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Theories of Policy Diffusion Lessons from Latin American Pension Reform

Published online by Cambridge University Press:  13 June 2011

Kurt Weyland
Kurt Weyland
Affiliation:
University of Texas
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Abstract

What accounts for the waves of policy diffusion that increasingly sweep across regions of the world? Why do many diverse countries adopt similar changes? Focusing on the spread of Chilean-style pension privatization in Latin America, this article assesses the relative merit of four theoretical explanations that scholars of diffusion have proposed. As the principal mechanism driving innovations' spread, these approaches emphasize external pressures, emanating especially from international financial institutions; the quest for symbolic or normative legitimacy; rational learning and cost-benefit calculation; and cognitive heuristics, respectively. The article assesses which one of these frameworks can best account for the three distinctive features of diffusion, namely its wavelike temporal pattern; its geographical clustering; and the spread of similarity amid diversity. While several approaches contribute to understanding policy diffusion, the analysis suggests that the cognitive-psychological framework offers a particularly persuasive account of the spread of pension reform.

Type
Research Article
Information
World Politics , Volume 57 , Issue 2 , January 2005 , pp. 262 - 295
Copyright
Copyright © Trustees of Princeton University 2005

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References

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12 It is not uncommon in Latin America for reform legislation simply to remain on the books. For a partial explanation of why governments get cold feet, see the discussion of the Nicaraguan case at the end of this article (p. 294).

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14 Heclo (fn. 9).

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21 Certainly, forceful pressure is not the only way in which the ins can, in principle, contribute to policy diffusion. As the discussion of normative imitation immediately below shows, for instance, the IFIs may “teach” new norms. By providing objective information, they may also influence rational learning, and by calling attention to a novel policy model, they can shape the inferences of boundedly rational decision makers. Yet in the extant literature, in pressure (”coercion,” conditionality) has attracted the most attention.

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23 Finnemore (fn. 1).

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26 Advocates of rational learning have argued that the mass public can use simple cues to make reasonably good political choices, at least in the aggregate; see Popkin (fh. 6); Lupia and McCubbins (fn. 6). But this argument holds when actors are asked to choose between “given” options and when there is access to long-established cues (such as partisanship) that have over time proven to be good predictors of outcomes. These preconditions are clearly not fulfilled when actors face a unique momentous decision on whether to adopt and to adapt a novel model with little track record, such as pension privatization.

27 Headed by officials from the target region, the regional development banks, such as the Inter- American Development Bank, are less powerful and less insistent on conditionality than the IMF and the World Bank, as numerous Latin American policymakers indicated in interviews.

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32 Author interview with Alfonso Peña Rueda, former national pension secretary (1995–97), La Paz, July 24,2002.

33 Author interviews with Fabio Duran, former actuarial director, Costa Rican Social Security Institute, San José, Costa Rica, June 25, 2004, and with Adolfo Rodriguez Herrera, general superintendent of securities and former leader of first pension reform team (1995—98), San José, Costa Rica, June 21,2004.

34 Author interviews with Helga Salinas, former vice-minister of finance and leader of first pension reform team (1991–93), La Paz, July 26,2002, and with Cesar Penaranda, former head adviser to Econ omy Minister Carlos Bolona, Lima, July 12,2002; similar author interview with Pablo Gottret, superintendent of pensions, securities, and insurance, La Paz, July 30,2002; see also Meseguer (fh. 3), 13–14.

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37 See, e.g., Finnemore (fn. 1), 42–47.

38 Lieberson, Stanley, A Matter of Taste (New Haven: Yale University Press, 2000)Google Scholar.

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40 Cf. Orenstein (fn. 8), 183; see in general Bergesen, Albert, ed., Studies of the Modern World System (New York: Academic Press, 1980)Google Scholar.

41 In fact, adherents of this framework depict the spread of norms and models as a “cascade” that quickly gathers momentum. See Finnemore and Sikkink (fn. 36), 902—4; Lutz and Sikkink (fn. 36), 638, 655–59; see also, on reputational cascades, Kuran, Timur and Sunstein, Cass, “Availability Cascades and Risk Regulation,” Stanford Law Review 51 (April 1999), 687, 714, 728–31CrossRefGoogle Scholar.

42 Cf. Lowi, Theodore J., “American Business, Public Policy, Case-Studies, and Political Theory,” World Politics 16 (July 1964)CrossRefGoogle Scholar.

43 Finnemore (fn. 1).

44 Its official purpose—to plan and coordinate scientific activities—would place such an institution under Lowi's (fn. 42) category of “regulatory” decisions, but in most underdeveloped countries—especially those without a significant science community—it simply allowed government leaders to make additional patronage appointments, which turned this innovation into a distributive decision.

45 See Kahneman, Daniel, Knetsch, Jack, and Thaler, Richard, “Fairness as a Constraint on Profit Seeking,” American Economic Review 76 (September 1986)Google Scholar.

46 Mesa-Lago, Carmelo, Ascent to Bankruptcy (Pittsburgh, Pa.: University of Pittsburgh Press, 1989)Google Scholar.

47 Author interviews with Salinas (fn. 34) and Alberto Bonadona, former leading pension reform team member, La Paz, August 9, 2002.

48 Author interviews with Victor Ramirez, intendent of the public pension system and leading reform team member, San Salvador, July 8,2004, and with Ruth Solorzano, leading pension reform team member, San Salvador, July 7,2004.

49 Author interview with Alfonso de los Heros, former labor minister and prime minister, Lima, July 8,2002.

50 Interviews with De los Heros (fn. 49), Peñaranda (fn. 34), and Fritz Du Bois, former adviser to Economy Ministers Carlos Bolofia (1991–92) and Jorge Camet (1993–97), Lima, July 2,2002.

51 Reliable cross-nationally comparable data on the financial and actuarial difficulties of social security systems are unavailable, as confirmed by personal communications from Sarah Brooks, Department of Political Science, Ohio State University, January 22, 2005, and from Raul Madrid, Department of Government, University of Texas at Austin, January 24,2005. In fact, several aspects of expenditures and revenues—for instance, what counts as the system's revenue sources—were contested in a number of countries. The strength of IFI pressures also differed from country to country. But whereas adherents of rational choice tend to take external constraints as a given and focus on the margin of choice that actors retain, my classification of theoretical frameworks sees the extent of actors' choice as an issue to be explained and therefore treats it as the first step in my nested theoretical analysis.

52 Cf. Ikenberry (fn. 1), 101–2. There are some rational learning arguments that predict an S-shaped pattern for adoption of decisions, but these arguments focus on learning from experience in each separate case and do not consider learning among cases, that is, diffusion. See, e.g., Carpenter, Daniel and Lewis, David, “Political Learning from Rare Events: Poisson Inference, Fiscal Constraints, and the Lifetime of Bureaus,” Political Analysis 12 (Winter 2004)CrossRefGoogle Scholar.

53 See, e.g., author interview with Moises Naim,Venezuela's former economy minister (1989—90), Washington, D.C., March 30, 2000; Weyland, Kurt, ed., Learning from Foreign Models in Latin American Policy Reform (Washington, D.C.: Woodrow Wilson Center Press, 2004), chaps. 4–9Google Scholar.

54 For instance, Price Waterhouse, Proyecto de Reforma del Sistema Previsional Boliviano (Project for a reform of Bolivia's social security system) (N.p., 1993), an early version of Bolivia's privatization project, lists in its short two-page bibliography twelve consultant reports by Chilean experts. And a succinct analysis of the Salvadoran reform process, written by a member of the small domestic reform team, “Proceso de Implementacxon de la Reforma al Sistema de Pensiones de El Salvador” (N.d.), refers to Chilean—and only Chilean—consultants in many places.

55 Tsebelis, George, Nested Games (Berkeley: University of California Press, 1990), 32–38Google Scholar.

56 Popkin (fn. 6); Lupia and McCubbins (fn. 6).

57 Simon, Herbert, “Human Nature in Politics: The Dialogue of Psychology with Political Science,” American Political Science Review 79 (June 1985)CrossRefGoogle Scholar.

58 As reported, e.g., in author interviews with Sergio Tamayo, pension reform team member, San Salvador, July 6, 2004, and with Bonadona (fn. 47); for other Latin American countries, see Müller (fn. 5), 121–22; Madrid (fn. 5), 49–52, 79,113,181–83.

59 See Steinbruner, John, The Cybernetic Theory of Decision (Princeton: Princeton University Press, 1974), 121–22Google Scholar.

60 Particularly contagious were team members' focus on the Chilean model and neglect of other reform experiences, as well as their overextrapolation of the Chilean model's success, which the following pages discuss and document. As a result, team members who had initially been more skeptical came to endorse the Chilean model wholeheartedly. In El Salvador, for instance, a leading pension reformer had initially advocated a mixed public/private system but soon embraced a full-scale reform modeled closely on the Chilean original. Compare the following: Ramirez, Victor, “El Sistema de Pensiones de El Salvador: Un Acercamiento al Problema,” in Ramírez, Víctor and Chavarria, Mauricio, Diagnóstics sobre la Seguridad Social en El Salvador (Assessments of social security in El Salvador) (San Salvador: Fundación Dr. Guillermo Manuel Ungo, 1994)Google Scholar, Documento de Trabajo: Serie Seguridad Social 94–1 (January), 16–17; and Ramírez, Víctor, “El Sistema de Pensiones de El Salvador: Un Acercamiento al Problema,” in Centra Internacional para el Desarrollo Económico (CINDE), ed., Soluciones Descentralizadas/Privadas a Problemas Públicos (Decentralized/private solutions to public problems) (San Salvador: CINDE, 1994), 100–102Google Scholar.

61 Teichman, Judith, The Politics of Freeing Markets in Latin America (Chapel Hill: University of North Carolina Press, 2001)Google Scholar; Kaufman, Robert and Nelson, Joan, “Introduction,” in Kaufman, and Nelson, , eds., Crucial Needs, Weak Incentives: Social Sector Reform, Democratization and Globalization in Latin America (Washington, D.C.: Woodrow Wilson Center Press, 2004), 6–7Google Scholar.

62 See in general Jones, Bryan, Politics and the Architecture of Choice: Bounded Rationality and Governance (Chicago: University of Chicago Press, 2001)Google Scholar; and Levitt, Barbara and March, James, “Organizational Learning,” Annual Review of Sociology 14 (1988)CrossRefGoogle Scholar.

63 Kahneman, Slovic, and Tversky (in. 6); Gilovich, Griffin, and Kahneman (fn. 6).

64 Kahneman, Slovic, and Tversky (fn. 6), chaps. 1,11–14,33; Gilovich, Griffin, and Kahneman (fh. 6), chaps. 3—5.

65 Kahneman, Slovic, and Tversky (fn. 6), chaps. 1–6; Gilovich, Griffin, and Kahneman (fn. 6), chaps. 1–2.

66 Kahneman, Daniel and Tversky, Amos, “On the Study of Statistical Intuitions,” in Kahneman, Daniel, Slovic, Paul, and Tversky, Amos, eds., Judgment under Uncertainty (Cambridge: Cambridge University Press, 1982), 503CrossRefGoogle Scholar; see also Gilovich, Griffin, and Kahneman (fn. 6), chaps. 6–8.

67 Interestingly, Mintrom (fn. 16) found that among the U.S. states, neighborhood effects are especially influential in agenda setting (pp. 756–59,761).

68 Moreover, countries that did not suffer from the problem that the new model promises to resolve may well refuse to adopt the innovation, regardless of its performance. Thus, there are additional reasons why the wave of diffusion may not affect the universe of cases.

69 Thus, bounded rationality arguments do not deny that actors can modify their initial judgments as more information becomes available. But they disagree with rational choice arguments that such adjustments optimally process the relevant information in a systematic and unbiased fashion.

70 On these variations, see Mesa-Lago, Carmelo, “Social Welfare Reform in the Context of Economic- Political Liberalization,” World Development 25 (April 1997)CrossRefGoogle Scholar; and Madrid (fn. 5), 14–21.

71 See Rose, Richard, “What Is Lesson-Drawing?” Journalof Public Policy 11 (January 1991), 10–11Google Scholar.

72 Nelson, Joan, Informing Health and Education (Washington, D.C.: Overseas Development Council, 1999), 22—24Google Scholar; Nelson explains why Chile's health and education reforms were not sufficiently comprehensive, integrated, and bold to turn into similarly “available” models.

73 Author interviews with Bonadona (fn. 47), Ramirez (fn. 48), Alfredo Romero, former leader of pension reform team (1992), Lima, July 17, 2002, Salinas (fn. 34), and Tamayo (fn. 58); “Proceso de Implementatión” (fn. 55); Comisión Técnica de Pensiones, Sistema de Pensiones en Chile: Informe de la Visita Efectuada a Chile (The pension system in Chile: Report on the trip to Chile) (San José: Caja Costarricense de Seguro Social, 1990)Google Scholar.

74 Author interviews with Celecino de Carvalho Filho, secretary of special studies, Ministry of Social Security and Assistance, Brasília, July 12,1989, and with Celso Barroso Leite, former secretary of social security, Ministry of Social Security and Assistance, Rio de Janeiro, February 19,1990.

75 Author interview with Luis Fernández Fagalde, former president, Social Policy Committee, Chamber of Deputies, La Paz, July 25,2002; see also Gonzalez, Andrés Bustos, “A Previdencia Social no Chile. Enfoque dos Trabalhadores,” in Associaçäo Nacional dos Auditores Fiscais de Contribuiçöes Previdenciarias (ANFIP), Ciclo de Estudos sobre Seguridade Social: Semindrio International sobre Seguridade Social (Series of studies about social security: International seminar on social security) (Brasilia: ANFIP, 1995)Google Scholar.

76 Demarco (fn. 5), 86–89.

77 Interview with Mauricio Barassi, one of the architects of Argentina's pension privatization, reported in Madrid (fn. 5), 114–15.

78 Author interviews with Salinas (fn. 34), Bonadona (fh. 47), and Teresa Vargas, former core member of pension reform team, La Paz, July 31, 2002; similarly author interviews with Ramirez (fn. 48) and Tamayo (fn. 58) for El Salvador; and with De los Heros (fn. 49) and Mario Roggero, former deputy of the Democratic Front (FREDEMO) and initiator of pension reform project, Lima, July 11, 2002, for Peru. For Colombia, Juan Manuel Santos, “La Reforma de las Pensiones en Colombia,” in Jose Pinera, ed., “La Revolution Latinoamericana de las Pensiones” (The Latin American pension revolution) (book manuscript) reports a very similar experience. On Colombia, Mexico, and Uruguay, see also Madrid (fn. 5), 173–75; and Muller (fn. 5), 34–38.

79 This included not only additional nations that enacted pension privatization, such as Ecuador and El Salvador, but also a number of countries that ended up rejecting reform, such as Guatemala, Honduras, Panama, and Paraguay; Madrid (fn. 5), 173–74.

80 See, e.g., Instituto Liberal (IL), Previdencia Social no Brasil (Social security in Brazil) (Rio de Janeiro: IL, 1991), chap. 4Google Scholar; de Faro, Clovis, ed., Previdencia Social no Brasil (Social security in Brazil) (Rio de Janeiro: Editora da Fundacao Getiilio Vargas, 1993)Google Scholar.

81 Huber, Evelyne and Stephens, John, The Political Economy of Pension Reform (Geneva: United Nations Research Institute for Social Development, 2000), 2, 22–29Google Scholar.

82 Cichon (fn. 39).

83 Author interviews with Rodríguez (fn. 33), Salinas (fn. 34), Solórzano (fh. 48), Tamayo (fh. 58), and Vargas (fn. 78); Brooks, Sarah and Weaver, Kent, Lashed to the Mast? The Politics of Notional Defined Contribution Pension Reforms (Chestnut Hill, Mass.: Center for Retirement Research at Boston College, 2005), 24–25Google Scholar. There is no trace of the NDC scheme in the mass of primary documents that I collected in Bolivia, Costa Rica, El Salvador, and Peru, nor in published case studies by other authors, such as Madrid (fn. 5); Müller (fn. 5); and Demarco (fn. 5). As the only exception, Uruguay, with its wealth of pension expertise, considered a notional defined-contribution scheme in 1991—92 but discarded it under the influence of the Chilean model; Müller (fn. 5), 35–36.

84 Pablo Gottret, “Bolivia: Capitalisation, Pension Reform and their Impact on Capital Markets” (Paper prepared for Organisation for Economic Co-operation and Development, Advisory Group on Privatisation, Paris, September 21–22,1999), 15–16.

85 World Bank, Bolivia: Public Expenditure Review, Report no. 19232-BO (Washington, D.C.: World Bank, 1999), 10,22Google Scholar.

86 Manuel Arellano, “Natural Gas, Social Unrest, and the Ousting of a President” (Talk presented at the panel “Are Latin American Presidents Living Dangerously?” University of Texas at Austin, April 8, 2004); Laserna, Roberto, “Bolivia: Entre Populismo y Democracia,” Nueva Sociedad 188 (November- December 2003), 13Google Scholar.

87 As Madrid (fn. 5) argues in general (pp. 31—40), documents for Mexico (pp. 73–76), Argentina (pp. 109—10), Brazil (p. 145), Bolivia, Colombia, Costa Rica, the Dominican Republic, Nicaragua, Peru, and Uruguay (pp. 170–73), and confirms through a wide-ranging quantitative analysis (pp. 192–200), the claim that pension privatization would raise domestic savings, which experts and decision makers inferred in a logically problematic fashion from the Chilean experience, was a decisive motive for enacting structural social security reform in Latin America. Sarah Brooks establishes the same point through a sophisticated statistical analysis; Brooks, , “Social Protection and Economic Integration: The Politics of Pension Reform in an Era of Capital Mobility,” Comparative Political Studies 35 (June 2002)CrossRefGoogle Scholar.

88 Author interviews with Juan Jose Daboub, former finance minister, San Salvador, July 9, 2004, and with Peñaranda (fh. 34); similar interviews with Du Bois (fn. 50) and Solórzano (fn. 48). The team of Costa Rican experts that visited Chile in 1989 also emphasized the impact of pension privatization on domestic savings as a major attraction: Comision Tecnica de Pensiones (fn. 73), 14—16.

89 Interview with Peña Rueda (fn. 32); similar interviews with Du Bois (fn. 50) for Peru and with Tamayo (fn. 58) for El Salvador; data computed from Superintendencia de Administradoras de Fondos de Pensiones (Santiago de Chile), Rentabilidad Real Anual del Fondo de Pensiones, www.safp.cl/inf_estadistica/index.html (accessed May 12,2004).

90 Samwick, Andrew, “Is Pension Reform Conducive to Higher Saving?” Review of Economics and Statistics 82 (May 2000)CrossRefGoogle Scholar; White, Joseph, “Looking in the Wrong Place: Why Chile Provides No Evidence for Social Security Privatization,” Public Budgeting and Finance 20 (Winter 2000)CrossRefGoogle Scholar.

91 Peter Orszag and Joseph Stiglitz, “Rethinking Pension Reform” (Paper presented at the conference on “New Ideas about Old Age Security,” World Bank, Washington, D.C., September 14—15, 1999), 8; similarly, see Barr, Nicholas, Reforming Pensions: Myths, Truths, and Policy Choices (Washington, D.C.: International Monetary Fund, 2000), 12—13Google Scholar. See also the World Bank's new skeptical assessment of pension privatization in Indermit Gill, Packard, Truman, and Yermo, Juan, Keeping the Promise of Social Security in Latin America (Washington, D.C.: World Bank, 2004)Google Scholar.

92 Orszag and Stiglitz (fn. 91), 4.

93 A similar sequence of initial enthusiasm and later disappointment occurred among former communist countries: the World Bank initially embraced Czech voucher privatization firmly and pushed it on other nations but later recognized its serious flaws; see Appel (fn. 4), 3—4

94 As reported in Octavio Enriquez and Juan Carlos Bow, “Requiem a nueva Ley de Pensiones,” El Nuevo Diario, July 22,2004. On the possibility of Nicaragua backing away from pension privatization, see author's telephone interview with Alejandro Bonilla chief, Studies and Operations Branch, International Social Security Association, Geneva, January 25,2005.

95 See, e.g., Banco Mundial—Proyecto de Reforma al Sistema de Seguridad Social de Largo Plazo en Bolivia, Restructuracion del Sistema de Seguridad Social de Largo Plazo en Bolivia (The restructuring of Bolivia's social security system) (La Paz: CIEDESS, December 1993)Google Scholar; Comision para la Reforma al Sistema de Pensiones, “Propuesta de Reforma al Actual Sistema de Pensiones” (San Salvador: Comision para la Reforma, 1996); “Crease Sistema Privado de Pensiones complementario al Sistema Nacional de Pensiones a cargo del IPSS. Decreto Legislativo No. 724,” El Peruano (November 11,1991). For Colombia, see Santos (fn. 78), 42; for Mexico, Argentina, and Colombia, see Madrid (fn. 5), 79,116,175.

96 Raul Madrid, “Ideas, Economic Pressures and Pension Privatization,” Latin American Politics and Society 47 (forthcoming), 14–15, based on an interview with Hermann von Gersdorff, World Bank staff economist, Washington, D.C., May 15,1998.

97 Roggero, Mario, Escoja Usted (You choose!) (Lima: N.p., 1993), 22–24,58–59,185,190,200–202Google Scholar.

98 In a substitutive model, the new private pension scheme completely replaces the old public social security system. On similarities and differences of Latin America's reformed pension systems along a number of specific rules and issues, see especially Stephen Kay and Barbara Kritzer, “Social Security in Latin America: Recent Reforms and Challenges,” Economic Review (Federal Reserve Bank of Atlanta) 86 (first quarter 2001); Devesa-Carpio, Jose and Vidal-Meliá, Carlos, The Reformed Pension Systems in Latin America (Washington, D.C.: World Bank, May 2002), 47–59Google Scholar; and Palacios, Robert, “Pension Reform in Latin America: Design and Experiences,” in International Federation of Pension Fund Administrators (FIAP), ed., Pension Reforms: Results and Challenges (Santiago de Chile: FLAP, 2003)Google Scholar.

99 Author interview with Alberto Leon, pension reform team member, Lima, July 2,2002.

100 Interview with Salinas (fn. 34); similar interview with Ramirez (fn. 48).

101 See, e.g., for El Salvador: Mesa-Lago, Carmelo and Durán, Fabio, Evaluatión de la Reforma de Pensiones en El Salvador (Evaluation of El Salvador's pension reform) (San Salvador: Fundacion Friedrich Ebert, 1998), 6–7Google Scholar.

102 Interview with Ramirez (fn. 48).

103 Moron, Eduardo and Carranza, Eliana, Diez Años del Sistema Privado de Pensioner (Ten years of the private pension system) (Lima: Centro de Investigation—Universidad del Pacífico, 2003), chaps. 4–5Google Scholar. For a comprehensive assessment of these kinds of problems in all of Latin America's private pension systems, see the new World Bank study by Gill, Packard, and Yermo (fn. 91).

104 Author interview with Francia Breve, former political leader of pension reform team (1995–97), San Salvador, July 7,2004.

105 For instance, the IFls make extraregional models available. In this way, they facilitated the relatively rapid “jump” of pension privatization to Eastern Europe; see Orenstein (fn. 8), 185–90.

106 These arguments may be more persuasive in other policy areas, however, such as highly competitive economic markets (Simmons, fn. 19) or (effectively) distributive decision making (Finnemore, fn. 1).

107 See recently Gowda and Fox (fn. 25).

108 The other leading approach, institutionalism, cannot offer a satisfactory explanation of diffusion because it focuses on actors' institutionally defined capacities and the constraints they face, but—unless combined with rational choice or culturalism—lacks an account of actors' motivations.

109 Contra Tsebelis (fn. 55), 32–38.