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A Just Retirement Future for Chilean Workers: Social Insurance or Private Savings?

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  • Silvia Borzutsky
  • Mark Hyde

Abstract

This article addresses a recurring debate in social policy analysis, but with a contemporary twist. Which model of pension provision is most likely to augment the financial well-being of Chilean workers in retirement: social insurance or private savings? The analysis developed here evaluates both models against the requirements of justice and poverty reduction. The neoliberal rationale for pensions privatisation is typically articulated as a synthesis of deontological and consequentialist imperatives, emphasising the centrality of the individual’s inalienable rights, but permitting a degree of intrusive paternalism to diminish the prevalence of economic disadvantage among retirees. Our analysis of empirical evidence regarding pension design and outcomes in Chile suggests that privatisation has failed to meet the objectives that are shaped by this normative repertoire and in fact it has contributed to keeping almost 20 percent of the retirees below the poverty level. While it represents a fundamental departure from the free market model of neoliberalism, we find that a well-designed social insurance arrangement that is universal in scope, and redistributive, would augment the freedom of Chilean workers and also reduce poverty.

Suggested Citation

  • Silvia Borzutsky & Mark Hyde, 2015. "A Just Retirement Future for Chilean Workers: Social Insurance or Private Savings?," Global Development Institute Working Paper Series 21415, GDI, The University of Manchester.
    • Handle: RePEc:bwp:bwppap:21415
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    References listed on IDEAS

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    5. Sanjay Patnaik, 2015. "Rent-Seeking and Public Policy," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(3), pages 03-05, October.
    6. Mark Hyde & Silvia Borzutzky, 2016. "Rent-Seeking in Private Pensions," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-58035-1, July.
    7. Mitchell, Olivia S. & Utkus, Stephen P. (ed.), 2004. "Pension Design and Structure: New Lessons from Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780199273393.
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    Cited by:

    1. Renáta Pitoňáková, 2018. "Private Sector Savings," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-17, March.

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