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EUROMOD Working Paper Series EM2/18

Improving income protection for the elderly poor in Ecuador

Authors

Publication date

22 Jan 2018

Abstract

A series of social benefits targeting vulnerable groups, such as the elderly population,
has been implemented in Ecuador over the last few decades. Elderly adults living in
vulnerable conditions and not affiliated with social security are entitled to noncontributory
pension assistance under the Human Development Transfer program.
However, over one quarter of old-age beneficiaries still live in poverty and the recent
fall in oil prices has put increasing pressure on government expenditures to deliver such
schemes. This paper aims to assess the current needs of old-age adults based on
expenditure data, and makes use of microsimulation techniques to evaluate the effect of
covering those needs through an increase in pension assistance. Our results show that
increasing pension assistance to match the level of the poverty line in Ecuador would
reduce elderly poverty by 40% and would take 18% of old-age beneficiaries out of
poverty. We analyze the effect of additional hypothetical reforms and discuss the
importance of using microsimulation techniques, in particular to assess the effect of
budget neutral reforms in a macroeconomic environment with low oil prices.

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