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Pension reforms and employment

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  • Alejandra Cox Edwards

Abstract

The Chilean social security reform became effective in November 1980, replacing a traditional pay-as-you-go system with a unified system based on a minimum required contribution towards an individual account. The reform lowered the combined contribution rates towards old age and disability pension and tightened the link between contributions and benefits increasing individuals' valuation of contributions. This paper offers estimates of 'money's worth' ratios for 'typical contributors' before and after reform, indicating that the post-reform money's worth of each peso of contribution increased substantially for all groups, and particularly for women. Using aggregate data on employment and output from 1960 to 2002, estimates imply that a 10% reduction in the payroll tax led to a 2% increase in employment, and to a 0.7 point expansion in labour force participation.

Suggested Citation

  • Alejandra Cox Edwards, 2005. "Pension reforms and employment," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 305-319.
    • Handle: RePEc:taf:intecj:v:19:y:2005:i:2:p:305-319
    DOI: 10.1080/10168730500080600
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    References listed on IDEAS

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    1. Barrientos, Armando, 1998. "Pension reform, personal pensions and gender differences in pension coverage," World Development, Elsevier, vol. 26(1), pages 125-137, January.
    2. Edwards, Sebastian & Edwards, Alejandra Cox, 2002. "Social Security Privatization and Labor Markets: The Case of Chile," Economic Development and Cultural Change, University of Chicago Press, vol. 50(3), pages 465-489, April.
    3. James, Estelle & Edwards, Alejandra Cox & Wong, Rebecca, 2003. "The gender impact of pension reform : a cross-country analysis," Policy Research Working Paper Series 3074, The World Bank.
    4. James, Estelle & Edwards, Alejandra Cox & Wong, Rebeca, 2003. "The gender impact of pension reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(2), pages 181-219, July.
    5. Sebastian Edwards & Alejandra Cox Edwards, 2002. "Social Security Privatization Reform and Labor Markets: The Case of Chile," NBER Working Papers 8924, National Bureau of Economic Research, Inc.
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