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Pension Reform And Capital Markets: Are There Any (Hard) Links?

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Author Info
EDUARDO WALKER () (Escuela de Administración, Pontificia Universidad Católica de Chile)
FERNANDO LEFORT () (Escuela de Administración, Pontificia Universidad Católica de Chile)

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Abstract

The creation of fully funded, privately managed pension systems may have significant positive direct effects on savings, growth and welfare. However, the indirect link, via capital market development, may be as important. This hypothesis is verified with evidence from emerging economies that have recently engaged in such reforms with a focus on Chile, Argentina and Peru. There is abundant qualitative and anecdotal evidence that relates pension reform with the accumulation of "institutional capital", with the existence of an adaptive legal framework, with increased specialization, transparency and integrity and even with better corporate governance. Evidence of increased financial innovation is also found while there is little evidence of bank disintermediation. In addition, time-series and panel data evidence is generally consistent with the following hypothetical effects: a reduction in the cost of capital; lower security-price volatility; and higher traded volumes. The evidence suggests that the indirect channel via capital market development may have important implications for economic growth and productivity.

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File URL: http://www.abante.cl/files/ABT/Contenidos/Vol-5-N2/Walker%20Lefort.pdf
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Publisher Info
Article provided by Escuela de Administracion. Pontificia Universidad Católica de Chile. in its journal ABANTE.

Volume (Year): 5 (2002)
Issue (Month): 2 ()
Pages: 77-149
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Handle: RePEc:pch:abante:v:5:y:2002:i:2:p:77-149

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Related research
Keywords: Pensions; Reform; Capital markets; Emerging markets; Economic growth;

Find related papers by JEL classification:
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions
O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
    Other versions:
  2. Agenor, Pierre-Richard & Aizenman, Joshua, 1998. "Volatility and the welfare costs of financial market integration," Policy Research Working Paper Series 1974, The World Bank. [Downloadable!]
    Other versions:
  3. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June. [Downloadable!] (restricted)
    Other versions:
  4. James M. Poterba & Steven F. Venti & David A. Wise, 1997. "Personal Retirement Saving Programs and Asset Accumulation: Reconciling the Evidence," NBER Working Papers 5599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Hans J. Blommestein, 1997. "Institutional Investors, Pension Reform, and Emerging Securities Markets," RES Working Papers 4094, Inter-American Development Bank, Research Department. [Downloadable!]
  6. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July. [Downloadable!] (restricted)
  7. Ajit Singh, 1996. "Pension Reform, The Stock Market, Capital Formation and Economic Growth: A Critical Commentary on the World Bank's Proposals," SCEPA Working Papers 1996-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
  8. Eduardo Walker, 1998. "The Chilean Experience Regarding Completing Markets with Financial Indexation," Working Papers Central Bank of Chile 29, Central Bank of Chile. [Downloadable!]
  9. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  10. Olivia S. Mitchell & Flavio Ataliba Barreto, 1997. "After Chile, What? Second-Round Pension Reforms in Latin America," NBER Working Papers 6316, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-78, November.
  12. Arestis, Philip & Demetriades, Panicos O & Luintel, Kul B, 2001. "Financial Development and Economic Growth: The Role of Stock Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 16-41, February.
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  13. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-88, June. [Downloadable!] (restricted)
  14. : Klaus Schmidt-Hebbel, 1998. "Does Pension Reform Really Spur Productivity, Saving, and Growth?," Working Papers Central Bank of Chile 33, Central Bank of Chile. [Downloadable!]
  15. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. E Philip Davis & Yuwei Hu, 2004. "Is There A Link Between Pension-Fund Assets And Economic Growth? - A Cross-Country Study," Public Policy Discussion Papers 04-23, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
    Other versions:
  2. E Philip Davis, 2005. "The Role Of Pension Funds As Institutional Investors In Emerging Markets," Economics and Finance Discussion Papers 05-18, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  3. Jorge Roldos, 2007. "Pension Reform and Macroeconomic Stability in Latin America," IMF Working Papers 07/108, International Monetary Fund. [Downloadable!]
  4. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Stock market development under globalization : whither the gains from reforms ?," Policy Research Working Paper Series 4184, The World Bank. [Downloadable!]
    Other versions:
  5. Dayoub, Mariam & Lasagabaster, Esperanza, 2008. "General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin America," Policy Research Working Paper Series 4720, The World Bank. [Downloadable!]
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