Publication: Enabling Conditions for Second Pillars of Pension Systems
Loading...
Date
2009-04-01
ISSN
Published
2009-04-01
Author(s)
Editor(s)
Abstract
This note adds to the existing literature by examining the enabling conditions for the creation of mandatory funded pension funds, and identifying additional factors that are important to consider in the early stages of the reform. The note stresses the importance of some factors that had already been identified in previous literature but not fully observed by reforming countries, including the strong and lasting commitment of the authorities with the reform, the fiscal commitment with the reform, and some basic financial infrastructure. The analysis is also extended to analyze the role of supervision in the early stages of the reform and the role of the government in fostering the development of the domestic capital market.
Link to Data Set
Citation
“Rudolph, Heinz; Rocha, Roberto. 2009. Enabling Conditions for Second Pillars of Pension Systems. Policy Research working paper ; no. WPS 4890. © World Bank. http://hdl.handle.net/10986/4084 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Mexico : Capital Market Development(World Bank, Washington, DC, 2013-03)Securities markets in Mexico are orderly and relatively innovative; however, corporate markets lag behind those in comparator countries. The government bond market accounts for the bulk of the fixed-income segment, and is well developed and active. While financial savings rates have been growing, little has been transformed into long-term investments. Most of the savings remain in traditional savings accounts. Institutional investors still hold the bulk of their assets in government bonds. Mexico will need to find solutions to further develop its capital market to fund its development needs. In the infrastructure sector alone, the country needs approximately US$230 billion of new investments. In the corporate sector, provision of financing by banks fare well below peers, especially for small and medium enterprises. Meanwhile, the pension fund industry, growing at about US$20-US$30 billion annually, requires sound investment outlets. The large concentration in the control of financial intermediaries raises complex issues and may stunt market development. The investor base in the equity market lacks diversity, with limited development of the retail segment. Mutual funds could play a key role in mobilizing long-term finance. Most funds are used by banks as alternative ways of tapping clients' savings. Mutual funds (particularly open ones) are much more sensitive to liquidity risks than institutional investors with long-term horizon. The independent distribution vehicle created under the 2002 reform has not been very successful in fostering sustainable entry. Restrictions placed on institutional investors limiting investment to only publicly offered securities keep them away from more specialized investments.Publication El Salvador Financial Sector Assessment Program Update(Washington, DC, 2010-11)The capital markets in Salvador are small and relatively underdeveloped, and have played a very limited role in the economy. On average, institutional investors invest less than 10 percent of their total assets in capital market instruments. In 2009, there were only five new issuances of corporate bonds and three in the case of equity. Banks and pension funds are the main institutional investors. The current market architecture and the natural monopoly it grants to the exchange hamper market development and prevent the modernization of the regulatory framework. There is an urgent need to overhaul of the regulatory framework to promote sound market development in the short-to-medium term. The regulatory framework should guarantee a level playing field between bonds and bank deposits, which should be reflected in the investment guidelines for institutional investors. The exchange should reposition itself to become more competitive and strategic at the local and regional level. The investment funds law should be finally approved to broaden and diversify the investor base. The importance of this reform is paramount as the current reliance on just two main institutional investors (banks and pension funds), with investment limitations (35 percent each per issue), creates a major limitation for new issuances. In the medium -to long- run, it is recommended to explore gradually integrating the individual markets at the regional level. This paper is divided into following four parts: part one gives current market situation; part two gives regulatory and supervisory framework; part three gives recommendations; and part four is reference section.Publication Malaysia : Bond Market Development(World Bank, Washington, DC, 2013-01)This paper pertains to the bond market development in Malaysia, and provides an overview of the market scenario in the country. Malaysia has been successful in developing the capital markets, particularly bond markets, in the recent past. Now, it faces the challenge of how to improve broader access and efficiency of the bond market. A high degree of investor concentration, dominated by government pension funds, plays a significant role in impeding the growth of higher-yield bond market. The role of the government in stimulating the growth of the bond markets should be now shifted toward encouraging more diversity. In order to promote risk diversity, significant measures should be taken to increase competition on the demand side. Another important challenge for the bond markets going forward is improving transparency to make them more attractive to a broader constituency. To improve liquidity and transparency, the authorities should encourage the establishment of open, independent electronic platforms that integrate price search, negotiation, and trading of bonds. It is felt that while Malaysia has seen success in the bond markets, there is scope for further improvement.Publication Republic of Romania : Financial Sector Assessment(Washington, DC, 2009-06)This financial sector assessment (FSA) summarizes the key findings and recommendations of the 2008 FSAP update report for Romania. The main findings of the FSAP update are: the financial system entered the crisis well capitalized and with high liquidity buffers, and the four financial sector regulatory authorities have made significant progress in adopting international best practice, including through transposition of European Union (EU) directives, and implementation of many of the recommendations of the 2003 FSAP. While the banking system is currently well capitalized, the rapid deterioration in economic conditions and the depreciation of the leu may put strains on bank capital. The measures to strengthen the system are needed: an ex ante strengthening of capital positions is warranted; the overall exposure of foreign parent banks to Romania should be maintained; banks need to develop effective debt restructuring or workout procedures for household and corporate clients; crisis management coordination should be accelerated; bank resolution powers strengthened; and deposit insurance funding and payout arrangements improved. Some cross-sectoral themes emerge to strengthen the supervisory frameworks, including the need to strengthen the political independence and financial autonomy of the non-bank financial regulators; better cross-sectoral cooperation in supervision of financial groups; further movement toward a more risk-based approach to supervision; better consistency in valuation rules for market instruments; adoption of international financial reporting standards (IFRS) accounting; and in the banking sector, strengthening of the basel two implementation framework. Longer term developmental issues include the need to address obstacles to capital market development, certain risks in insurance, and to ensure sustainability of the pension system reform.Publication Financial Sector Assessment Program Update : Republic of Kazakhstan - Investment Opportunities for Pension Funds(World Bank, Washington, DC, 2004-08)The objective of this note is to put forward policy alternatives that could lead to improved management of pension fund assets in Kazakhstan. This note emphasizes prudence in the management of pension assets, given the social and fiscal importance of the pension sector. It also discusses different investment alternatives and development options for the domestic Kazakhstani capital market. The note aims to be realistic and pragmatic, based on the best professional judgment of the author.1 It is concluded that neither the regulators nor industry participants appear to fully appreciate the risks attached to the practice of focusing on short-term and high yield investments, which exposes pensioners to higher reinvestment and issuer risk. The recommendations are summarized in the last section of this note.
Users also downloaded
Showing related downloaded files
Publication The Brazilian Pension System Under an Equity Lens(Washington, DC: World Bank, 2024-05-07)The objective of this note is to provide a comprehensive analysis of the Brazilian pension system through an equity lens. This focus is important, because fairness and equity of the pension system are relevant even beyond their intrinsic societal value: they are also instrumental for economic growth, as it impacts the incentives to participate in the labor market, as well as the productivity of current and future workers. Furthermore, political considerations also require that fairness and equity are taken into account in any future pension reform discussions. Section 2 provides general overview of the pension system and briefly explains the recent pension reforms in Brazil, while Section 3 offers a framework for addressing equity issues in the pension context. It explores how Brazilian pension system provides different levels of protection to distinct groups, creating a mismatch between contributions paid and benefits received, not always in a progressive manner. Section 4 concludes with a summary of the findings and a set of policy recommendations.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication World Development Report 2011(World Bank, 2011)The 2011 World development report looks across disciplines and experiences drawn from around the world to offer some ideas and practical recommendations on how to move beyond conflict and fragility and secure development. The key messages are important for all countries-low, middle, and high income-as well as for regional and global institutions: first, institutional legitimacy is the key to stability. When state institutions do not adequately protect citizens, guard against corruption, or provide access to justice; when markets do not provide job opportunities; or when communities have lost social cohesion-the likelihood of violent conflict increases. Second, investing in citizen security, justice, and jobs is essential to reducing violence. But there are major structural gaps in our collective capabilities to support these areas. Third, confronting this challenge effectively means that institutions need to change. International agencies and partners from other countries must adapt procedures so they can respond with agility and speed, a longer-term perspective, and greater staying power. Fourth, need to adopt a layered approach. Some problems can be addressed at the country level, but others need to be addressed at a regional level, such as developing markets that integrate insecure areas and pooling resources for building capacity Fifth, in adopting these approaches, need to be aware that the global landscape is changing. Regional institutions and middle income countries are playing a larger role. This means should pay more attention to south-south and south-north exchanges, and to the recent transition experiences of middle income countries.Publication Unlocking the Power of Healthy Longevity(Washington, DC: World Bank, 2024-09-12)The World Bank has a long history of engaging in population issues, ranging from childhood illness, nutrition, fertility, and safe motherhood to the aging process. It supports countries in addressing the implications of the demographic process through analytical work, technical advice, and financing to expand health coverage, redesign pension systems and social security, and undertake actions that support their economies. This report follows that tradition and analyzes the steps to promote healthy longevity and enhance the quantity and quality of human capital through attention to the burgeoning problem of Non-communicable diseases (NCDs). Research began before COVID and concluded after, drawing upon lessons from the pandemic. The report is intended to inform policy and action at the country level. The demographic transformation is a global phenomenon, and the increasing population of the middle-aged and elderly brings with it many challenges which are more acute in low- and middle-income countries where resources are more limited. The increasing number of adults calls upon countries to institute the social and economic measures of ensuring their wellbeing and making them optimally productive. Health must be at the center of these concerns, not only its preservation towards the end but its optimization throughout the life-course. This report builds on a compendium of analytical papers covering the economics of avoidable mortality, long-term care, behavior change, social protection, and whole-of-government solutions to support healthy longevity. It emphasizes that a great deal of ill health globally is a result of inequities—especially poverty and gender inequities that limit or delay access to and use of health care. High out-of-pocket payments for NCDs can plunge households further into poverty or extreme poverty. Women live longer with NCD morbidities.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.