A Critical Review of Social Insurance Analysis by Multilateral Lending Institutions

Laurence Kotlikoff


This paper reviews the social insurance analysis of Multilateral Lending Institutions (MLI). It first describes a country's fiscal fundamentals. Consideration of how social insurance programs affect these fundamentals leads to the following conclusion: Social insurance programs cannot be meaningfully discussed in a vacuum, with little or no regard to the rest of the government's fiscal policies.
Unfortunately, MLI's analyze countries' social insurance policies in isolation. Consequently, MLI's fail to show the degree to which these programs are affecting fiscal fundamentals and are, as a result, ameliorating or exacerbating macro and microeconomic problems. The failure to discuss social insurance within a broader policy context means that the social insurance recommendations being provided may neither be affordable nor advisable.

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