Time for a New Course: An Essay on Social Protection and Growth in Latin America

Publication Name
EU LAC WORKING PAPERS
Year of Publication
2021
Author(s)
Santiago Levy
Guillermo Cruces
Organization Name
United Nations Development Programme
Acronym
UNDP
Full Date
June 2021
Category
Reports
Theme
Country - LAC
Keyword(s)
Social insurance
Poverty
inequality
productivity
universality
socially inclusive growth
Abstract
We develop a framework to analyze the effects of social protection policies on two dimensions:
their efficacy to protect households against risks, reduce poverty and mitigate inequality; and
their impact on productivity and long-term growth. Our framework pays close attention to the
legal and institutional context in which these policies are deployed, and to their interaction with
other policies that also impact the social and economic outcomes that we focus on, particularly
those related to taxation and the performance of markets. We argue that social protection
policies provide incomplete and erratic protection against risks, do not redistribute enough and
hurt productivity—in sum, that they are inconducive to socially inclusive growth. We propose
a new social protection architecture based on the principle of universality with respect to the
relevant population and discuss its implications for health; retirement pensions; protections
against disability, death and the loss of employment; poverty; inequality; and for firm and worker
behavior among various margins that impact productivity. We discuss the tax implications of this
architecture. We argue that, jointly considered, our proposals offer a route to fiscally sustainable
and socially inclusive growth.