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The Chilean pension reform: A model to follow?

  • Cerda, Rodrigo A.

One of the major economic reforms in the Chilean economy was the 1981 pension reform. In that year, Chile transformed its Pay-as-you-go social (PAYG) security system to an individual account social security system (IA). This paper discusses the impacts of the social security reform. To do so, we construct a countra-factual scenario of the Chilean economy under the PAYG system using simulations methods and we compare it with the effective data occurred under the IA system. We discuss the fiscal impacts, plus pension coverage on the elderly and the PAYG system's macroeconomics impacts by comparing them with the actual evolution of the Chilean economy under the IA system. Our simulations show significant fiscal deficits in the PAYG plus relatively lower pension coverage and modest benefits compare to the IA system. Finally, we show that the pension reform might have had significant macroeconomic impacts.

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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 30 (2008)
Issue (Month): 3 ()
Pages: 541-558

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Handle: RePEc:eee:jpolmo:v:30:y:2008:i:3:p:541-558
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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  15. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711.
  16. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 1999. "Social Security in an Overlapping Generations Economy with Land," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 638-665, July.
  17. de Jager, Nicole E. M. & Graafland, Johan J. & Gelauff, George M. M., 1996. "A negative income tax in a mini-welfare state: A simulation exercise with mimic," Journal of Policy Modeling, Elsevier, vol. 18(2), pages 223-231, April.
  18. Laurence J. Kotlikoff & Kent A. Smetters & Jan Walliser, 1998. "Opting Out of Social Security and Adverse Selection," NBER Working Papers 6430, National Bureau of Economic Research, Inc.
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