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Social Security and Wealth Accumulation in Developing Economies: Evidence from the 1981 Chilean Reform

  • Cerda, Rodrigo A.

Summary Wealth holdings are particularly important in developing economies as they allow individuals to insure themselves against income shocks in the absence of developed financial markets. In this paper, we test whether the existence of future social security benefits impacts wealth holdings by using the 1981 Chilean social security reform. Our estimates are based on the EPS 2004, which contains detailed data on wealth holdings (assets and liabilities) and social security account balances. By means of different econometric methods, we find no impact of social security on wealth accumulation, with the exception of poorer individuals. In that case, each additional peso in social security wealth depresses other types of wealth by almost 0.1 pesos, mainly in regard to real estate.

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Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 10 (October)
Pages: 2029-2044

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:10:p:2029-2044
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  1. Feldstein, Martin, 1980. "International differences in social security and saving," Journal of Public Economics, Elsevier, vol. 14(2), pages 225-244, October.
  2. Rodrigo Cifuentes, 2000. "How Does Pension Reform Affect Savings and Welfare," Working Papers Central Bank of Chile 80, Central Bank of Chile.
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  4. Solange Berstein & Guillermo Larraín & Francisco Pino, 2005. "Cobertura, densidad y pensiones en Chile: Proyecciones a 20 años plazo," Working Papers 12, Superintendencia de Pensiones, revised Nov 2005.
  5. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
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  8. Martin Feldstein & Andrew Samwick, 1997. "The Economics of Prefunding Social Security and Medicare Benefits," NBER Working Papers 6055, National Bureau of Economic Research, Inc.
  9. Cerda, Rodrigo A., 2008. "The Chilean pension reform: A model to follow?," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 541-558.
  10. Alan L. Gustman & Thomas L. Steinmeier, 1998. "Effects of Pensions on Saving: Analysis with Data from the Health and Retirement Study," NBER Working Papers 6681, National Bureau of Economic Research, Inc.
  11. Dominique Hachette, 1998. "Ahorro Privado en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 35(104), pages 3-48.
  12. Barro, Robert J. & MacDonald, Glenn M., 1979. "Social security and consumer spending in an international cross section," Journal of Public Economics, Elsevier, vol. 11(3), pages 275-289, June.
  13. Gullason, Edward T & Kolluri, Bharat R & Panik, Michael J, 1993. "Social Security and Household Wealth Accumulation: Refined Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 548-51, August.
  14. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  15. Andrea Butelmann & Francisco Gallego, 2001. "Household Saving in Chile (1988 and 1997): Testing the Life Cycle Hypothesis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(113), pages 3-48.
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