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Impacts of an employer’s contributory pillar: evidence from Chile

Author

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  • Parada-Contzen, Marcela
  • Provoste, Lucas
  • Sanhueza, Cristóbal
  • Traina, James
  • Tran, Uyen

Abstract

We estimate labor demand elasticities to predict the employment effects of an employer’s contributory pillar in Chile’s pension system. The Chilean system has been a model for reform in many countries worldwide. We find labor demand to be inelastic, with baseline estimates ranging from −0.27 to −0.91. We predict that the implementation of an employer contributory pillar with contribution rates of 1% increase would increase unemployment rates by 0.20 to 0.71 percentage points (pp) from a baseline unemployment of 6.51%. Our results show sizable differences in labor demand elasticities and employment impacts by industry and workforce characteristics. Simulations imply implementing a uniform employer contributory pillar would especially reduce employment for low-skilled workers and workers in industries where labor is easily substitutable.

Suggested Citation

  • Parada-Contzen, Marcela & Provoste, Lucas & Sanhueza, Cristóbal & Traina, James & Tran, Uyen, 2025. "Impacts of an employer’s contributory pillar: evidence from Chile," Journal of Pension Economics and Finance, Cambridge University Press, vol. 24(4), pages 543-563, October.
    • Handle: RePEc:cup:jpenef:v:24:y:2025:i:4:p:543-563_3
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