

Governance and governmentality: a discussion in the context of UK private pension provision

Abstract

While the governance of pension schemes, and the risk this poses for pension savers, is a prominent issue in current pension debate in the UK, this paper places that debate in, arguably, the more important context of the governance of individual behaviour. Using the concept of governmentality as a means of interpreting the course of recent UK pension policy and its attempts to influence individual saving behaviour, it critiques that policy. The paper then goes on to consider the effect of the introduction of personal accounts upon the pensions landscape, and in particular its potential to push forward the government's recent approach to pension provision. It argues that these reforms, rather than furthering individual saving for retirement, may alternatively create the very real possibility of undermining it.     

The relationships between public and private pension schemes: an introductory overview

Only recently have social insurance and private pensions, collectively, come to be thought of in terms of a total social security benefit package. The economic problems brought on by the 1974 oil crisis initially triggered consideration of a common, integrated role for the two systems. The second oil crisis reinforced the relative expansion in private pension programs, as a supplement to social security. Before these events, private and public pension programs interacted in only a limited number of ways, confined to relatively few countries. These interactions were largely confined to collective bargaining, whereby private pensions were gradually extended to nearly all employees in France and Sweden; mandating, or legally requiring private supplementation of social security, debated in several countries in the early 1970's, but postponed by the 1974 oil crisis; and contracting out, or covering a part of the social security benefit under a private plan, as in the United Kingdom. Overall, the tradition of private pensions was not very strong or broadbased. The current debate centers on which public/private pension mix is desirable from the point of view of an old-age income-maintenance program. A new element is the rising support for a "third pillar"--individual tax-encouraged savings--not only as a supplement, but as an alternative to social insurance.     

Swedish Bureaucracy in an Era of Change

Swedish bureaucracy combines some structural peculiarities founded on constitutional traits from the 17^th century with a clear formal division of labor between the national and local levels from the late 19^th century. These structures have mainly remained unchanged during periods of strong expansion in the first post-WWII decades and preconditions for shrinking during the 1980s and 1990s. In this article, we highlight how these changes have put stress on the bureaucracy and the public sector in general, and how demands for reform and adapting have been managed and viewed by the administrative and political camps, respectively. Social, educational, and political changes among Swedish bureaucrats and their roles are presented and analyzed. The national bureaucracy has "muddled through" and has not been subjected to radical reforms. Its working is still approved—though by no means regarded as sacred—by its administrative agents and its political principals.