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Pension reform and capital markets : are there any (hard) links?

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  • Walker, Eduardo
  • Lefort, Fernando

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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Bibliographic Info

Paper provided by The World Bank in its series Social Protection Discussion Papers with number 24082.

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Date of creation: 28 Feb 2002
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Handle: RePEc:wbk:hdnspu:24082

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Related research

Keywords: Economic Theory&Research; Banks&Banking Reform; Pensions&Retirement Systems; Environmental Economics&Policies; Financial Intermediation;

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References

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  2. Pierre-Richard Agenor & Joshua Aizenman, 1998. "Volatility and the Welfare Costs of Financial Market Integration," NBER Working Papers 6782, National Bureau of Economic Research, Inc.
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  9. Fernando Lefort & Klaus Schmidt-Hebbel, 2002. "Indexation, Inflation and Monetary Policy: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.), Indexation, Inflation and MOnetary Policy, edition 1, volume 2, chapter 1, pages 001-018 Central Bank of Chile.
  10. Morande, Felipe G., 1998. "Savings in Chile. What went right?," Journal of Development Economics, Elsevier, vol. 57(1), pages 201-228, October.
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  13. 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.
  14. Hans J. Blommestein, 1997. "Institutional Investors, Pension Reform and Emerging Securities Markets," IDB Publications 6807, Inter-American Development Bank.
  15. 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.
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  18. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
  19. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
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  21. Robert Holzmann, 1997. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 149-178, June.
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  24. : Klaus Schmidt-Hebbel, 1998. "Does Pension Reform Really Spur Productivity, Saving, and Growth?," Working Papers Central Bank of Chile 33, Central Bank of Chile.
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