metadata: authors: 0: author: Puffert, Douglas J.
docna: 0: docna: Social security finance in developing countries
docty: Policy Research Working Paper
subtopic: Pensions & Retirement Systems,Social Protections & Assistance,Disability,Social Development & Poverty,Inflation
teratopic: Gender
abstracts: cdata!: This paper presents a survey of the
            financial nature of social security schemes in developing
            countries, their implications for public sector finance as a
            whole, and for the process of economic development. Chapter
            1 discusses what social security is and in what various ways
            it is implemented in developing countries. Chapter 2
            considers in detail the specific provisions and financing of
            social security programs in a sample of 41 developing
            countries. Chapter 3 discusses the implications, including
            potential dangers, of social security systems for public
            sector finance generally, and Chapter 4 considers the
            effects of social security systems on capital and labor
            markets, and thus on the process of economic development.  A
            final chapter sums up the implications of the analysis for
            public policy in developing countries and for the research
            agenda for the World Bank.
repnme: repnme: Social security finance in developing countries
display_title: Social security finance in
            developing countries
listing_relative_url: /research/1988/08/700679/social-security-finance-developing-countries
topicv3: Inflation m1326709 0870F4727ACED1CF8525815C00471347,Social Insurance m1326950 751,Occupational Injuries m1327435 1645,Retirement m1504007 2896,Disability m1583873 4215
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Gender
origu: Policy Plan & Prog Review Dept
no_of_pages: 51
model_extractions: P:c,Planning, and Ruchw |

World Devehopnwnt Report Social security systems usually cover less than 10 percent of the population of developing countries. Yet in a number of countries, these systems make up a large proportion of public sector revenues and expenditures.

Most social security systems in developing nations are nnning substantial surpluses. If the systems are to meet future obligations, reserve funds and surpluses should be invested in safe assets with real positive rates of retum.

But many countries lack well-developed financial markets and good domestic opportunities for productive investment. The government usually controls social sec'nrity systems - and often uses the surpluses to finance government deficits.

Economists are divided over how social security systems affect pri-,ate saving and capital accumulation, which leads to long-term growth. They also disagree on the inefficiencies which social security systems introduce into labor markets.

It is clear, however, that investing social security funds in government securities increases the risk of the social security system's insolvency.

Governments facing fiscal difficulties find it tempting to expand the money supply and drive up inflation. This cuts government obligations to social security reserve funds by reducing the real value of the investments in government bonds.

There is also conrsant pressure for many govenmmen **t** s oincrease benefits without increasing contributions. Although such actioi is expeaient, it often proves unsustainable. A govenmment's ability to resist such pressure thus has a direct bearing on the long-term success of the system.

One system that stands out as sound, with wisely invested reserves, is the regulated private social security system in Chile.

This is a background paper for the 1988 World Development ReporL Copies are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Rhoda Blade-Charest, room S13-060, extension 33754.

The PPR Working Paper Series disseminates the findings of work under way in the Bank's Policy, Planning, and Research Complex. An objective of the series is to get these fmdings out quickly, even if presentations aie less than fully polished. The findings, interpretations, and conclusions in these papers do not necessarily represent official policy of the Bank.

Copyright i: 1988 by the International Bank for Reconstruction and Development!The World Bank
.........

# **Social Security** rinance **in** Developing Countries

|by<br>Douglas J. Puffert|
|---|
|1.Introduction ............................................<br>.<br>........<br>1|
|Origin and Spread of Social Security ....................<br>3|
|Types of Benefits............................<br>.<br>..........*<br>4<br>Principles of Benefits and Finance ......................<br>4|
|Reserve Funds, Generosity of Benefits, and Long-run Financial<br>Solvency ................................................<br>.<br>........<br>7|
|2.Benefits and Finance inaSample of Countries ...........<br>9|
|Types, Principles, and Level of Benefits ................<br>9|
|Extent of Coverage<br>in the Populat ion<br>....................<br>12|
|The Financial Size of Social Security Systems ...........<br>14|
|Sources of Revenue for Social Security Systems ..........<br>16<br>Relative Size of Benefit Programs .......................<br>17|
|3.The Consequence of Social Security Systems for Public-Sector<br>Finance ...................................................<br>.<br>.........<br>19|
|4.The Consequences of Social Security Systems for Economic|
|Growth ....................................................<br>24|
|5.Conclusions........<br>....<br>.<br>28|
|Notes .....................................................<br>.<br>........<br>30|
|References......<br>..<br>.<br>....<br>36|
|Appendix...................<br>.<br>38|
1

# 1. Introdudtion

- Most developing covntries have social security **systems** publicly administered sets of programs which provide for people in the event of lose of income (due to retirement, disability, death of a breadwinner, illness, maternity, work-related injury, or unemployment) and often in the event of need for medical care or the expense of raising children. Usually - but not always - the programs are not as extensive as programs in industrial countries. They usually cover only a small part of the population (often well under ten percent) and benefits **are** typically less generous than those in the industrial countries.

Still, social security systems make up a large proportion of public sector revenues and expenditures .in a number of developing countries. This fact may be hidden, for in most countries, systems are managed by autonomous public bodies whose financial flows are only partially reported in central government statistics. Social security systems have major implications for public finance for two further reasons. First, systems in most developing countries have growing reserve funds which finance much of their governments' deficits and also, sometimes, provide a pool of investment capital which furthers economic development. Second, social security systems pose special financial dangers for central governments. Unless systems are managed effectively with a view to covering future liabilities, they can become insolvent. Already a number of systems have come to
2 require majbr allocations of central-government revenues.

This paper presents a survey of the financial nature of social security systems in developing countries and their implications for public-sector finance as a whole and for the process of economic development. It gives only brief consideration to the needs which give rise to social security systems and the adequacy of various countries' systems for meeting these needs, 1 It also passes over various issues in the administration of social security: for example, the great multiplicity of programs and occasional failure to collect taxes, keep proper records, or distribute earned benefits in some La'in American countries (Mesa-Lago, 1986).

The remainder of this chapter will discuss wiL. social security is and in what various ways it is implemented in developing countries. Chapter 2 will consider in more detail the specific provisions and financing of social security programs in a sample of 41 developing countries. Chapter 3 will discuss the implications, including potential dangers, of social security systems for public-sector finance generally, aad Chapter 4 will consider the effects of social security systems on capital and labor markets, and thus on the process of economic development. A final chapter will sum up the implications of this analysis for public policy in developing countries and for the research agenda of the World Bank.
3

# **Origin and4pread** of social security

The need for social security is often seen to arise in the transition from a traditional social and economic order to a modern urban society and industzial economy. The loosening of family, kinship, and community ties and the rise of wage labor add new elements to the age-old problem of providing for those who lack an income or have medical needs. Central governments have assumed responsibility for making this provision. 2 To be sure, government has long (if not generally) been involved in providing for the poor. Modern social security, however, dates from the late nineteenth century when Germany and Denmark instituted public pension schemes for the greater part of their working populations. As Table 1.1 suggests, most European countries, as well as some of the more industrialized countries of North and South America, adopted pension schemes and other social security programs in the early decades of this century. Most remaining countries (and most colonial administrations) instituted various programs in the twenty years follow'ng the Second World War. Most of the world's smaller countries (i.e., those with populations below one million), however, have adopted such programs only since 1965.

We note in Table 1.2 that countries with higher incomes now, which for the most part have had substantial modern economic sectors for a longer time, tend to have adopted social security programs earlier. Still, as of 1985 at least 24 out of 37 low-income economies have programs which at least cover work-
4 related injury and provide pensions for those retired due to age or disability and, usually, for dependent survivors.

# Types of Benefits

Tables 1.1 and 1.2 also show the typical progressive institution of programs for different types of benefits. Usually, work-injury benefits (earnings replacement and medical expense) are the first provision to be instituted. 3 After pensions for old age, disability, and death of a family's bread-winner, the most common benefits are replacement of earnings (cash benefits) in the event of sickness and maternity, and medical care (provided directly) or else (rarely) hospital- ization insurance. 4 Family allowances benefits for raising children - are quite common in the industrial countries, middleincome European countries, countries in Africa which have a French colonial heritage, and much of South (but not Central) America. Partial replacement of earnings during periods of involuntary unemployment is universal in the industrial market countries but not common in developing countries.

# Principles of **Benefits and Finance**

Social security programs are intended to provide adequately for their beneficiaries, whether this adequacy is viewed as partial replacement of previous earnings or as providing a minimum or standard level of benefit to all. Usually a pragmatic balance is reached between a concept of social equity, which involves
5 redistribution from those better off to those worse off, 5 and individual equity, which involves providing people wit benefits equal in (expected, discounted) value to their contributions or taxes. In nearly all cases both workers and their employers are deemed responsible to c ribute to the funding of social security benefits throug.. 'axes on wage or sa-ary earnings. Additional funding may come from general state revenues or ear-ma;ked taxes.

Five alternative principles are commonly employed for determining levels of social security benefits and financing them. The panels in Table 2 show the application of these principles in countries with different levels of income per capita.

The principle most often applies is that of social insurance. Social insurance schemes are funded principally by the earnings-related contributions of workers and/or their employers. 6 Earnings-replacing benefits under social insurance vary positively with a covered worker's earnings.

Universal benefits are of uniform amount and apply to all residents who experience a given contingency. Some pension schemes (chiefly in the industrial countries) combine a uniform benefit with an earnings-related component. Medical care, hospitalization insurance, and family allowances are generally provided on a universal basis; Table 2 (and Table 3 below) reports these benefits as "social insurance," however, in cases where such schemes are financed from employer and worker contributions.
6 A third principle, social assistance or means-testing, directs benefits specifically to those in greatest apparent need. It is applied either alone or in conjunction with other principles, but it is now rarely used.

Employer liability, which is often applied in conjunction with mandatory private insurance, is used by some countries to accomplish the goals of social security without involving the public sector in its provision. Table 2 gives counts for these programs but does not include them in totals for social security programs. 7 Finally, provident funds collect contributions from workers and employers into personal accounts from which workers (or their survivors) can draw in the events of old age, disability, death, and in scme cases .ther contingencies. Benefits are paid as lump sums in the amount of accumulated contributions plus interest. They are, effectively, forced savings schemes. Some provident funds originated as regulated private schemes in British colonies which were nationalized and expanded after independence. Others were instituted as public schemes from the outset. In a few cases provident funds have been converted into social insurance schemes. Provident funds are sometimes favored for their administative simplicity and for their accumulation of sizeable reserves which may be applied to capital accumulation or the funding of government debt.
7

# **Reserve funds, generosity of benefits, and long-run financial solvency**

Provident funds, by definition, maintain reserve funds equal in value to their liabilities for future benefit payments, and they return to their participants an amount equal in expected present value to their (and their employers') contributions. Early social-insurance pension schemes, both in Europe and in Latin America, also had these characteristics; thus they operated on the same principles as the private insurance which had often previously been offered by mutual-aid societies and similar institutions - except that coverage was made mandatory and extended to larger groups of workers.

Naturally, it was realized that by drawing down the reserve funds benefits can, for.a time, be raised above levels that simply provide a fair return on contributions. Thus all the early social insurance pension schemes moved towards the principle of "pay-as-you-go" financing, under which current contributions pay for current benefits. 8 9 Some of these systems, both in Europe and in Latin America, have required special ear-marked taxes or special allocations from general revenues to remain solvent.

The younger social-security pension schemes in developing countries have had much less in the way of previous private systems to build upon. For the most part they never intended to - maintain full-funding today only Kuwait's scheme, Chile's new privatized system, and the various provident funds are fully-
8 funded - but they do operate on the basis of partial-reserve financing, with a view to "asuring solvency over a horizon of a few decades into the future. Many of them, in fact, are accumulating substantial surpluses (sometimes over half their revenues) into reserve funds. This accumulation is largely for the reason - that the pension schemes h4ve not yet "matured" they do not yet have a full complement of pensioners eligible for full benefits. Chapter 3 considers at greater length the financial difficuVies of some Latin American schemes and the prospect or the continued financial solvency of the younger schemes in developing countries.
9

# 2. **Den*fitv and rinance** in a sample of **Countries**

We now turn from these general consideratiens to an examination of the structure of social security in a sample of 41 developing countries drawn from every major region of the world. Our sample also considers three industrial market countries (not especially typical) in order to enable some comparison with them.

**Types,** Principles, **and Level of Benefits**

Table 3 presents the range of benefits provided by the social security systems in our sample, the principles by wh'ch these benefits are financed, and a partial account of how retirement pensions are determined. Within each regional section countries are ordered from the lowest per-capita income to the highest. As in Tables 1 and 2 above, we note that the fullest range of benefits are provided in Latin America and in Europe, the Middle East, and North Africa. Soe-ial insurance is the most common principle of provision, provident funds are common in Sub-saharan Africa and Asia (nearly always in former British colonies), and employer liability is occasionally invoked (especially in Africa) for cash sickness and maternity benefits, some medical care, unemployment (severance) benefits, and most often for work-injury insurance. China, notably, charges its collectives and other employers with responsibility for the full range of benefits provided 1 (Wallich 1986). Several countries have programs which operate under a combination of principles,
10 adding soctal assistance, universal benefits, or employer liability to social insurance or provident funds.

Since 1981 Chile has largely privatized its social security system. Previously the country (like many Latin American nations still) had a number of social insurance systems covering different sets of workers. Those systems (now partially unified) are still in effect for reptrees a.sd the 40 percent of the active labor.force who have not switched to the new system. Several private commpanies have been organized to operate under state supervision, providing pensions, on a fully-funded basis, as well as cash sickness and maternity benefits and medical insurance (Lacey 1987).

Under the heading "medical care" we note, by the letter "M", countries in which a public medical system operates separately from the social security system. Possibly not all such systems are noted, however.

Another substantial omission is that of the ccmmon, but nonlegislated, provision of private pensions and private insurance, often through employers, in several countries. This practice is - much more common, however, in the industrial market countries most notably in the United States.

The last three columns of Table 3 present a very summary account of who is eligible for old-age pensions and how substantial are the benefits provided. The normal retirement age is the age at which covered workers (sometimes with exceptions for miners, other occupations, or the unemployed) are eligible for
11 full benefit.. In many cases reduced benefits are available at a lower age, and sometimes higher benefits are given to those who delay retirement until after the normal age. We see in the table that normal retirement ages are 60 to 65 for men, and usually lower for women, in most of the industrial market countries, Latin America, and Europe, the Middle East, and North Africa. In Sub-saharan Africa and Asia, which for the most part have lower life expectancies, normal retirement ages are usually 55 or 60 for men and sometimes lower for women. Most provident funds permit withdrawal from one's account at age 55, often without any requirement for actual retirement. Under social insurance programs rules for actual retirement vary widely.

Levels of benefits nearly always depend on both the number of years of contributions and the level on one's earnings (or of one's contributions) over either the last several years of one's working life or else all of one's covered working life. The rules which govern benefits are often quite complex, so that the figures in the last two columns of Table 3 are hardly complete in the information they convey. In most cases the specified number of years of required contributions makes one eligible for the minimum specified earnings replacement rate, while additional years of contributions makes one eligible for a higher replacement rate. Sometimes, however, higher raplacement rates are for those with lower average earnings (i.e., the benefit formula is progressive). Often the legislated formulae for levels of benefits do not specify a replacement rate. In these cases a "C"
12 in the table indicates that benefits vary with total contributions or covered earnings. "B" in this column designates that there is a "base" Ievel of benefits to which are added benefits which vary with contributions or earnings. Provident funds, indicated by "PI', pay a lump-sum benefit in the amount of accumulated contributions plus interest.

We see that, for the most part, pension benefits replace between one third and four fifths of one's pre-retirement - earnings with benefits closer to-the higher figure for long periods of coverage. There is little general difference in replacement rates among regions, or for that matter between countries of different income levels within a region.

# Extent of Coverage in the Population

In most of the developing world social security applies - mainly to urban wage labor usually a small part of the population. Only in the middle-income countries of Europe, in several countries in Latin America, and in a few other countries such as Israel, Mauritius, and Singapore is the majority of the labor force and population covered. In most other countries it seems likely, based on categories of covered workers, that less than ten percent of the population is covered. As Mesa-Lago (1986) notes for the Latin American countries, "In general the extension of risk coverage has been much faster than that of population coverage.... [O]ften a minority of the population is covered against all risks, but the majority is not protected against any
13 risks at **alj.,*** 2 Table 4 presents the results of Mesa-Lago's (1986) study of social security coverage in Latin America. 3 For the most part extent of coverage varies directly with per-capita income, although the countries of northern South America and Central America have lower coverage than countries of comparable income further south. Several higher-income countries provide more extensive coverage for sickness and maternity benefits than for pensions. Among the lower-income countries sickness and maternity benefits are available less widely than pensions.

Unfortunately there are (apparently) no comparable studies for other developing countries. Brief, sometimes imprecise descriptions of the covered population are, however, provided in the United States Social Security Administration's biennial report Social Security Programs Throughout the World. These descriptions make it clear that there are substantial restrictions even on the extent of coverage of urban wage labor in (among our sample of developing countries) Ghana, Nigeria, India, Pakistan, Indonesia, Thailand, Korea, and Singapore. 4 In these cases only larger employers or a limited range of industries are covered. In many other of our sample countries, social security does not apply to domestic workers or casual workers. Family workers - usually a substantial portion of urban (as well as - rural) workers are seldom covered. The urban self-employed are covered in Egypt, Cyprus, Israel, Portugal, and Yugoslavia; they are also covered voluntarily or in a limited range of occupations
14 in Mauritius, Hungary, China, Indonesia, the Philippines, and Singapore. It is often not clear in these descriptions to what extent rural employees or the rural self-employed are covered. There is certainly coverage for at least some rural workers in Zambia, Cameroon, Morocco, Israel, Hungary, Portugal, Yugoslavia, Sri Lanka, and China. 5 Mesa-Lago (1986) points out that in Latin America, "coverage tendr to be positively correlated with income, the degree of skill at work and the power of pressure groups." Similarly, in the rest of the developing world it is the urban elites who receive the most protection under social security while needier groups are not covered. 6 This becomes a matter of particular concern to the extent that social security is paid for out of general revenues or will later become a burden upon the central - government. In these cases arguably rare outside of Latin America - socal security systems may constitute a mechanism for a perverse redistribution from the worse- to the better-off.

# The financial size of social security systems

While it is difficult to determine the extent of social security coverage in the population, information on financial flows is accessible for most countries. Tables 5 through 8 present information collected by the International Labour Office for its triennial survey, Cost of Social Security. 7 Table 5, in particular, presents the size of social security finances relative to the economy as a whole as measured by Gross Domestic
15 Product. 8-_ The table presents information not only on social security programs for the public as a whole but also on programs which apply only to public employees and programs apart form social security which provide public health care and public (or social) assistance. These programs fall under the International Labour Office's definition of social security programs, and they may be categprized as social security in government financial statisti-.s, but they are not considered in the present paper apart from this table. 9 We note that systems for public employees are sometimes larger than broader social security programs. Where no flows are reported for public-employee systems, it is either the case that public employees are covered only under the general system or that the finances for such systems are not reported to the I.L.O.

As we focus on the first four columns of Table 5 we see that social security systems involve the largest share of an economy's product in Chile, 10 the higher-income European and Middle-Eastern countries, Singapore, and the industrial market countries. Social security involves a very small portion of the economy - less than 0.2 percent - in Nigeria, Bangladesh, Burma, Pakistan, Indonesia, and Thailand. Other figures for receipts and expenditures vary widely, with some tendency for richer countries to distribute a larger portion of their product through the social security system.

We also see in Table 5 that only three countries in our
16

- - sample Peru, Mexico, and Portugal have deficits, of about seven percent, four percent, and one percent of revenue respectively. A substantial number of countries, especially in Asia and Sub-saharan Africa, have high surpluses - often more than 50 percent of revenues. 11

# Sources of Revenue for Social Security Systems

Table 7 presents information on sources of revenue for social security systems. In the first two columns it lists the sta&utory contribution rates which are applied to workers' wage and balary earnings (or, from employers' point of view, to payroll). The remaining columns present the percentage of total revenues supplied by contributions, special taxes and general state revenues, income from investment of reserve funds, and miscellaneous sources.

In nearly half of the countries sampled, contribution rates for insured workers and their employers total between 10 and 20 percent. Most of the remaining countries have contribution rates between 20 and 30 percent. Argentina and Portugal have combined rates well in excess of 30 percent, while Singapore's rate is 50 - percent 25 percent each from insured workers and employers. 12 The lowest contribution rates, well below 10 percent, are found in Burma, Thailand, and the Republic of Korea, the only countries listed which do not have pension coverage.

Except in Chile and Yugoslavia employers are charged (taxed) a higher contribution rate than workers. 13 In part this is
17

**because** the portions of the contribution which finance workinjury insurance and family allowances are nearly always charged entirely to the employer.

Special taxes and general revenues constitute no more than a small part of revenues in most developing countries, while their reserve funds provide a substantial investment income (at least in the nominal, i.e. non-inflation-adjusted, terms reported). 14 In industrial market countries, by contrast, the state often supplies a substantial part of revenues while reserve funds are too small to provide much revenue. State participation in Chile has become particularly high in the past several years in order to provide benefits for current beneficiaries while the youngest cohorts' contributions are directed into the private system. 15

# **Relative size** of benefit programs

Programs for old age, disability, and survivors' pensions receive the largest portion of revenue in most countries' social security systems but, due to the immaturity of most such programs in developing countries, they expend a somewhat smaller share of benefits than they receive as a share of revenues. The surpluses we examined above are almost solely for the purpose of providing for future increases in pension expenditures. Thus the relative shares of benefits which we now examine in Table 8 give an incomplete picture of the relative importance of different types of benefits.

- Even so, the tables show that a number of countries Peru,
18

- Colombia, Maxico, Bangladesh, Burma, and Pakistan place greater weight on sickness and maternity insurance and on medical care than on pensions. These benefits are also relatively high throughout Latin America, in Europe (including Turkey), and in Israel, but they are low or zero in Sub-saharan Africa and much of East Asia. Family allowances make up large proportions of benefits in the African countries once colonized by France (the proportions are as high as they are, obviously, due to the immaturity of pension programs in these countries) and are also offered, as we noted above, in Europe and parts of South America. Work-injury coverage looms large in the finances of the Cote d'Ivoire, Cameroon, Indonesia (where coverage for work injury is much broader than that for the provident fund), and Thailand (where work-injury insurance is the only coverage provided). Countries with provident funds usually provide little in benefits for contingencies other than old age, disability, and death.
19 3. **The Conibquences** of Social Security **Systems** for Public-Sector Yinance

- The institution of a social security system and particularly of a pension scheme - obligates a government to pay increasing levels of benefits as the scheme matures (that is, as successive cohorts of new beneficiaries have been covered longer and are eligible for increased benefits) and as life expectancy improves. This growing financial obligation can prove quite burdensome to a government under some financial arrangements for social security systems.

We have seen that most social security systems in developing countries are not yet mature, are running substantial surpluses, and are financed without resort to substantial sums in special taxes or general state revenues. Some, indeed, reap substantial revenues from investment of their surpluses.

Usually these systems are managed by decentralized public agencies, and their surpluses are usually kept nominally separate from funds of the central government. The surpluses, however, are often used to purchase the central government's debt - that is, 1z finance its deficits. This raises a question, at least, as to how real are the reserve funds of social security systems, or how independent are these systems from the central government and its policies.

A government which grows accustomed to using the substantial surpluses of a social security system to finance its deficits may have sufficient difficulty funding its operations once the social
20 security system matuxen and peapes to run surpluses that it will not be able to redeem the bonds held in the social security reserve fund. A more subtle, and more common, means by which a government escapes its obligation to its social security reserve fund is through high inflation, which erodes the value of nominally fixed assets such as government bonds. High inflation has periodically eroded the reserve funds of Latin American systems.

Administrators of social security systems are not always required to invest their assets in government bonds. High inflation can still greatly reduce the value of reserve funds eld - in private assets as it did in Turkey in the late 1970's and early 1980's. Moreover, due to a lack of developed local financial markets, however, (and in a desire to invest domestically rather than abroad) they may lack good opportunities for investment. Thus it is the considered opinion of staff workers in social security at the International Labour Office that while most social security systems of Africa, Asia, and the Caribbean are actuarially sound, they may yet experience financial difficulties due to the lack of good investment opportunities. 1 The actuarial soundness of social security finance can be altered ty a variety of demographic, economic, and political factors. An unexpected rise in life expectancy, decline in the birth rate, or increase in emigration raises the "dependency ratio" - the number of pension beneficiaries per contributing
21 worker - and thus worsens **the** financial picture. Economic growth increases the base upon which contributions are paid, and thus increases revenues, while prolonged stagnation reduces financial surpluses. Political pressures may lead to benefit increases which, though temporarily expedient, are unsustainable in the long run without increased revenues. It is difficult, politically, later to reduce benefits. If it is also politically difficult or economically harmful to raise contribution rates, special taxes or general revenues must be resorted to in order to pay for benefits.

Mesa-Lago (1986, pp. 143-4) confirms this analysis in his list of factors which threaten the financial stability of "the oldest and most highly developed systems" in Latin America. In addition to normal and foreseeable factors such as those relating to the maturation of systamd, he mentions "quite liberal legislation on benefits, ... an increasing number of pensioners who are living longer than was expected both in the original legislation and in older actuarial estimates, thus receiving their pensions and health benefits for longer periods" and the facts that "the contribution burden of social security is excessive and it is very difficult, politically and economically, to increase either social security contributions or taxes" and that "the yield .on pension funds has turned out to be very low, and even negative in the high-inflation countries...." He also adds some factors other than those in the analysis above:
22 ET]herb is a high level of evasion and delay, particularly in the countries which have high and sustained inflation (where delaying payment means a reduction in one's real contribution); ... the State - under pressure to meet multiple - and demanding requirements fails to comply with its financial obligations, thus leading to the accumulation of very large debts;...and...the transfers (or "loans") from the pension funds to cover the deficits of health programmes (the cost of which have escalated due to "a capital-intensive system of remedial medicine"] are difficult to reimburse in practice, which has contributed to the de-capitalisation of the funds, at a time it is necessary to use the accumulated technical reserves to meet the current pension payments.

Two additional factors which have had a notable effect on the financial solvency of social security in Uruguay are low retirement age (60 for men, 55 for women - but retirement at substantially younger ages for unemployed persons was permitted, and often accepted, until 1981), high life expectancy (72 at birth 2 but of course higher for those who survive until retirement age), and a high rate of emigration among the young. Together, these factors lead to a very high dependency ratio of .82 pensioners per contributor in 1983 (Mesa-Lago, 1985, cited in World Bank, 1986, pp. 80) and contributed to a deficit fully 60 percent as great as revenues in 1980 (Mesa-Lago 1986), requiring a subsidy from the central government of over four percent of GDP in 1983 (World Bank, 1986, p. 83). 3 4 It was partly Chile's experience with the need to use general revenues to maintain the solvency of its social security system that led it to institute its privatized system. A noteworthy feature of this system is that it maintains its actuarial soundness through full funding and the limitation
23 (apart frow a state-guArantebd minimum benefit linked to the minimum wage) of **the** expected value of one's benefits to one's contributions plus interest. The state is thus protected in the long run from any need to maintain the solvency of the system, although now in the absence of the contributions of those who switched to the privatized system it must make substantial contributions to pay benefits for current retirees. Thus far the average real rate of return on fund investments has been an astounding 16.8 percent and fund investments have risen to 50 percent of total term deposits in the financial system (Lacey 1987).

The financial difficulties of the older Latin American schemes may or may not be repeated in the younger schemes in Latin America or in the rest of the developing world. Whether it is depends on the abilities of governments to withstand political pressures either to raise benefits (and thus give substantial tr'ansfers to current beneficiaries and those soon to retire) without providingj for their financing or else to maintain contribution rates or relatively low retirement ages in the face of the need to raise one or the other due to increasing life expectancy (see Mesa-Lago (1986), pp. 145-6). It also depends, as we have seen, on the ability of social security administrators to place their reserve funds in safe assets with a positive real rate of return.
24

# **4. The Consqu.nces** of Social security Systems for Economic Growth

Due to the magnitudes of their financial flows, social security systems can have substantial impacts on the economy through both the capital market and the labor market. The nature and degree of some of these impacts are matters of significant dis'ute among economists. While studies have focused primarily on the industrial market countries, their insights or assertions can be applied to developing countties as well.

The impact of social security systems on capital market comprises both the direct effect arising through the accumulation of reserves and the behavioral response of covered individuals to the prospect of their future pension benefits. Reserves may be invested (domestically) either in government bonds or (either directly or through financial instruments) in capital goods. The effect of investment in government bonds may be either to enable increased government spending, to reduce taxes, to reduce foreign borrowing, or to free other savings for capital investment.

Unfortunately information is not readily available concerning how, or to what extent, reserves are used to finance capital accumulation. One very interesting use for which information is available is the use of Singapore's provident fund to finance housing (Wallich 1987). Not only are public housing projects financed this way, but individuals may borrow against their accounts to purchase homes. The provident fund holds mortgages and receives regular payments on these loans; any balances
25 outstanding when covered workers receive their lump-sum benefits are deducted from these benefits. Nearly half the participants in provident funds have used them to finance purchases of homes. People's behavioral response to their prospective pension benefits, or "social security wealth," is a matter of substantial dispute. The basic issue is this: to what extent do people reduce private saving because their expected pensions replace that which they need to save? If the reduction is of a substantial magnitude, as argued by Feldstein (1974, 1982), then, unless reserves are used to replace these savings in the generation of capital, a social security system will reduce a nation's total savings and capital stock. Barro (1974) has argued, to the contrary, that private inter-generational transfers offset the effects of public transfers even in a pay-as-you-go system, so that saving is unaffected. For & more extensive survey of the theoreti-al issues and empirical evidence see Wallich (1983), Shome and Squire (1983), or Munnell (1986).

A further argument is sometimes made about savings and capital accumulation in developing countries in particular. Many people in these countries have no prior experience with financial institutions. Social security programs give them such experience and therefore, it is said, encourage a "habit of saving." Thus they stimulate financial savings in addition to those generated through the programs' reserves.

Social security systems affect the labor market both by inducing earlier retirement and by introducing distortionary
26 marginal taxes on wage payments. The first effect is important and undisputed.<sup>1</sup> The second effect hinges on two disputed questions: (1) what is the incidence of the payroll taxes, or contributions, of both insured workers and employers, and (2) does an insured worker view contributions as a tax or as deferred compensation. The answers to these quustions determine the extent to which contributions function as taxes which raise employers' cost of labor above workers' wages, bringing inefficiencies<sup>2</sup> to the labor market while tending to reduce employment.<sup>3</sup> Many economists hold, on the bases of a marginal-product theory of wage determination, that employers' contributions are effectively paid by workers. The International Labour Office (1984) argues virtually the opposite: that workers are able to bargain for wage increases to offset increases in their contributions. Some economists argue that part of the incidence of the tax is passes on in the price of products. See Brittain (1972) for an evaluation of these and related arguments.

Whether a worker views contributions (including those of the employer) as a tax or as deferred compensation depends on large part on the perceived marginal linkage between these contributions and expected benefits. Under a provident fun-d or a system, like the new privatized pension scheme in Chile, which operate on the basis of private insurance principles, expected benefits rise on a one-to-one basis with contributions, provided that one's credited rate of return matches one's personal discount rate.<sup>4</sup>
27 In many sywtems benefits are provided on a progressive basis, so that while one's total expected benefits may exceed one's contributions, the marginal linkage is often less than unity and workers can rightly view part of their contribution as a tax. Some countries use only the several last or highest-earnings years to determine the level of ones benefits; in such cases most of one's contributions have no marginal linkage to benefits.. Of course, covered individuals may not be able to evaluate the implications of the more complicated formulae used to determine benefits. Still, they do develop attitudes about whether they will get a sufficient return for the contributions they make, and these attitudes affect their choices in the labor market.
28 5. Conclusion In view of the substantial consequences of social security systems for the integrity of government finance, for economic efficiency and growth, and for equity, what guidelines should govern the structure and operation of such systems?

First, systems must be managed in a way that assures their long-term financial viability. Benefits must be limited to what is sustainable from revenues over a horizon of several decades. Systems must be made effectively -- not just formally -- autonomous from the central government, and they must be given both the right and the accountable responsibility to invest trust funds in a range of effective investments. If they are required to purchase government bonds (for a limited portion of their portfolios only), these bonds must be credibly indexed for inflation.

Second, it is highly important both that there be an explicit linkage between one's contributions and one's benefits and also that one's benefits be based on one's entire stream of contributions. This will not only enable households to plan their futures with some confidence, but will also increase efficiency in labor markets (and in other markets affected by labor markets). To these same ends it is important as well that participants be able to have confidence in the adequacy of record-keeping, in the prompt payment of earned benefits, and in the continuing financial viability of the system.

Third, reserve funds for pension programs should be used for the formation of capital. While it is unclear whether the existence of such programs recduces private saving for investment, public programs can further a country's development if invested well. This may prove difficult, however, in some countries.

Fourth, systems must be equitable. Care muet be taken in this especially where it is impossible to extend effective coverage beyond an already privileged segment of the population. Privileged classes should not receive benefits greatly exceeding their contributions. Systems should be financed only from the
29 contributions of those who will benefit -- not from aeneral revenues (except, perhaps, for benefits which are universal). Because the burden of payroll taxes may be born partly by consumers who do not benefit from the system, the scale of the system should be kept relatively limited.

All of these considerations commend systems that are relatively straightforward in structure, simple to administer, and based on sound actuarial principles. Among such systems are the various provident funds and the regulated privatized system of Chile. These particular models need not be taken as normative, but system structures which depart far from the guidelines here can easily give rise to financial pitfalls, slower growth, o.L **hLars** to many residents of countries that adopt them.
30

# Notes to Chapter **1**

1. For information on these matters the reader is directed to various publications of the International Labour Office, particularly Introduction to Social Security (third edition, 1984).

2.In developing countries particularly, financial markets are usually insufficiently developed to offer on a private basis the insurance and annuity coverage of social security systems.

3. This is usually done initially through provisions in the labor code which make employers liable to furnish or arrange private insurance for such benefits. Statistics are not readily available to indicate when public administration of such benefits began in various countries. Hence, Tables 1.1 and 1.2 count employer-liability programs for work-injury coverage, although they do not count employer-liability programs for other types of '-Jn AO J -a.

4. In this chapter's tables, the figures for medical care include only those countries in which such care is provided through the social security system. Countries which provide free or low-cost medical care under other administrative arrangements are not counted here, although some of them are tallied below in Table 3.

5. In actual operation a social security system may perversely give a positive transfer to some who are well off. This is documerted for the United States' Old Age and Survivors Insurance in Boskin, Kotlikoff, Puffert, and Shoven (1987).

S. Government may contribute also, out of general revenues or through ear-marked taxes.

7. See note 3 above concerning the inclusion of employer-liability work-injury programs in Table 1.

8. For an analysis of how this possibility became politicallyexpedient policy in Latin America see Mesa-Lago (1986), p. 143. Also, in several cases pay-as-you-go financing has resulted from the loss of reserve funds, either through their effective confiscation f'or other governmental expenditures or through high inflation and financial crisis. The latter happened, notably, to the original social-insurance pension scheme, that of Germany, in Germany's hyper-inflation of 1923 and in the financial crisis which, in the Federal Republic of Germany, followed World War II. The related experience of Latin American and other developing countries is discussed below in chapter 3.

9. If population and real wages grow fast enough, benefits can be raised above the value of contributions indefinitely without the maintainance of any reserve fund. If growth is slower,
31 beneficiaries (apart from the initial generation, which receives a windfall) **receive** loss than the value of their contributions. Theso conditions **are** discussed by Wallich (1983) and Samuelson (1958). In fact, due to recent declines in both fertility and economic growth, younger generations in many countries can expect to receive less than a fair-insurance return on their (and their employers') contributions. This has been most extensively documented for the United States (see Boskin, Kotlikoff, Puffert, and Shoven (1987)) but is evident for most industrial countries and at least some middle-income countries. Apparently there has been little research on this matter for developing countries generally.
32

# Notes to Chapter 2

1. These benefits are funded on a pay-as-you-go basis, which will prove particularly burdensome for collectives with an older than average work force.

2. Outside Latin America, we may note in several tables, few developing countries have protection against all risks.

3. See lIesa-Lago's study for a discussion of the inherent defects in making these sorts of estimates.

4. Still, 80 percent of Singapore's labor force is covered (Asher 1985).

5. These descriptions could ba used together with data on the proportion of the labor force in various sectors of the economy to develop very rough estimates of the extent of coverage in the population. Alternatively, imprecise estimates could be derived from legislated contribution rLtes together with data on revenues of social security systems. Of more direct relevance for the present study, however, is the information presented below on the size of social security receipts, expenditures, and surpluses relative to the economy as a whole.

6. It is usually much easier to provide coverage to urban wage laborers than to others.

7. The most recent edition, the Twelfth International Inquiry, is forthcoming in 1988. The data as we have them are provisional. As of the writing of the present version of the present paper information is lacking for several countries in our sample. Space is left in Tables 5 through 8 to accomodate this information if and when it becomes available. Note that these tables delete those countries in Table 3 which have no public social security system.

8. It would also be worthwhile to view these financial flows as proportions of public-sector financial flows as a whole. This exercise awaits the development of the latter figures by the staff of the World Development Report - 1988.

9. Another category of benefits reported by the I.L.O. is that of benefits to war victims. In the present sample only Israel, Japan, Sweden, and the United States provide such benefits.

10. [Argentina and Uruguay should be added to this list if data becomes available for a later draft.] 11. (Here insert data on surpluses in Egypt if it becomes available from the I.L.O.]
33 12. Singapore's combined contribution rate is 40 percent of the - employer's wage bill for the wage bill including the employer's contribution is 125 percent of nominal wages.

13. But see the discussion in chapter 3 of the incidence of this tax.

14. See Chapter 3 concerning the real erosion of reserve funds due to inflation. Such erosion would not be reported in the figures here.

15. There is little explicit information to account for the other non-zero figures in the last three columns. One suspects that the high figure for "other" revenue for Indonesia largely refle-ts investment income, which is not reported as such.
34

# **Notes** to Chapter 3

1. This point **was** made in a **telephone** conversation with an analyst at the I.L.O. The I.L.O. has worked with many of these systems to establish their actuarial soundness.

2. Source: World Development Indicators - 1987.

3. Uruguay is now undertaking a substantial reform of its social security system, with some assistance from the World Bank.

4. [Substitute information from I.L.O. to avoid citing unavailable source and to use 1983 as a comon year.]
_i_ 35

# **Notes** to Clapter 4

1. The prospect of earlier retirement tends to raise rates of saving, tending to offset the reduction in saving which social security otherwise induces. **See** Munnell (1986).

2. These inefficiencies, or "dead-weight losses," vary roughly with the square of the total tax rate (including the rate for other income taxes) applied to payroll or to wage income.

3. The impact of payroll tax rates on the cost of labor as a factor of production, affecting the labor-intensity of production, has been of particular concern in the European market economies. In an effort to reduce unemployment, several of these countries have reduced the role of contributions based on labor earnings in financing social security.

4 The expected value of benefits is actually even areater when one considers the insurance value of "contingent assets" for risk-averse individuals.
36 Ref erences

- Ahmed, Sadiq. 1984. "Public Finance in Egypt: Its Structure and Trends." Washington: Staff Working Papers No. 639, World Bank.

- Asher, Mukul G. 1985. "Forced Saving to Finance Merit Goods: An Economic Analysis of the Central Provident Fund Scheme of Singapore." Canberra, Australia: Occasional paper no. 36, Centre for Research on Federal Financial Relations, Australian National University.

- Barro, Robert. 1974. "Are Government Bonds Net Wealth?" Journal of Political Economy 82,6:1095-1117.

- Boskin, Michael J., Laurence J. Kotlikoff, Douglas J. Puffert, and John B. Shoven. 1987. "Social Security: A Financial Appraimal Across and Within Generations," National Tax Journal 40,1:19-34.

- Brittain, John A. 1972. The Payroll Tax for Social Security. Washington: Brookings Institution.

- Feldstein, Martin. 1974. "Social Security, Induced Retirement, and Aggregate Capital Formation." Journal of Political Economy 82,5:905-26.

- Feldstein, Martin. 1982. "Social Secur:,ty and Private Saving: Reply." Journal of Political Economy 90,3:630-42.

- International Labour Office. 1984. Introduction to Social Security. Third edition. Geneva: I.L.C.

- International Labour Office. 1988 (forthcoming). Cost of Social Security: Twelfth international inauiry. 1981-1983: Basic tables. Geneva: I.L.O. Provisional data.

- Lacey, Robert. 1987. "The Privatization of the Social Security System in Chile." Washington: World Bank. Processed.

- Meea-Lago, Carmelo. 1985. El Desarollo de la Seauridad Social en America Latina. Santiago de Chile: ECLA, Estudios y informes No. 43.

- Mesa-Lago, Carmelo. 1986. "Comparative Study of the Development of Social Security in Latin America." International Social Security Review 39,2:127-152.

- Munnell, Alicia H. 1986. "The Impact of Public and Private Pension Schemes on Saving and Capital Formation." International Social Security Review 39,3:243-257.
37

- Samuelson, Paul. 1958. "An Exact Consumption Loan Model With or Without the Social Contrivance of Money." Journal of Political Econmn 66,6:467-82.

- Shome, Parthasarathi and Lyn Squire. 1983. "Alternative Mechanisms for Financing Social Security." Washington: Staff Working Papers No. 625, World Bank.

- Turan, Kamil. 1985. The Turkish Social Security System. (Consultant's report for World Bank Sector Review Mission.) Ankara: processed.

- United States. Social Security Administration. 1986. Social Security Proarams.Throughout the World. Washington: Research Report No. 60, Social Security Administration.

- Wallich, Christine. 1983. "Savings Mobilization Through Social Security: The Experience of Chile During 1916-77." Washington: Staff Working Papers No. 553, World Bank.

- Wallich, Christine. 1987. "Social Security in China" in forthcoming annex to: World Bank. 1987. Finance and Investment Report No. 6445-CHA. Washington: World Bank.

- World Bank. 1986. Country Economic Memorandum on Uruauay (Appendix A: "Social Security: Present Situation and Pros-

- pects"). Washington: Report no. 6054-UR, World Bank.
Tablo<sup>1.1 Adoption of social security prroems</sup>

# ,inur of economies with programs in s5lcted years) I/

t _tio_ Asrlca<sup>sod</sup><sup>_tim_</sup> Caribbean (21 of<sup>21repod sm</sup> **sagan**<sup>**as**of</sup><sup>_1905)_</sup>

|TYPeof<sup>benf It</sup><br> <br> <br>|1925<br>1<br>2<br>|94f5<br>1<br>11<br>|965<br>195<br>19<br>21|
|---|---|---|---|
|Old *9,<br>disability,<br>or death<br>Sickness<br>or sternity|<br> <br>2<br> <br>|<br>it<br> <br> <br>|Is<br>20<br> <br>21|
|<br> <br>wr IlnJuy|12<br>|18<br> <br>|1<br> <br>|
|<br>Unloment|0|2<br>|3<br>|
|y<br>Faily<sup>Allownce,</sup>|0|3|6|

hiddle-mncoms Er and Sfout<sup>Africa (I ofIreWted som prog</sup><sup>**aso**ofI965)</sup> 1925 145S 1965 1965 Typ of<sup>benefit</sup>

|Old ag,<br>disability,<br>or death<br> <sup>ortit</sup>|2<br>5|7<br>7|7<br>1<br>7<br>7|
|---|---|---|---|
|Sicknes <sup>maerny</sup><br>Work inJury|7<br>|7|I<br>7<br>4<br>5|
|unemloymnt|0<br>||<br><br>I<br>I|
|FamilyAl<br>Iottnce|0|3|<br>|

**Seb-Slmrem** AtrIa (s33 of 35<sup>reortedsamprogr aof19)</sup>

|7.<br>obeft<br> <br>|'I5<br> <br>0|1945<br> <br>0|1965<br>1965<br>19<br>_27_|
|---|---|---|---|
|Old o,<br>disabillty,<br>ordoett<br>Sickes<sup>or mtwenIty</sup>|<br>0|<br>.0<br>|15<br>16<br> <br>|
|<br>_Worklijurw_||21<br>|30<br>32<br> <br>|
|_y_<br>Ummplment|0|0<br>|0-1<br>3<br> <br>15|
|<br>FealtyAliow'an|0|0|is<br>|

**progi** **_m_ as**<sup>of 1965)</sup>

Asia (14<sup>outof19repoteso.</sup> 1925 194 5 196 190 5 TIn of<sup>beneIt</sup>

|Oldop,<sup>dlsbiIlty,</sup><br>or death|0<br>0|0<br>0|7<br>5|10<br>5|
|---|---|---|---|---|
|Sickess<sup>or maternity</sup><br>Wk Injur|<br>3|<br>8|<br>14|14<br> <br>|
|or y<br>U-IlUIt|0|0|0<br>|1<br>w<br> <br>|
|.oym<br> <br>Al|0|0|0|0<br>OD|
|Family<br>ow|||||

son .pgr as of 1965I2/ VSal Niddilo<sup>Ent</sup> md Nor<sup>Afrlca15 of 19reported</sup> 1925 1945 1965 '965

|Type ot<sup>benfit</sup><br> <br>dh|<br>0|<br>0|12|14|
|---|---|---|---|---|
|Old *9e,<sup>disability,</sup><br>or eat<br>Sickres<sup>ormaternity</sup>|<br>0<br>|1<br>|10<br>|10<br>14|
|WorkInjury|2|9<br>|13<br>|<br>3|
|<br>tnemploymnt|0<br>|0<br>|1<br>|<br>6|
|<br>Family<sup>Allowance</sup>|0|4|6||

" o° s s (25 ot<sup>34 reported</sup> pra as of<sup>195)</sup> / 1925 1945 1965 1965 Ty" of<sup>benfit</sup>

|Oldo*p<sup>dIsbillity,</sup><br>or death|2<br>1|4<br>2|a<br>25<br>4<br>15|
|---|---|---|---|
|Sickness<sup>or aternity</sup><br>Work InJury|<br>4|<br>10|<br>16<br>20<br>|
|<br>Ult|I|1-2|3-4<br>5<br> <br>|
|nmoymn<br>FmilyAllow|0|0|3<br>4|

in World lIsted and high-incom oIl exporters 1/ _low-inao_ econom<sup>,middle-income</sup><sup>_eco nos,_</sup> D9Veloipmnt Indicators, plus small-population co fnoies. 6ab.n has<sup>be moved outofthe</sup> list Of<sup>sall-population</sup> c mes<sup>becausIts population should exceed the threshold by</sup> 1966.

**_2/_** Includes<sup>Trkey.</sup> Includes with populations<sup>below oneIIIIon.</sup> 3/ U.N.<sup>andWorldSank meai countries</sup> Luxeourg, Icelaond,<sup>and several</sup> high-incom<sup>oileuporters.</sup>

(1966),<sup>SocialSecurity Programs Throughoutthe</sup> Source:<sup>U.S. Social Security Adeinistrotion</sup> I I ^. incame cateoires:<sup>World Devlopment Report 1967, Wlorld</sup>
39 Table 1.2 Adaption of social security progress (Number of economies with programs In selected years) Lo*-noome economies (31 out of 37 reported som program as of 1965)

|Type of benefit|1925|1945|1965|1985|
|---|---|---|---|---|
|Old age, disability,<br>or death|0|0|17|24|
|Sickness<br>or maternity|0|0|14|14|
|Work injury|4|17|30|31|
|Unemployment|0|0|0|1|
|Family<br>Allowance|0|0|10|10|

Lower middle-income economies (33 out of 36 reported sowa program as of 1985)

|Type of benefit|1925|1945|1965|1985|
|---|---|---|---|---|
|Old age, diubility.<br>or death|1|5|25|30|
|Sickness<br>or maternity|1|7|22|23|
|Work Injury|8|25|30|32|
|Unemployment|0|1|3|6|
|Family<br>Allowance|0|4|10|11|

Upper middle-income economies (23 out of 24 reported some program as of 1965)

|Type of benefits|1925|1945|1965|1985|
|---|---|---|---|---|
|Old age, disability,<br>or death|3|13|20|22|
|Sickness<br>or maternity|6|12|18|19|
|Work InJury|13|21|23|23|
|Unevployment|0|4|5|8|
|Family<br>Allowance|0|6|14|14|

Industrial market economies (19 out of 19 reported some program as of 1985)

|Type of benefits|1925|1945|1965|1985|
|---|---|---|---|---|
|Old age, disability,<br>or death|13|17|19|19|
|Sickness<br>or maternity|12|16|17|18|
|Work Injury|18|19|19|19|
|Vnemploymcnt|12|18|19|19|
|Family<br>Allowance|0|11|17|19|

Note: Gabon has been added to the upper middle-income countries. See note I to Table 1.1.

Sources: Program Information: U.S. Social Security Administration (1986), Social Security Programs Throughout the World 1985, Washington, D.C. Incom categorles: World Development Report 1987, World Development Indicators, Table 1, World Sank, Washington, D.C.-
Table 2<sup>Principlaes</sup> il se to rslelo ot various<sup>socialscurity</sup> 1f its !_ara of sco_Inl.s 19651 U MEr *Iddil.-icoma<sup>ecomonles</sup>

# tow-lem ecomies

Universal

|T<br>Ofbeneit<br>T|S<br>otal_ln_|<br> <br>ocial<br> <br>_sursc_<br>|Un**IVrBl**<br>befit<br>or socia<br>Pr<br>aslstafce<br>2<br> <br>|ovident<br> <br>Fund<br>|Eployer<br>Liabilt,<br>yf<br>I|
|---|---|---|---|---|---|
|Oldq,<br>disabillty,<br>ordath|24<br>5|16<br>4|0<br>0|a|<br>I|
|Sicknss|<br>|<br>13|<br>0|0|10|
|watanlty<br>|13<br>6|<br>6|<br>0|0|10|
|lbtiral<br>ew Y|<br>19|<br>19|<br>0|0|12|
|Work lnJury<br>|<br>|<br>0|<br>0|I|2|
|Ummloymeat<br>|I<br>10|<br>10|<br>0|0|1|
|Fmilya ttliaua||||||

|Tit<br>btei<br>T<br>Olddisabilit<br>or dueth|S<br>otal<br>t/In<br>22|<br>oalo<br> <br>surance<br>le|bese I t<br>or sorial<br>Pr<br>assIstanc<br>2'<br>2|owIdent<br><br>Fund<br>L<br>2|_Eiolyr_<br>iability<br>0<br>|
|---|---|---|---|---|---|
|ae, y.<br> <br>Sickness|to<br> <br>|18<br>|M1)'<br>0|0<br>0|I<br>2|
|fternIlty|1<br>I<br>|9g<br>|<br>3|<br>1|0|
|fWdli cal<br>c<br>/|21<br>|17<br>|<br>0|<br>0|f|
|Work Injury|Is<br>|t<br>|<br>4|<br>0|3|
|U_<br>ewoamnt|8<br>|4<br>|<br>2|<br>0|0|
|FilIl*lIeu|14|12||||

tuar mlddle-lacome<sup>eco</sup> Inoes Univral

|T<br>fbnffit|<br>Total<br>in|Social<br>surae<br>|Univwrsal<br>be"; It<br>orSoial<br>P<br>assistance<br>2<br>|rowidnt<br>Fund<br>|fplow r<br>LiabilIty<br>0|
|---|---|---|---|---|---|
|Oldp,<br>dIs1bility<br>or dath<br>|10<br>19|27<br>19|(1)<br>0|3<br>0|<br>2|
|Sickens<br>|<br>23|<br>23|0|0|4*|
|WNteraity<br> <br>|<br>19|<br>16|1|0|2|
|dilcal<br>cr a3/<br>|<br>25|<br>25|0|0|7Vornjry|
|lWorkilJuy<br> <br>|<br>0|<br>3|2|t|6|
|l<br>iaplot<br> <br>|<br>11|<br>10|I|0|0|
|**Fmi**I,el<br>**llmc**||||||

|Ti***Of**banf<br>it<br>Olddiblit<br>or death|<br>Total<br>1'I<br>19|Social<br>nsuranwe<br>16|besfIt<br>orsowial<br>Providnt<br>assistae<br>2'Fwd<br>31.5)<br>0|<sup>Etowr</sup><br>iabillty<br>0<br>|
|---|---|---|---|---|
|ap, asy,<br> <br>Slcklass|is<br>|16<br>|2<br>0<br>1<br>0|0<br>0|
|at erity|17|16<br>|<br> <br>7<br>0|0|
|lIdicel<br>cae|Is.|11<br> <br>|<br> <br> <br> <br>0|4|
||Is<br>|IS<br> <br>|<br>l)<br> <br> <br>0|0|
|1na<br>qloy_it|19<br>|17<br>|2(+41<br> <br>13i1<br>0|0|
|FilVall<br>1|19|5|.}<br>||

- I/ Teotl _oeclda_ sployr-llability progr. _2/ Pwra"s Indicate nwers_<sup>of prgr&a</sup> for which<sup>tha principle</sup> Is "pield In conjunction **_ultt ottwr_**<sup>prieciples.</sup>

- 3/ WaIcal cre lncludes hoWitatizatIon Insurance.

_Source:_ Pr_om<sup>lfortlon:</sup> U.S. Social<sup>SacurityAinlstratlon</sup> (1966), Social<sup>ScUriwty</sup> Progam Throuhot te world 1965.<sup>Washinn</sup> D.C. Inem ctegories: World Deelopment D.C. _PeArt_ 19t7, World<sup>Odealenm t Indicators, Table 1.World Wn,Wshington,</sup>
o-- **U'**

|l<br>r|- -<br>o<br>^eao>.z---°e||-<br>;ooe^|-<br>"2-2--|o,||o--<br>**U'**|
|---|---|---|---|---|---|---|---|
||.ih.~~~~~~~~~~<br>-|~~~~~~~~~~SI||IIIII||||
|i<br>**_1W_**|*...<br>i~~<br>~<br>~<br>~<br>**_irn_**<br>.<br>44W<br>.--..<br>l<br>t!<br>iQ<br>|<br>j<br>'<br>!!'<br>j<br>||......<br>4444<br>~~~~~~~~~~~<br>~<br>.,<br>.S_._-<br>*_-----<br>.....<br>*****<br>,<br>''<br>l<br>|<br>i|4----..<br>**-2**- -<br>-<br>- -<br>-<br>-_<br>...<br> <br>_<br>, _<br>Ij8<br>1|-------<br>-<br>-<br>IL<br>.<br>-g<br>L<br>I' IL<br>,,_<br>**.**<br>}<br>I<br>;;<br>4<br>4.,444I4|--<br>- --<br>_tS_<br>4I<br>M<br>_|i|<br>I~~~|'<br>~~|
42 Table 4 Coverage of population and active labor<sup>force in Latin America, 1980</sup>

|Country|Population covered<br>in sickness and<br>maternity program<br>(percent)|Active labor<br>force covered in<br>pension program<br>(percent)|
|---|---|---|
|Low income|||
|Haiti|1|2|
|Lower middle-income|||
|Bolivia|25|18<br>|
|Honduras|7<br>|13<br>|
|Nicaragua|9<br>|19<br>|
|Dominican Republic|8<br>|14<br>|
|El Salvador|6<br>|12<br>|
|Paraguay|18<br>|14<br>|
|Peru|17<br>|37<br>|
|Ecuador<br>|8<br>|23<br>|
|Cuatemala|14|33<br>|
|Costa Rica|78<br>|68<br>|
|Colombia|12<br>|22<br>|
|Chile|67|62|
|Upper middle-income|||
|Brazil|96|96<br>|
|Uruguay|69|81<br>|
|Mexico|53|42<br>|
|Panama<br>|50<br>|46<br>|
|Argentina|79|69|
|Venezuela|45|50|

Source: Carmelo Mesa-Lago (1986), "Comparative<sup>Study of the Development of</sup> Social Security in Latin America", International Social Security Review 39, 2: 127-152, Tables 1 and 3.
43

|Table<br>5. Fin<br>(Percenta<br>of|ancial<br>flow<br>e<br>GOP,<br>exce|<br>s<br>of soci<br>pt<br>or Su|al<br>secu<br>rplus/|rity<br>and<br>re<br>Receip|lated<br>pro<br>ts)|<br>graes<br>(fisc|al<br>year<br>en|ding<br>dur|ing<br>1983)|.|
|---|---|---|---|---|---|---|---|---|---|---|
|<br> <br>|<br> <br> <br>Social<br>Se|<br> <br> <br>curity<br>Sy|<br> <br>stem<br>-|<br>----||Public<br>Em|<br>ployee<br>S|s<br>ystem-|--<br>Other<br>Pro|grass----|
|Country<br>|Receipt<br>E|s<br>xpendi|tures<br>|:<br>Surplu<br>S|s<br>urplus|/<br>Receipt<br>E|s<br>xpend:<br>|-<br>Surpl|us<br>Public|Public|
||...<br>b|----ae|nefit<br>Tota|s<br>i<br>R|eceipt|s|tures||Medica<br>A|l<br>ssistance|
|Latin<br>Americ<br>a<br>|a<br>nd<br>the<br>Ca|ribbea|n||||||||
|Haiti|||||||||||
|Dominican<br>Rep|<br>.||||||||||
|Jamaica|2.22|2 0.59|7 0.76|7 1.46|X 65.9|Z<br>0.70|X 0.59|X 0.1|12 0.62%|0.24X|
|Peru<br>|2.15<br>|X 2.04<br>|7 2.30<br>|d -0.14<br>|% -6.7<br>|1<br>0.00<br> <br>|0.00<br>|7. 0.0<br>|02 0.00<br>|0.002<br>|
|Coluabia|2.03|Z 1.52|X 1.75|X 0.29|8 13.9|7<br>0.52|Z 0.47|7 0.0|4X 0.007|0.007|
|Chile|16.73|2<br>13.01|X<br>14.2|97 2.44|UX 14.6|7<br>0.00|7 0.00|1 0.0|02 0.00|<br>0.00|
|Brazil|5.52|X 5.07|1 5.46|1_O.Ob_|_%_1.1|7<br>0.15|2 0.15|% 0.0|0 0.00|<br>0.002|
|Mexico|".03|X 1.52|1 2.11|% -0.0O|X -3.9|t. 1.04|% 0.65|7 0.4|07 0.007|0.002.|
|Argentina|||||||||||
|Sub-Sahara<br>Af|n<br>rica||||||||||
|The<br>Gambia|||||||||||
|Kenya|0.77|7 0.05|2 0.07|2 0.70|Q 90.8|X<br>0.00|0.00|O 0.0|02 0.002|0.002|
|Ghana|||||||||||
|Zambia|2.62|X 0.86|Z 1.22|X 1.40|7 53.3|2<br>0.00|0.00|2 0.0|0 0.00|<br>0.00|
|Cote<br>d lvoir<br>|e 1.17<br>|Z 0.51<br>|Z 0.65<br>|X 0.51<br>|X 43.9<br>|1<br>0.00<br> <br>|2 0.00<br>|% 0.0<br>|0 0.007<br>|. 0.0OX<br>|
|Nigeria|0.17|X 0.01|2 0.02|Z 0.14|. 85.6|7<br>0.00|2 0.00|2 0.0|% 0.00|0.00|
|Cameroon|1.42|7 0.36|7 0.36|7 1.06|I 74.5|X<br>0.21|1 0.21|7 0.0|07. 0.001|0.001|
|Mauritius|<br>3.54|X 1.98|9 1.98|9 1.57|J 44.2|Z<br>0.00|O 0.00|0.0|0 0.00|0.162|
|Congo|1.91|X 0.61|% 0.91|7 1.00|7 52.5|7<br>0.00|7. 0.00|. 0.0|0 0.00|<br>0.007.|
|Europe, Middle|East, and|North Afr|ica||||||||
|Morocco|1.54|X 0.91|B 0.86|X 0.67|X 43.7|7<br>0.00|2 0.00|1 0.0|07 0.007|0.001|
|Egypt|||||||||||
|Turkey<br>|3.39|% 2.23|7 2.36|7 1.02|X 30.3|7<br>1.47|X 1.41|7 0.0|5X 0.31X|0.01Z|
|Tunisia|||||||||||
|Hungary|15.44|UZ<br>15.36|2<br>15.4|47 0.00|7. 0.07|. 0.00|7 0.00|7.<br>0.0|0. 0.00|0.00|
|Portugal|7.eb|7 7.44|7 7.95|X -0.09|X -1.1|7<br>1.74|7 1.78|7 -0.0|4X 3.387|0.40Z|
|Yugoslavia|11.33|7<br>10.33|2 11.2|72 0.06|7 0.57|<br>0.00|. 0.00|7.<br>0.0|0. 0.00.|0.00|
|Cyprus|6.53|7 3.44|7 3.52|X 3.01|7 46.1|7<br>1.55|X 1.13|X 0.4|1X 1.937|0.387|
|Israel|10.42|7 7.92|1 9.27|X 1.15|X 11.1|7. 0.9.|0.80|7 0.0|02 0.00|<br>0.72X|
|Asia|||||||||||
|Bangladesh|0.01|7 0.00|7.<br>0.00|0.01|2 55.3|X<br>0.00|0.00|2 0.0|02 0.00|<br>0.00O|
|<br>Bursa|<br>0.08|<br>9 0.04|<br>7 0.05|7 0.02|X 31.3|7<br>0.00|7. 0.00|0.0|0 0.007|. 0.007|
|India|1.33|X 0.49|7 0.51|7 0.82|I bl.3|<br>1.44|X 0.92|7.<br>0.5|2X 0.007|0.047.|
|Pakistan|0.10|7 0.03|7 0.04|7 0.06|7 60.3|7<br>0.37|7 0.37|7 0.0|07.<br>0.00|<br>0.217|
|Sri<br>Lanka|2.00|X 0.32|7 0.34|7 1.66|7 83.0|7<br>0.47|7 1.81|% -1.3|4X 0.007|0.067|
|Indonesia|<br>0.09|% 0.01|7 0.02|7 0.05|7 71.8|7<br>0.00|7 0.00|0.0|07.<br>0.007|. 0.00|
|Philippine|s 1.00|2 0.31|X 0.34|2 0.67|X 66.4|7<br>0.75|7 0.40|X 0.3|57 0.007|0.002|
|<br>Thailand|<br>0.04|<br>7 0.01|<br>7 0.01|<br>2 0.02|<br>7 63.7|<br>7<br>0.16|1 0.16|. 0.0|07. 0.00.|0.00|
|Malaysia|5.32|1 0.77|X 0.83|Z 4.49|X 84.4|Z<br>0.00|0.00|0.0|0 0.00|0.04N|
|Korea|||||||||||
|Singapore|<br>14.70|7 3.79|7 6.43|1 B.27|7 56.3|7<br>0.26|X 0.26|7 0.0|07 0.93Z|0.017|
|Industria<br>Mar|l<br>ket Countr|ies|||||||||
|Japan<br>|10.97|7 7.44|7 9.46|1 2.51|7 22.9|7<br>2.11|Z 1.58|1 0.5|3Z 0.25I|1.25X|
|Sweden#|1989|8<br>169'|7X<br>173|89 251|X 126|7<br>237|7 237|X 00|02 777|546UX|
|<br>United<br>State<br>n|.<br>s<br>.97|<br>.<br>Z 9.34|<br>.<br>7 9.t2|.<br>Z 0.35|.<br>X 3.97|<br>.<br> <br>3.27|.<br>2 1.71|.<br>% 1.5|.<br>52 1.127|.<br>2.661|
44

# Table 7. Sources of **Revenue** for Social Security **Systems**

|Statutory<br>Contr<br> <br> <br>|ibution<br>Rates<br> <br>|: Perce<br>|ntage<br>Dist<br>|ributi<br>of<br>|on<br>Revenu<br>|e-|
|---|---|---|---|---|---|---|
|Country<br>(percent<br>of vage<br>|s<br>or payroll|) Contr|ibutio|ns---<br>Othe|<br>r<br>Invest|-|
|<br> <br> <br> <br>Inmred|<br> <br>|<br>Insur|<br>ed|<br> <br>Taxe|<br> <br><br>s sent||
|Person|Employe|r Perso<br>|n<br>Eeploy<br>u|er<br>State|) Incom|e Other|
|Latin<br>America<br>and<br>the<br>Caribbe|an||||||
|Haiti<br>2 -6X|4- 12S||||||
|Oominican<br>Rep.<br>2.5|9.5||||||
|<br>Jamaica<br>2.5*|2.5*|24.3|2 29.7|1<br>7.4|23B.5|%0.12|
|Peru<br>3|7 - 18.2|<br>89.5|(both|) 0.0|10.2Z|<br>1.2X|
|Columbia<br>15.5<br> <br>|18 - 24<br>|23.7<br>|2 *55.e<br> <br>|z0.0<br>|<br>9.0X<br>|<br>11.42<br> <br>|
|Chile<br>24.6-26.5s*t<br>|4.2 - 4.6<br>|31.1<br> <br>|2<br>2.1<br>|Z48.9<br> <br>|% 15.91<br>|<br>2.0X<br>|
|Brazil<br>8.5 - 10<br>|14.7-16.9<br>|<br>15.6<br> <br>|X 74.0<br>|2<br>8.22<br>|<br>0.0<br> <br>|<br>2.2X<br> <br>|
|**"eex**<br>**4**<sup>**co**</sup><br>3.75|11.31#|<br>19.|7%61.9|2 12.3|2<br>5.2Z|<br>0.8X|
|Argentina<br>14|24||||||
|Sub-Saharan<br>Africa|||||||
|The**6ambia.**<br>5|10||||||
|Kenya<br>5|5<br>|25.3|2 25.3|2 49.3|2<br>0.0|2 0.02|
|Ghana<br>5|12.5||||||
|Zambia<br>5|5|38.5|2 29.5|1<br>0.0|232.82|<br>0.2Z|
|Cote<br>d lvoire<br>1.2|9.3-12.3<br>|<br>61.9<br>|2 17.7<br>|2<br>0.0<br>|20.42<br>|<br>0.02<br> <br>|
|Nigeria<br>6<br>|6<br>|28.<br> <br>|22 20.<br>|22 0.0<br>|251.41|<br>0.32|
|Cameroon<br>2.8<br>|13-16.2|<br>12.8|X 64.4|2<br>0.0|2 22.9|2 0.02|
|Mauritius<br>3|6<br>|tO.62<br> <br>|21.2<br> <br>|2 52.3<br>|2 14.32|<br>1.62|
|Congo<br>2.6|15.88|<br>12.1|l<br>80.2|X<br>0.0|2 7.5|2 0.22|
|Europe,<br>Middle<br>East,<br>**and**<br>North<br>A|<br>frica||||||
|Morocco<br>1.9|13.8|8.42|<br>78.4|2<br>0.0|213.21|<br>0.02|
|Egypt<br>11<br> <br>|24<br>|||<br>||<br>|
|Turkey<br>14<br>|20.54'<br>|36.9<br>|2 39.9|2<br>5.1|217.62|<br>0.5X|
|Tunisia<br>6.25|18.5-26.5||||||
|Hungary<br>3 - 15|10 - 24|14.9|247.1X|<br>38.02|<br>0.0|2 0.02|
|Portugal<br>11.5|<br>25|28.1|264.|127.82|<br>0.0|2 0.02|
|Yugoslavia<br>23.2+|<br>Varie|s<br>66.<br>|72 24.<br> <br>|527.32<br>|<br>0.92<br> <br>|<br>0.62<br> <br>|
|Cyprus<br>6|6<br>|35.1<br>|<br>35.3<br>|2 20.6<br>|2<br>8.2%<br>|<br>0.72<br> <br>|
|Israel<br>3.6|8.2t*|23.2|239.|3227.2|2 10.62|<br>0.72|
|Asia|||||||
|Bangladesh<br>(Not<br>re|<br>ported)|19.4|2 43.4|2<br>4.3;|.<br>32.92|<br>0.02|
|<br> <br>**Bursa**<br>1<br> <br>9710|<br>3<br>116134|19.<br> <br>|9259.8<br> 7|217.8<br> <br>|91.9X<br> 27|<br>0.52<br> <br>22|
|India<br>.5-.5|.-.|<br>29.|233.|<br>1.1|23.|<br>.8|
|Pakistan<br>0|12|<br>0.0|272.3|2<br>0.1|226.92|<br>0.52|
|Sri<br>Lanka<br>8|13-19.5|<br>28.|72 29.9|2 0.0|241.42|<br>0.02|
|Indonesia<br>3|7+|16.5|249.|42 0.0|2O.O|X 35.12|
|Philippines<br>2.85-4.55|7.75-9.45|<br>20.|0231.4|X<br>0.0|248.12|<br>0.52|
|<br>Thailand<br>0<br>|0.2<br>- 4.5|<br>0.0|264.0|2<br>3.72|32.31|<br>0.0O|
|Malaysia<br>9.5|12.75|<br>62.8|2<br>2.22|<br>0.0|234.42|<br>0.62|
|Korea<br>1.5<br>- 4|3.24<br>||||||
|Singapore<br>25|25|39.|6242.0|2<br>0.0|217.92|<br>0.52|
|Industrial<br>uarket<br>Countries<br> <br>||<br>|||||
|Japant#it<br>10.05<br> <br>|10.9-23.3<br>|<br>31.8<br> <br>|2 29.6<br>|921.6<br> <br>|2 11.6<br>|26.31<br>|
|Sweden<br>O|30.45|<br>1.8|b4M|2<br>-16.7|X 16.7|<br>0.02|
|<br> <br>United<br>Staten<br>7.05|<br>12'.|<br> <br> <br>34.9|<br>2 45.1|<br> <br>217.|<br>622.32|<br><br> <br>0.11|
45 Table B. Distribution of benefits **among** types of benefits. (Percent of total benefits)

|Country<br>Old age<br>disabil|,<br>Sickne<br>ity and|ss<br>Wor|Other<br>k Medica<br>U|<br>l<br>neepl|Famil<br>oy-<br>Allow|y<br>-|(Total<br>Medical|
|---|---|---|---|---|---|---|---|
|<br>& deat<br>|<br>h<br>Matern|<br>ity<br>Injur|<br> <br>y Care|<br> <br>sent|<br>ance|Othe|r Care)|
|Latin<br>Awric**a**nd<br>the<br>Car|ibbean|||||||
|Haiti||||||||
|Dominican<br>Rep.<br>||||||||
|Jamaica<br>94.|31 0.1|% 5.6|% 0.0%|0.0|% 0.0%|0.0|% 0.0%|
|Peru<br>34.1|%<br>58.8|%7.1%|<br>0.01|0.0|<br>0.0|<br>0.0|65.5%|
|Columbia<br>28.89|<br>62.9%|<br>8.3%|<br>0.0|<br>0.0|% 0.0%|0.0|% 59.9%|
|Chile<br>65.9|%<br>14.9|%2.5%|<br>0.0%|3.5%|<br>9.6%|<br>3.6%|12.7%|
|Brazil<br>62.<br>|1%11.6%|<br>0.6|% 21.9%|0.0|%3.3%|<br>0.4|721.9%|
|Mexico<br>22.51|<br>63.8%|10.|1%1.81|0.02|<br>0.4%|1.4|%36.7%|
|Argentina||||||||
|Sub-Saharan<br>Africa||||||||
|The<br>Gambia||||||||
|Kenya<br>99.0|%<br>0.0|% 0.0|% 1.0%|0.0|%0.0%|<br>0.0|% 1.0%|
|Ghana<br>||||||||
|Zatbia<br>62.7|%<br>0.9<br>|% 0.0<br>|% 0.0%<br>|0.0%<br>|<br>0.0%<br>|36.<br>|4% 0.0%|
|Cote<br>d Ivoire<br>32.9|%<br>0.0:|24.1|%0.0%|0.0|%43.0%|<br>0.0|<br>0.0%|
|Nigeria<br>100.|0% 0.0|% 0.0|% 0.0%|0.0|% 0.0%|0.0|% 0.0%|
|Caiwoon<br>10.|0% 0.0|%14.91|<br>0.0%|0.0|% 75.2|% 0.0|%3.0%|
|Mauriiius<br>92.21|<br>0.0%|<br>t|0.0%|0.9%|<br>7.4|% 0.0|% 0.0%|
|Congo<br>o|0.0<br>O|%<br> <br>t|0.0%|0.0<br>OZ|%|0.0|% 0.0O|
|Europe,<br>Middle<br>East,<br>and<br>No|rth<br>Afri|ca||||||
|Morocco<br>46.|7%2.5%|<br>0.0|%0.0%|_0.0_|_%_50.9|% 0.0|%0.0%|
|Egypt||||||||
|Turkey<br>61.9|%<br>19.01|<br>3.2%|<br>0.0%|0.0%|<br>0.0%|15.|91 17.0%|
|Tunisia||||||||
|Hungary<br>54.|1% 8.4|% 0.4|%23.01|0.0|% 11.6|%2.5%|23.0%|
|Portugal<br>67.9|%<br>9.6%|<br>0.0|% 0.0%|3.3%|10.0|%9.1%|<br>0.0%|
|<br>Yugoslavia<br>53.3|%<br>7.9%|<br>0.3%|33.9%|<br>0.0|% 4.6%|0.0|%33.9%|
|Cyprus<br>95.B|% 4.8|%1.7X|.<br>0.0%|7.1|% 0.0%|0.4|% 0.1%|
|Israel<br>39.8|%<br>3.3%|<br>2.7%|32.8%|1.1|%19.1%|<br>1.1|%34.2%|
|Asia||||||||
|Bangladesh<br>43.4|%<br>46.3%|10.3|%<br>0.0%|0.0|% 0.0%|0.0%|<br>0.0%|
|Burma<br>1.5%|<br>27.3%|<br>8.5|% 62.6%|0.0|% 0.0%|0.0|%62.6%|
|India<br>75.1|% 8.5|%3.9%|11.0%|<br>0.0|% 0.0%|1.5%|11.0%|
|Pakistan<br>e|100.0%|<br>'|0.0%|0.0|% 0.0%|0.0|% 85.3%|
|Sri<br>Lanka<br>100.|0% 0.0|% O%O|X 0.0%|0.0|% 0.0%|0.0|o 0.0%|
|Indonesia<br>38.5|% 0.0|%61.5%|<br>0.0%|0.0|% 0.0%|0.0|% 0.0%|
|Philippines<br>73.7|%<br>*|4.2%|22.1|0.0|% 0.0%|0.0|%23.3%|
|Thailand<br>0.0|%<br>0.0|% 100.|0% 0.0%|0.0%|<br>0.0%|0.0|%41.2%|
|Malaysia<br>95.9|%<br>0.0%|<br>4.1|%0.0%|0.0|%0.01|0.0%|<br>0.4%|
|<br>Korea||||||||
|Singapore<br>97.7|X 0.0|%2.3%|<br>0.0%|0.0%|<br>0.0%|0.0|%0.0%|
|Industrial<br>Market<br>Countr|ies|||||||
|Japan<br>to<br> <br>|to<br> <br>|**mm**<br> <br>|<br>|to<br>|to<br> <br>|to<br>|to<br>|
|Sweden<br>61.31|<br>23.3|<br>1.4|% 0.0o|5.1%|<br>8.8|0.0|%2.7%|
|United<br>States<br>F|igures<br>for<br>|<br> <br>1993ar|e<br>not<br>on ha|nd<br>**as**of|this<br>wri|ting.||
46

# **Notes** to Tables **5, 6, 7,** and **8**

Unfilled lines in these tables are for countries in our sample for which-=the International Labour Office has not received satisfactory information. In several cases information should be available in time for an updated version of this paper and these tables.

# Table 5.

* Expenditure figures do not include some administrative expenses which apply to several programs.

All figures are for financial years ending in 1983.

Sources: Financial flows: International Labour Office (1988), The Cost of Social Security: Twelfth international inquiry. 1981-1983: Basic tables, Geneva (provisional figures from forthcoming publication). Gross Domestic Product: International Monetary Fund, International Financial Statistics Yearbook 1986 and Government Finance Statistics Yearbook 1986, Washington.

Table 6. Trends in financial flows: Table is forthcoming.

Financial flows are from earlier editions of I.L.O., Basic Tables. GDP is from I.M.F., °Fs cit.

# Table 7.

*Plus additional universal contribution. **Average rate.

***Figures reflect old system. Under new system, the insured worker's contribution rate is 19.5%. Employer rate is unchanged.

Contribution rates are for 1985, revenue and GDP are for 1983. Sources: Contribution rates: United States Social Security Administration (1986), Social Security Programs Throuahout the World - 1985, Washington. Distribution of revenue: I.L.O., op. cit.

# Table 8.

*Amounts are included in other tables. **Division among types of benefits is not explicit. [Jamaica-oad&d]: Includes 6.6% for which the nature of benefits is not explicit. (Mexico-other]: Day care for children. [Turkey-other]: Funds which apparently provide multiple types of benefits. [Portugal-other]: Nature of benefits is not explicit. Heading "Other Medical Care": Care not included under other benefits. Heading "Total Medical Care": Care included under various benefits.

Data are for 1983. Source: I.L.O., 2op cit*
PPR Working Paper Series

|Title|Author|Date|Contact|
|---|---|---|---|
|WPS14The Optimal Currency Composition<br>of<br>External Debt|StiJn Claessens|June1988|S.Bertelsmeier<br>33768|
|WPS15 Stimulating<br>Agricultural<br>Growth and<br>Rural Development in Sub-Saharan<br>Africa|Vijay S. Vyas<br>Dennis Casley|June1988|H. Vallanasco<br>37591|
|WPS16Antidumping<br>Laws and Developing<br>Countries|Patrick Messerlin|June1988|S.Torrijos<br>33709|
|WPS17Economic Development and the Debt<br>Crisis|Stanley Fischer|June1988|C.Papik<br>33792|
|WPS18China's Vocational<br>and Technical<br>Training|Harold Noah<br>John Middleton|June 1988|W. Ketema<br>33651|
|WPS19 Cote d'Ivoire's<br>Vocational<br>and<br>Technical Education|Christiaan<br>Grootaert|<br>June1988|R. Vartanian<br>34678|
|WPS20Imports and Growth in Africa|Ramon Lopez<br>VInod Thomas|June1988|61679|
|WPS21Effects of European VERs on Japanese<br>Autos|Jaime de Melo<br>Patrick Messerlin|June1988|S.Fallon<br>61680|
|WPS22Methodological<br>Problems in Cross-<br>Country Analyses of Economic Growth|Jean-Paul Azam<br>Patrick Guillaumont<br>Sylviane Guillaumont|June1988|E. Zamora<br>33706|
|WPS23Cost-Effective<br>Integration<br>of<br>Immunization<br>and Basic Health Services<br>in Developing<br>Countries: The Problem<br>of Joint Costs|A. Mead Over, Jr.|July1988|N. Jose<br>33688|
|WPS24World Bank Investments<br>in Vocational<br>Education and Training|John Middleton<br>Terri Demsky|July1988|W.Ketema<br>33651|
||PPR<br>Title|Working Paper Series<br>Autii|Date|Contact|
|---|---|---|---|---|
|WPS25|AComparison<br>of Alternative<br>Training<br>Modes for Youth in Israel: Results<br>from Longitudinal<br>Data|Adrian Ziderman|July 1988|W. Ketema<br>33651|
|WPS26|Changing Patterns In Vocational<br>Educatic'n|John Middleton|July 1988|W. Ketema<br>33651|
|WPS27|Family Background and Student<br>Achievement|Marlaine E. Lockheed<br>Bruce Fuller<br>Ronald Nyirongo|<br>July 1988|R. Rinaldi<br>33278|
|WPS28|Temporary Windfalls and Compensation<br>Arrangemeots|Bela Balassa|June 1988|N. Campbell<br>33769|
|WPS29|The Relative Effectiveness<br>of<br>Single-Sex and Coeducational<br>Schools<br>itThailand|Emmanuel Jimenez<br>Marlaine E. Lockheed|August 1988<br>|T. Hawkins<br>33678|
|WPS30|The Adding Up Problem|Bela Balassa|July 1988|N. Campbell<br>33769|
|WPS31|Public Finance and Economic Developmen|t Bela Balassa|August 1988|N. Campbell<br>33769|
|WPS32|Municipal Development<br>Funds and<br>Intermediaries|Kenneth Davey|July 1988|R. Blade-Chnares<br>33754|
|WPS33|Fiscal Policy in Commodity-<br>Exporting LDCs|John Cuddington|July 1988|R. Blade-Charest<br>33754|
|WPS34|Fiscal Issues in Macroeconomic<br>Stabilization|Lance Taylor|||
|WPS35|<br>Improving<br>the Allocation<br>and Manage-<br>ment of Public Spending: Some<br>Lessons of African Experience|S+ephen Lister|||
|WPS36|Means and Implications<br>of Social<br>Security Finance in Developing<br>Countries|Douglas J. Puffert|August 1988|R. Blade-Charest<br>33754|