Pension reform and fiscal policy.Some lessons from Chile
AbstractIn this paper we analyze the short and medium term fiscal costs stemming from structural pension reform, taking Chile as workhorse. The Chilean pension system, based on individual capital accounts managed by the private sector, has been in operation for almost 30 years, providing a rich evidence of the impact of pension systems on public accounts. Besides, a recent reform that crucially changes the solidarity pillar is being implemented now. In the paper we argue that although much lower than its benefits, fiscal transition costs tend to be high and persistent, so a fiscal consolidation prior to the reform is advisable. This also allows filling the coverage holes that labour market informality generates, as illustrated for Chile, Colombia, Mexico and Peru. Finally, in more general terms, the exportability of this type of pension reform depends not only on its specific design, but on the quality of market and public institutions.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 0915.
Length: 37 pages
Date of creation: Jul 2009
Date of revision:
Pension reform; implicit debt; fiscal costs; solidarity pillar; minimum pension; Chile;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-04-11 (Economics of Ageing)
- NEP-ALL-2010-04-11 (All new papers)
- NEP-MAC-2010-04-11 (Macroeconomics)
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- Javier Alonso & Jasmina Bjeletic & David Tuesta, 2010. "Reasons to justify fees on assets in the Peruvian private pension sector," Working Papers 1024, BBVA Bank, Economic Research Department.
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