Redistributive Pensions in the Developing World

25 Pages Posted: 25 Apr 2019

See all articles by Achim Kemmerling

Achim Kemmerling

University of Erfurt - Willy Brandt School of Public Policy

Michael Neugart

Technical University of Darmstadt

Date Written: May 2019

Abstract

Redistributive so‐called social pension schemes have seen a remarkable surge in developing countries. These schemes often target the rural elderly and correlate with urbanization rates, urban rural‐wage differentials, and family norms. We use this stylized evidence to motivate a political economy model for a Beveridgean pension system with trade‐offs between four groups: the (poorer) rural old and young, and the (richer) urban old and young. We show under which conditions governments will install a pension system and increase its generosity as the share of the urban population rises, productivity differentials between urban and rural workers widen, or the social norm erodes. Our conclusion is that the role of the rural–urban divide in shaping redistribution merits more scholarly attention, as the gap between cities and the countryside widens in many developing countries.

Keywords: crowding out, developing countries, electoral support, family transfers pensions

Suggested Citation

Kemmerling, Achim and Neugart, Michael, Redistributive Pensions in the Developing World (May 2019). Review of Development Economics, Vol. 23, Issue 2, pp. 702-726, 2019, Available at SSRN: https://ssrn.com/abstract=3376865 or http://dx.doi.org/10.1111/rode.12582

Achim Kemmerling

University of Erfurt - Willy Brandt School of Public Policy ( email )

Nordhäuser Str. 63
Erfurt, 99089
Germany

Michael Neugart (Contact Author)

Technical University of Darmstadt ( email )

Hochschulstraße 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.vwl3.wi.tu-darmstadt.de

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