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World Bank - Costa Rica, a pension reform strategy

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Early retirement and lax eligibility for disability are bad for the economy because they reduce labor productivity and the supply of experienced workers, and they are bad for the system because they impose a heavy financial burden that makes it nonsustainable. Costa Rica is at a turning point with respect to its social security system. While half the work force is covered and beneficiaries have fared well in the past, the pay-as-you-go (PAYG) pension system is unsustainable for the future. This publication describes the present pension system, its shortcomings, and defends the need for urgent reform. It also makes recommendations on how to reform the system, what should be changed first, and exactly what areas of the pension system should be modified.

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title Costa Rica a Pension Reform Strategy World Bank Country Study - photo 1

title:Costa Rica, a Pension Reform Strategy World Bank Country Study
author:
publisher:World Bank
isbn10 | asin:0821346547
print isbn13:9780821346549
ebook isbn13:9780585261270
language:English
subjectSocial security--Costa Rica, Pensions--Costa Rica.
publication date:2000
lcc:HD7134.C673 2000eb
ddc:331.25/2/097286
subject:Social security--Costa Rica, Pensions--Costa Rica.
Page i
A World Bank Country Study
Costa Rica
A Pension Reform Strategy
Costa Rica a pension reform strategy - image 2
Page ii
Copyright 2000
The International Bank for Reconstruction
and Development/THE WORLD BANK
1818 H Street, N.W.
Washington, D.C. 20433, U.S.A.
All rights reserved
Manufactured in the United States of America
First printing January 2000
World Bank Country Studies are among the many reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the governments. Some of the reports are published in this series with the least possible delay for the use of governments and the academic, business and financial, and development communities. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available.
The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries.
The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally grant permission promptly.
Permission to photocopy items for internal or personal use, for the internal or personal use of specific clients, or for educational classroom use, is granted by the World Bank provided that the appropriate fee is paid directly to Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, U.S.A., telephone 978-750-8400, fax 978-750-4470. Please contact Copyright Clearance Center prior to photocopying items.
For permission to reprint individual articles or chapters, please fax your request with complete information to the Republication Department, Copyright Clearance Center, fax 978-750-4470.
All other queries on rights and licenses should be addressed to the World Bank at the address above, or fax no. 202-522-2422.
ISBN: 0-8213-4654-7
ISSN: 0253-2123
Library of Congress Cataloging-in-Publication Data has been applied for.
Page iii
Contents
Abstract
v
Acknowledgments
vii
Glossary
ix
Executive Summary
xi
Introduction
1
I
Costa Rica 'S Old Age Insurance System and the Need for Reform
2
Picture 3
The Existing Social Security System
2
Picture 4
The Old Age, Disability and Survivor Pension System (IVM)
2
Picture 5
The National Teachers' Pension Scheme
2
Picture 6
Main Shortcomnings of the System: Systemic Problems
4
Picture 7
Financial Nonsustainability
4
Picture 8
Rising Payroll Taxes
6
Picture 9
Overly Generous Benefits.
6
Picture 10
Early Retirement and Disability: The High Implicit Tax on Additional Work
7
Picture 11
Evasion
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