The Effects of Noncontributory Pensions on Material and Subjective Well-Being

Abstract

Public expenditures on noncontributory pensions are equivalent to at least 1% of gross domestic product in several countries in Latin America and are expected to increase. We explore the effect of noncontributory pensions on well-being by studying the Pension 65 program in Peru, which uses a poverty eligibility threshold. Households with a beneficiary increased their level of consumption by 40%. The program improved subjective well-being by 0.17 standard deviations. Comparing our findings to those we published in 2016, we conclude the effects of noncontributory pensions on well-being in rural Mexico are comparable to those found in Peru.