Reforming Pensions: Lessons from Economic Theory and Some Policy Directions

Pension systems have wide-ranging and important effects. They influence the living standards of older people and hence the welfare of both older people and their children. They can also affect national economic performance through potential effects on the labor supply and saving. The design of pensions therefore matters. In discussing the topic, this paper draws on two of our earlier works. It starts by setting out some central lessons from economic theory. Then we derive some policy implications of particular relevance to Latin America.