WP#1999-3  

Introduction 

The primary goal of this study is to cast light on what might happen were the United States to partially privatize its Social Security system. The analysis draws on evidence from four Latin American countries that have privatized their public pension schemes (Chile, Mexico, Bolivia, and El Salvador) and four that have partially privatized (Argentina, Uruguay, Colombia, and Peru). In Latin America privatization tends to have positive economic effects. It contributes to the development of financial institutions and to an increase in investment capital. There is less consensus, but at least some evidence suggesting that it may increase the national savings rate and economic growth. However, privatization also leads to higher administrative costs as well as an increase in both income and gender inequality. In addition, there is a risk that many low-wage workers and particularly women will end up worse off with defined contribution than with defined benefit schemes.

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