Wharton Pension Research Council Working Papers

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Working Paper

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Chile has been at the forefront of pension reform, having switched in 1980 from a pay-as-you-go system to a fully funded privatized accounts system. The Chilean system served as a model for reform in many other Latin American countries and has also been considered by U.S. policy makers as a possible prototype for social security reform. Some of the criticisms of the Chilean system are low coverage rates and contributions rates among certain segments of the population. In 2006, the Chilean government proposed some reforms aimed at increasing coverage and contribution rates and expanding the safety net provided by the system to poor households. This study evaluates how changes in pension system rules affect working behavior and pension contribution patterns using data from a new Chilean household survey administered in 2002 and 2004 linked with administrative data from the pension regulatory agency. It develops and estimates a dynamic model of decision-making about working in the covered or uncovered sectors of the economy and studies implications for pension accumulations. The estimated model is used to simulate behavior under different pension system rules, such as a change in the number of years of contributions required for the minimum pension or a change in pension plan fees.

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© 2008 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


This work was supported by a grant from the Social Security Administration through the Michigan Retirement Research Center (Grant # 10-P-98362-5-04). The findings and conclusions expressed are solely those of the author and do not represent the views of the Social Security Administration, any agency of the Federal government, or the Michigan Retirement Research Center. We are also grateful to the National Institutes of Health - National Institute on Aging (grant number P30 AG12836); the Boettner Center for Pensions and Retirement Security at the University of Pennsylvania; and the National Institutes of Health - National Institute of Child Health and Development Population Research Infrastructure Program (R24 HD-044964) for funding this research. We thank Olivia Mitchell and Jere Behrman for helpful comments. Opinions and errors are solely those of the authors and not of the institutions with whom the authors are affiliated.

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Date Posted: 07 August 2019