OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

The Economy of the Possible

Pensions and Informality in Latin America

Social protection coverage is quite low in Latin America. This situation, irrespective of the type of pension scheme, represents a challenge for public policy since these low levels of affiliation and irregular contribution histories indicate that pensions will be insufficient in the coming decades. This paper describes the relationship between pension protection and labour informality in Bolivia, Brazil, Chile and Mexico by income level, using several rounds of national household surveys. Our analysis highlights that labour formality is limited, even among the middle and the high income groups. Correspondingly, coverage rates (measured by contributors or affiliates over workers) range between 10% of the labour force in Bolivia to up to 62% in Chile. 76% of formal workers are covered on average, while coverage among the self-employed in agriculture is below 7%. Based on this prognosis, we discuss some alternative pension reforms.


Keywords: old-age pension, informality, self-employment, Latin America
JEL: H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions; O17: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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