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Product Choice Under Government Regulation: The Case Of Chile'S Privatized Pension System

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  • Elena Krasnokutskaya
  • Yiyang Li
  • Petra E. Todd

Abstract

Chile's individual retirement pension accounts system has been a model for many countries. To limit the riskiness of pension investments, Chile required pension fund managers to deliver returns that are not more than 2% below the industry average. We develop and estimate a model of the pension investment market that allows us to study the impact of minimum return regulation. We find that the regulation leads to higher demand for risky investments, creates incentives to offer riskier portfolios, and leads to higher management fees. However, the regulation also stimulates balance accumulation that ultimately reduces the reliance on government support.

Suggested Citation

  • Elena Krasnokutskaya & Yiyang Li & Petra E. Todd, 2018. "Product Choice Under Government Regulation: The Case Of Chile'S Privatized Pension System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 1747-1783, November.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:4:p:1747-1783
    DOI: 10.1111/iere.12319
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    Cited by:

    1. Marcela PARADA‐CONTZEN, 2023. "Gender, family status and health characteristics: Understanding retirement inequalities in the Chilean pension model," International Labour Review, International Labour Organization, vol. 162(2), pages 271-303, June.
    2. Sam Flanders & Melati Nungsari & Marcela Parada‐Contzen, 2020. "Pricing schemes and market efficiency in private retirement systems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 1041-1068, August.
    3. Madeira, Carlos, 2021. "The long term impact of Chilean policy reforms on savings and pensions," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).

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