Chile approved in early 2008 the replacement of her two current non-contributory subsidies for the old poor for a unified program with a pioneering design, with phase-in ending in 2012. This paper describes the political economy of this reform and evaluates it with regards to efficiency and equity. The design is analogous to one adopted in Finland in 1957, with two differences: First, the subsidy withdrawal rate in response to the individual’s contributory pension benefit is lower, about 30% rather than 50%. Second, preserving a tradition introduced in 1975, benefits are also withdrawn in response to per capita household income.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 2520.
Find related papers by JEL classification: H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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