parties) and a distinction should be made between redistributing to contributors (via social security) and to noncontributors via social assistance (see below). Governments should be particularly careful to avoid perverse redistributions from those outside the system to those inside, while coverage is low.

Redistribution within social security may be achieved by having a very progressive or flat benefit formula in the first pillar (as in the Netherlands) or by introducing a floor or foregoing the usual ceiling on taxable earnings (as in Switzerland) or by providing a minimum pension guarantee (as in Chile and Kazakhstan). In Uruguay, low income contributors to the new funded pillar receive an extra benefit (Queisser, 1998). In Colombia a "solidarity tax" of 1% if imposed on salaries above a specified level and used to finance subsidies to low income contributors (Valdes-Prieto, 1998). These better payoffs or lower charges may encourage participation and thereby reduce the problem of the uninsured, because they take into account the lower demand and higher opportunity cost among low income workers for formal old age security programs. It may be preferable (and more accurate) to interpret such progressive benefits and charges as stemming from risk differentiation--poor workers are placed into a lower risk category because of their lower expected lifetimes--rather than from redistributive objectives. This line of thought also suggests that broader policies such as the provision of small business credit markets to low income groups may have positive compliance effects on social security by reducing their alternative needs for savings.

However, low income transient workers may not expect to be in the formal sector long enough to qualify for these redistributive benefits, which often require 20-30 years of contributions. Moreover, the political feasibility of these policies, and therefore coverage extension by these means, will be limited by the reluctance of the "haves" to redistribute much to the "have-nots." _The dificulties in collectingfrom small enterprises and the self-employed._ Furthermore, none of these policies are likely to completely solve the evasion problem, in the absence of effective enforcement. Now, enforcement is easier for certain groups than for others. For example it is relatively easy to collect from large companies but more difficult to collect from small enterprises or the self-employed or subsistence agriculture or transient workers. Small enterprises have a short life span; they may come and go before they are registered and taxed. The self-employed, who must pay both the worker's and employer's share, have a double incentive to evade and find it easy to under-report their eamings. Keeping track of transient workers who work irregularly for different employers is a daunting task. These problems exists in industrialized countries as well, but they are multiplied in developing countries where the "difficult" groups are disproportionately large and the government's capacity is weak. Many developing countries do not even try to cover these groups and those that try often fail. For example, the self-employed, who constitute about a third of the labor force, are not covered in Chile (World Bank, 1994, Queisser, 1998). The are covered in Argentina, which is considering excluding them from the mandate because of high evasion. It may be wise for developing countries to concentrate their limited enforcement capacities in those sectors where they are most likely to succeed.

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