The effect of pensions on wellbeing and mental health: Evidence from Paraguay


Published 16.03.22

A non-contributory pension scheme substantially improved consumption and wellbeing, and reduced the number of over-65s in poverty doing paid work

Read “Another Brick on the Wall: On the Effects of Non-Contributory Pensions on Material and Subjective Well-Being” by Bando, Galiani, and Gertler here.

Across Latin America, governments are looking at ways to support older persons, especially those living in poverty. While those who worked in the formal sector may receive a pension upon retirement, workers in the region’s large informal sector have limited or no access to contributory pension schemes. 

In this VoxDevTalk, Sebastian Galiani discusses his work with Rosangela Bando and Paul Gertler evaluating the effect of the Pensiones Alimentarias scheme in Paraguay. The scheme pays around $90/month to persons above the age of 65, living below the poverty line, who are not receiving benefits from other social support or welfare schemes. 

Using a randomised control trial over the course of a phased roll-out, the authors find that this non-contributory pension leads to substantial improvements in consumption (at the household level) as well as wellbeing (as reported by beneficiaries themselves). It is also associated with a reduction in persons older than 65 doing paid work, which those living in poverty may otherwise be unable to afford. The research adds to a growing body of evidence, including previous studies of pension schemes in Mexico and Peru, that demonstrates the benefits and cost-effectiveness of old-age pensions.