Alternative ways of pricing and financing social insurance
Jousten, Alain; Gillingham, Robert
2014 • In Frölich, Markus; Kaplan, David; Pagés, Carmenet al. (Eds.) Social Security, Informal Sector, and Employment in Middle Income Countries: How to Protect Workers While Creating Good Jobs
[en] Social insurance systems vary widely in terms of coverage of workers and risks,
financing sources and the structure and generosity of benefits. The predominant
source of financing for social insurance comes from “deductions” from payrolls.
These deductions are typically categorized as either “taxes” or “contributions,” but
they share the characteristics of both. Any analysis of how best to finance social
insurance must thus start from an analysis of social insurance pricing: a
decomposition of the insurance component (the true contribution) from the pure tax
component (the true tax). Only then can an informed discussion about reforming
financing mechanisms proceed. After reviewing the structure of social insurance
financing and taxes in Latin America, this paper (1) discusses the problems with
payroll financing of social insurance, (2) presents options for addressing these
problems, (3) ties these problems to the level of informality, and (4) describes the
challenges faced by policymakers in deciding how best to finance social insurance.
Disciplines :
Economic systems & public economics
Author, co-author :
Jousten, Alain ; Université de Liège - ULiège > HEC-Ecole de gestion : UER > Théorie monétaire et macroéconomie
Gillingham, Robert
Language :
English
Title :
Alternative ways of pricing and financing social insurance
Publication date :
2014
Main work title :
Social Security, Informal Sector, and Employment in Middle Income Countries: How to Protect Workers While Creating Good Jobs
