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Saving for Development: How Latin America and the Caribbean Can Save More and Better
Abstract
Why should people-and economies-save? The typical answer usually focuses on the need to protect against future shocks, to smooth consumption during hard times, in short, to save for the proverbial rainy day. This book approaches the question from a slightly different angle. While saving to survive the bad times is important, saving to thrive in the good times is what really counts. People must save so they can invest in their own and their children's health and education, live productive fulfilling lives, and end their days in comfort and peace. Firms must save so they can grow productive enterprises that employ more workers in better jobs to produce quality goods for domestic and international markets. Governments must save to build bridges, highways, and airports that support a productive economy, to provide quality services such as education, health, water, and sanitation to their citizens, and to assure their senior citizens a dignified, worry-free retirement. In short, countries must save for a sunny day -a time when everyone can bask in the benefits of growth, prosperity, and well-being. - See more at: https://publications.iadb.org/handle/11319/7677?locale-attribute=en#sthash.ZrXR3zmJ.dpuf
... National saving is a veritable means through which an economy can mobilize massive financial resources towards economic growth and development (Cavallo and Serebrisky, 2016). Yet countries in Sub-Saharan Africa including Nigeria have recorded some of the lowest national savings rates in the last four decades. ...
The view posited by the International Demonstration Effects hypothesis is that exposure to developed country's consumption pattern will have negative effect on less developed countries domestic resource mobilization for development. This paper therefore attempts a validation of the international Demonstration Effect Hypothesis in Nigeria. The study employed annual time series data sourced from world development Indicators for the period 1996 and 2021. Autoregressive Distributed lag model (ARDL model) was adopted as the estimation technique for the study. The empirical results of the estimated models do not support the hypothesis that international demonstration effect when proxied with percent of the population with access to the internet depresses savings mobilization efforts in Nigeria over the period of the analysis. It is recommended that more rigorous analysis and alternative proxies be explored before a conclusive position could be taken on the proposition.
... Evidence on the crowding out of private investment by public investment in LAC is ambiguous, but mitigating this risk calls for governments to focus on investments that can raise total factor productivity, thereby increasing returns on private capital and incentivizing private investment (Fernández, Imrohoroglu, and Tamayo 2017;Ramirez and Nazmi 2003;Santiago et al. 2020). Measures to increase financial access, trust in the banking system, and financial literacy (through early financial education, for example) could help raise household saving rates (Cavallo and Serebrisky 2016). In the absence of higher domestic savings, LAC will have to continue relying heavily on foreign saving to support growth of the region's capital stock-an approach that may have contributed to low investment-to-output ratios over the last twenty years. ...
... • The data shows how the replacement ratios are affected by different policies such as an increase in the contribution rate and delaying of the retirement age. • Since the pension system represents a large component of national wealth and savings in most countries (OECD [5] ), the data can contribute to the study of the low savings rate in Latin America (Cavallo and Serebrisky [2] ) and the policies necessary to solve this problem in Chile. ...
This article provides five panel datasets for the projections of the mean replacement ratios of pension income relative to the worker's income. The time dimension is from year 2022 until 2055. The panel groups consider the gender, income and education of the workers. Furthermore, the variables consider different scenarios for the social security system: 1) a baseline with the current policies, 2) an increase of retirement age to 67 years, 3) an increase of the retirement age to 67 years and a 6% increase of the contribution rate, with a rate of 0% to 3% going to solidarity funds.
... The first perspectives exploring this phenomenon investigated supply-side barriers limiting women's access to financial services (Morsy, 2020) primarily addressing access issues to financial services (Di Giannatale and Roa, 2019). However, the evidence on the efficiency of supply side initiatives in improving financial inclusion of vulnerable individuals remains inconclusive (Cavallo and Serebrisky, 2016) and has resulted in new studies shifting to understand demand-side barriers over the "less-than-stellar results of supply-side efforts" (Di Giannatale and Roa, 2019). Demand side studies have identified trust in financial institutions (Lyons and Kass-Hanna, 2019;Mehrotra et al., 2019), income level (Lyons and Kass-Hanna, 2019;Mndolwa and Alhassan, 2020;Kara et al., 2021) and social restrictions (Karlan et al., 2014;Lyons and Kass-Hanna, 2019) as affecting financial inclusion. ...
Purpose
This study aims to investigate whether gender predicts financial inclusion and whether education can fill the gender gap in financial inclusion when controlling for the effects of supply side factors of financial inclusion in low-income economies.
Design/methodology/approach
This study aims to investigate whether gender predicts financial inclusion and whether education can fill the gender gap in financial inclusion when controlling for the effects of supply side factors of financial inclusion in low-income economies.
Findings
The findings provided support for the gender gap in financial inclusion using the most basic measure of financial inclusion. However, using formal savings and access to credit, the gender gap hypothesis is not supported. Moreover, the results revealed that education reduces the gender gap in the basic form of financial inclusion. However, this study could not find any significant difference between men and women's financial inclusion in terms of saving at a bank or borrowing from a bank though men tend to save more than women informally.
Originality/value
The current study contributes to the literature by examining the role of education in the relationship between gender gap and financial inclusion when controlling for the effects of heterogeneous infrastructure and the supply side factors of financial inclusion among the selected countries.
This study examines the impact on human mobility of social distancing policies implemented in 18 Latin American and Caribbean countries in March 2020. We use cell phone data and variation across countries regarding the adoption of these policies and their timing to estimate effects on the percentage of people traveling more than 1 kilometer per day. Results indicate that lockdowns reduced mobility by 10 percentage points during the 15 days following its implementation. This accounts for a third of the decline in mobility between the first week in March and the first week in April in countries that implemented lockdowns. The effect during the second week of implementation is 28% lower compared to the effect documented during the first week. Additionally, we find that school closures reduced mobility by 4 percentage points, but no effects were found for bars and restaurants closures and the cancellation of public events. JEL Classification Codes: C23, H12, I18
The main objective of the study was to assess the performance of Saving and Credit Cooperatives (SACCOs) in Hawelti Sub-city. Various methodologies were used to conduct this research. A random sampling technique was used to take 214 respondents from the sample population. Both questionnaire and interview instruments were used to collect reliable data. The primary data was gathered from members of a sample SACCOs via a questionnaire. The mixed quantitative and qualitative research approaches were employed. The secondary data was used and collected from the SACCOs' audit records. Data were analyzed using SPSS version 25 and Microsoft Excel and results were analyzed using descriptive statistics to generate tables, frequency, percentages, and graphs. To analyze the financial performance of SACCOs the PEARLS model was employed. The study results exhibited that the services' delivery on diversified products of saving, and loans were decent and through the provision of loans, members got a significant change in their living standards. SACCO's membership was raised, but not to the standard, and the promotion was determined to be inefficient and ineffective. The governance perspective of SACCO was found that members have trust, clarity, transparency, and discuss freely in their general assembly meetings. Regarding the financial performance, the saving deposit and total assets of SACCOs achieved tremendous growth. However, the net loan portfolio was found to be below the standard and has come across serious liquidity problems. The key challenges hampering the SACCOs are lack of governance, weak financial monitoring system, lack of financial regulation and proper financial records, poor saving culture, lack of hiring professional manpower, and the absence of training and education. The possible recommendations are creating awareness among members regarding their rights, and by-laws, hiring the required professionals, training based on need and gap assessment, and developing and introducing financial regulatory and monitory systems.
La inversión en infraestructura económica y social de la región
ha sido insuficiente, ineficiente, e insostenible hasta la fecha.
El impacto de la pandemia no ha hecho más que exacerbar los
problemas estructurales del sector. A la par del desarrollo de
una agenda que suponga mejoras de eficiencia a los procesos de
inversión pública, se requiere del desarrollo de mecanismos que
incentiven una inversión más activa y sostenible por parte del
sector privado.
A pesar de la compleja coyuntura económica de las últimas
décadas, el mercado de financiamiento privado de la
infraestructura en América Latina y el Caribe ha ido creciendo,
mostrando un desarrollo significativo del mercado de deuda con
la llegada de nuevos instrumentos y actores.
La banca comercial es el principal proveedor de financiamiento
a la infraestructura, pero el conjunto de proveedores se ha
diversificado en la región con una presencia cada vez más
importante de inversores institucionales y banca multilateral.
Las necesidades de financiamiento sostenible de la infraestructura
son enormes, así como el potencial de instrumentos de deuda
como bonos sostenibles con cada vez mayor presencia en la región.
Resulta clave fortalecer los componentes de sostenibilidad desde
las etapas de preparación de proyectos para facilitar el acceso a
instrumentos de financiamiento sostenible.
La agenda de financiamiento sostenible de la infraestructura
económica y social en América Latina y el Caribe es sin duda
una agenda de desarrollo en desarrollo. Representa un propósito
ulterior del presente trabajo servir de base y apoyo para otros
que profundicen en los temas tratados, y seguir contribuyendo a
una agenda analítica de investigación aplicada de gran relevancia
para el crecimiento inclusivo y la recuperación económica de
América Latina y el Caribe.
The main objective of the study was to assess the performance of Saving and Credit Cooperatives (SACCOs) in Hawelti Sub-city. Various methodologies were used to conduct this research. A random sampling technique was used to take 214 respondents from the sample population. Both questionnaire and interview instruments were used to collect reliable data. The primary data was gathered from members of a sample SACCOs via a questionnaire. The mixed quantitative and qualitative research approaches were employed. The secondary data was used and collected from the SACCOs' audit records. Data were analyzed using SPSS version 25 and Microsoft Excel and results were analyzed using descriptive statistics to generate tables, frequency, percentages, and graphs. To analyze the financial performance of SACCOs the PEARLS model was employed. The study results exhibited that the services' delivery on diversified products of saving, and loans were decent and through the provision of loans, members got a significant change in their living standards. SACCO's membership was raised, but not to the standard, and the promotion was determined to be inefficient and ineffective. The governance perspective of SACCO was found that members have trust, clarity, transparency, and discuss freely in their general assembly meetings. Regarding the financial performance, the saving deposit and total assets of SACCOs achieved tremendous growth. However, the net loan portfolio was found to be below the standard and has come across serious liquidity problems. The key challenges hampering the SACCOs are lack of governance, weak financial monitoring system, lack of financial regulation and proper financial records, poor saving culture, lack of hiring professional manpower, and the absence of training and education. The possible recommendations are creating awareness among members regarding their rights, and by-laws, hiring the required professionals, training based on need and gap assessment, and developing and introducing financial regulatory and monitory systems.
KEYWORDS: Saving, Cooperatives, SACCOs, Performance assessment, Financial performance
Chile implemented pension withdrawals during the pandemic at a much larger scale than other OECD countries. Estimating a life cycle model with survey data, I find that households consume a significant fraction of their non-contributory pension wealth, implying a tradeoff between improving public pensions and increasing savings. Counterfactual simulations show that the pandemic pension withdrawals may decrease the future savings rate by 1.7%. Furthermore, policy reforms may decrease the aggregate savings rate by 0.2% for each percentage point of solidarity tax from current workers. The solidarity taxes increase substantially the pension income of poor retirees, but their effects decline over time.
This study estimates requirements for infrastructure investment in 21 Latin American countries for the period 2011–2040 using a structural equation model. Needs total about 4 percent of GDP. Projections are provided for both a high-growth convergence scenario and a low-growth business-as-usual scenario. These costs represent minimum investments necessary to support expected economic growth. Costs are presented separately and in total for new-capacity investment and maintenance for 10 sectors: airports, electricity, fixed broadband, landlines, mobile telephony, ports, rail, paved roads, sanitation, and water. Country coverage comprises Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Uruguay, and Venezuela. The model differs from past studies of regionwide long-term infrastructure investment needs in five features: (1) It considers alternate GDP growth scenarios; (2) It employs a structural equation model using instrumental variables to provide unbiased, consistent projections for both GDP growth scenarios (Instrumented variables are urbanization and the shares in GDP of agriculture, manufacturing, and services); (3) Mobile phone investment costs are not constant but instead vary with population density; (4) Two additional, wealthier countries are included in modeling to prevent forecasting outside the range of the independent variables’ values used to construct the model, and; (5) Timing of new-capacity investments is distributed over multiple years and varies by sector.
A new empirical study of the relation between money, nominal income, prices, and real output in postwar quarterly U.S. data rejects virtually all of the conclusions reached by Families provide individuals with risk sharing opportunities which may not otherwise be available. Within the family there is a degree of trust and a level of information which alleviates three key problems in the provision of insurance by markets open to the general public, namely, moral hazard, adverse selection, and deception. The informational advantages of pooling risk within families must be set against the inability of families to provide complete insurance because of the small size of the risk pooling group. This paper demonstrates how families can provide insurance against uncertain dates of death. Death risk sharing family arrangements effectively constitute an incomplete annuities market. Our analysis indicates that these arrangements even in small families can substitute by more than70% for complete annuities. Given the adverse selection problem and transactions costs in public annuity markets, risk pooling in families may well be preferred to purchasing market annuities. In the absence of organized public markets in annuities, these risk sharing arrangements provide powerful economic incentives for marriage and family formation. The paper suggests that inter-family transfers need have nothing to do with altruistic feelings; rather, they may simply reflect risk sharing behavior of completely selfish family members.
This paper examines the rationale, nature and financial consequences of two alternative approaches to portfolio regulations for life insurers and pension funds, namely prudent person rules and quantitative portfolio restrictions. The argument draws on the financial-economics of investment and the differing characteristics of institutions liabilities, as well as evidence drawn from major OECD countries. The overall conclusion is that prudent person rules are superior to restrictions, particularly for pension funds, except in certain circumstances that may hold temporarily in emerging market economies.
This exciting new volume provides an up-to-date overview of the current state of taxation in the Latin America and Caribbean (LAC) region, its main reform needs, and possible reform strategies that take into account the likely economic, institutional, and political constraints on the reform process.
Age of Productivity offers a look at how the low productivity in Latin America and the Caribbean is preventing the region from catching up with the developed world. The authors look beyond the traditional macro explanations and dig all the way down to the industry and firm level to uncover the causes.
Why do people save? A strand of the literature has emphasized the role of ‘precautionary’ motives; i.e., private agents save in order to mitigate unexpected future income shocks. An implication is that in countries faced with more macroeconomic volatility and risk, private saving should be higher. From the observable data, however, we find a negative correlation between risk and private saving in cross-country comparisons, particularly in developing countries. We provide a plausible explanation for the disconnect between precautionary-saving theory and the empirical evidence that is based on a model with a richer account for the various modes of ‘precautionary’ behavior by private agents, in cases where institutions are weaker and labor informality is prevalent. In such environments, household saving decisions are intertwined with firms’ investment decisions. As a result, the interaction between saving behavior, broadly construed, and aggregate risk and uncertainty, may be more complex than is frequently assumed.
This paper discusses the building blocks of pension reform in the light of economic theory, and their application to different types of economy. The opening section sets out the simple economics of pensions. The second section discusses a series of myths which have proved remarkably persistent. Building on this analysis, the latter part of the paper sets out the foundations of effective pensions policy. The third section discusses the prerequisites which any pension reform must respect, i.e. those things which policy advisers can - and should - assert authoritatively. The fourth section turns to the range of choices facing policymakers, drawing on the very different arrangements in different countries. The main conclusions are threefold: (1) The key variable is effective government. (2) From an economic perspective, the difference between pay-as-you-go and funding is second order. (3) The range of potential choice over pension design is wide. One size does not fit all.
Since the creation of the Chilean pension fund industry in 1981, pension fund administrators have not been free to choose their investment portfolios because of stringent regulation of investment limits. The diagnosis implicit with the imposition of limits was that the Chilean capital market was not deep, that there was an important demand for funds to finance the expansion of the productive sector and that, due to principal-agent problems, protection for uninformed account holders was needed. As this regulation entails an inefficient combination of risk and return, this paper quantifies its costs.