Effects of Argentina's Social Security Reform on Labor Markets and Poverty

Abstract

In 1994, Argentina introduced Pension Reform and Unemployment Benefits as a major reform component to its social security system. This papers analyzes the effects of introducing new individual accounts in the pension system - which was under effect between 1994 and 2008 - over wages, employment and poverty. While the macroeconomic effects of a change in the pension system is an issue that is relatively well addressed by the literature, its microeconomic effects are often neglected in the analysis.We use a CGE model to evaluate the effects of the reform on labor market and poverty. Our results indicate that if private pension funds are allocated to physical investment, labor demand and wages increase and poverty goes down. However, these effects fade out if funds of private accounts are used to buy government debt.