Global Markets Forum
April 17, 2008, 5:30 - 7 p.m.
Good Intentions, Bad Outcomes: Social Policy, Informality, and Economic Growth in Mexico
Social programs in Mexico and other Latin American countries are distorting their labor markets, said Santiago Levy Algazi, vice president of sectors and knowledge for the Inter-American Development Bank. Mexico and other countries require firms to provide health insurance, pensions, and other social benefits directly to salaried workers, whereas non-salaried workers get these services through government pension and insurance programs. This distinction, and the policies that enforce it, act as a tax on salaried work and a subsidy to those who do the same job with the same productivity through informal arrangements. Salaried benefits in Mexico cost 30 to 35 percent more than their value to workers, Levy said. This drives workers into the informal sector, hurting overall growth.
Santiago Levy Algazi is Mexican economist Santiago Levy Algazi became the general manager and chief economist for the IDB Research Department on August 1, 2007.
Previously, he was General Director at the Mexican Social Security Institute (IMSS) from December 2000 to October 2005. Under his tenure, he promoted changes to the Social Security Act to increase transparency and accountability in IMSS finances and create long-term reserves.
From 1994 to 2000, Levy served as the Deputy Minister at the Ministry of Finance and Public Credit of Mexico, becoming the main architect of the renowned social program Progresa-Oportunidades that benefits the poor. He managed budgetary adjustments during the 1994 - 95 economic crisis and the 1998 fall in oil prices. Previous positions include President of the Federal Competition Commission and director of the Economic Deregulation Program at the Ministry of Trade and Industrial Promotion.
Levy holds an M.A. and PhD in economics from Boston University. He was a post-doctoral fellow at Cambridge University.
This event is part of the Initiative on Global Markets and is generously sponsored by Myron Scholes.
The Initiative also receives financial support from the Chicago Mercantile Exchange (CME) Group Foundation and our corporate partners: AQR Capital Management, Barclays Bank PLC, John Deere, and Northern Trust Corporation.