Reforms to an Individual Account Pension System and their Effects on Work and Contribution Decisions: The Case of Chile

Loading...
Thumbnail Image
Penn collection
Wharton Pension Research Council Working Papers
Degree type
Discipline
Subject
Economics
Funder
Grant number
License
Copyright date
Distributor
Related resources
Contributor
Abstract

This study evaluates the effect of Chile’s pension system rules and regulations on individuals’ contribution and working decisions. In 1980 Chile was the first country to switch from a pay-as-you-go system to a privatized system based on individual investment accounts; then it has since been a model for pension reforms in many other Latin American countries. The Chilean system has also been considered by U.S. policy makers as a possible prototype for reform. This paper develops and estimates a dynamic behavioral model of individual decision-making about formal or informal sector employment and about pension contributions, accounting for regulations that govern the timing and level of pension benefits. Model parameters are obtained by the method of simulated maximum likelihood applied to longitudinal data from a new household survey, the Social Protection Survey (2002 to 2004), and administrative data from the pension regulatory agency. The estimated model is used to simulate the impact on employment and contribution patterns of changing the system rules. Reducing the number of quarters required to obtain the Minimum Pension and increasing the size of that pension increases work in the formal sector and contributions in the informal sector.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2008-09-01
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection