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COVERAGE UNDER OLD AGE SECURITY PROGRAMS AND PROTECTION FOR THE UNINSURED—WHAT ARE THE ISSUES?

By Estelle James

Abstract

The majority of old people in developing countries are uninsured by formal social security programs. This paper argues that economic growth is the key to increased coverage. Contributory old age insurance programs may not be desirable or feasible for large portions of the population in underdeveloped economies. Moreover, the trade-offs between higher take-home pay and old age benefits, between maximizing coverage and minimizing evasion, and between increased coverage and greater competitiveness, need to be carefully evaluated before opting for expanded coverage, especially among low income groups. However, policies also matter. Keeping the contribution rate low, the rate of return high and enhancing the credibility of the system may encourage participation while avoiding these costly trade-offs. In recent years we observe a tighter link between benefits and contributions in contributory systems--most obviously in the shift toward multi-pillar systems with a large defined contribution component, usually accompanied by a modest redistributive public pillar. This augments the fiscal sustainability of social security systems and therefore may be considered a pre-condition for financially sound coverage expansion. At the sam

Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.195.7880
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