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Welfare Reform on the Web (September 2007): Pensions - overseas

Welfare retrenchment as social justice: pension reform in Mexico

P. Marier and J.F. Mayer

Journal of Social Policy, vol. 36, 2007, p. 585-604

In 2004 the Mexican government introduced a reform that cut back the retirement benefits enjoyed by public sector workers covered by the scheme administered by the Instituto Mexicano de Seguro Social (IMSS). Neither of the two political parties responsible for the enactment of the 2004 reform sought to distance themselves from the retrenchment measures, nor did the unions strongly oppose it. Supporters of the reform represented it as promoting social justice by attacking the privileged position of a minority of public sector workers and so closing the gap between them and the majority of disadvantaged private sector workers.

When does diffusion matter? Explaining the spread of structural pension reforms across nations

S.M. Brooks

Journal of Politics, vol. 69, 2007, p. 701-715

This paper presents an analysis of the cross-national spread of two distinct models of structural pension reform. In the first model, the funded defined-contribution system, individual retirement accounts are managed by private sector firms and invested in real assets (ie the accounts are fully funded). In the second model, called notional defined-contribution pension reform, the state retains management of the individual accounts, which are financed on a pay-as-you go basis like many traditional state pension systems. The funded defined contribution model is costly to enact and difficult to reverse, while notional defined contribution reforms impose a lighter upfront financial toll on governments, and may be more easily repealed ex post. The analysis showed that the decision to adopt a funded defined contribution system was swayed powerfully by similar reform decisions in peer countries, while the move to a notional defined contribution system was not influenced by diffusion.

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