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Social Security and Wealth Accumulation in Developing Economies: Evidence from the 1981 Chilean Reform

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  • Cerda, Rodrigo A.

Abstract

Summary Wealth holdings are particularly important in developing economies as they allow individuals to insure themselves against income shocks in the absence of developed financial markets. In this paper, we test whether the existence of future social security benefits impacts wealth holdings by using the 1981 Chilean social security reform. Our estimates are based on the EPS 2004, which contains detailed data on wealth holdings (assets and liabilities) and social security account balances. By means of different econometric methods, we find no impact of social security on wealth accumulation, with the exception of poorer individuals. In that case, each additional peso in social security wealth depresses other types of wealth by almost 0.1 pesos, mainly in regard to real estate.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 10 (October)
Pages: 2029-2044

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:10:p:2029-2044

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: wealth social security Latin America Chile;

References

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  1. Cerda, Rodrigo A., 2008. "The Chilean pension reform: A model to follow?," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 541-558.
  2. Feldstein, Martin, 1980. "International differences in social security and saving," Journal of Public Economics, Elsevier, vol. 14(2), pages 225-244, October.
  3. Dominique Hachette, 1998. "Ahorro Privado en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 35(104), pages 3-48.
  4. Andrea Butelmann & Francisco Gallego, 2001. "Household Saving in Chile (1988 and 1997): Testing the Life Cycle Hypothesis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(113), pages 3-48.
  5. Laurence J. Kotlikoff, 1995. "Privatization of Social Security: How It Works and Why It Matters," NBER Working Papers 5330, National Bureau of Economic Research, Inc.
  6. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September.
  7. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  8. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
  9. Mitchell, Olivia S & Zeldes, Stephen P, 1996. "Social Security Privatization: A Structure for Analysis," American Economic Review, American Economic Association, vol. 86(2), pages 363-67, May.
  10. Martin Feldstein & Andrew Samwick, 1997. "The Economics of Prefunding Social Security and Medicare Benefits," NBER Working Papers 6055, National Bureau of Economic Research, Inc.
  11. Gullason, Edward T & Kolluri, Bharat R & Panik, Michael J, 1993. "Social Security and Household Wealth Accumulation: Refined Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 548-51, August.
  12. Barro, Robert J. & MacDonald, Glenn M., 1979. "Social security and consumer spending in an international cross section," Journal of Public Economics, Elsevier, vol. 11(3), pages 275-289, June.
  13. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
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Cited by:
  1. Santiago Levy & Norbert Schady, 2013. "Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 193-218, Spring.

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