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Does Pension Reform Really Spur Productivity, Saving, and Growth?

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  • : Klaus Schmidt-Hebbel

Abstract

Substituting a fully-funded system for a pay-as-you-go regime provides potential efficiency gains in factor markets, can contribute to higher saving, and hence could raise growth. But pension reformers face significant uncertainty about the size and timing of these benefits. This paper sheds light on this issue in two directions. First it reviews recent world-wide empirical and simulations evidence on pension systems and reforms to infer about the likely factor market benefits and potential saving effects of pension reform and their quantitative implications for growth. Then new evidence is provided for Chile, the country with the oldest and most radical pension reform to date. The results suggest that Chile's pension reform has improved labor-market performance and raised saving, investment, and factor productivity, contributing to a quarter of the country's growth increase.

Suggested Citation

  • : Klaus Schmidt-Hebbel, 1998. "Does Pension Reform Really Spur Productivity, Saving, and Growth?," Working Papers Central Bank of Chile 33, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:33
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    Citations

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    Cited by:

    1. Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149.
    2. -, 2007. "Economic Survey of Latin America and the Caribbean 2006-2007," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1065 edited by Eclac, OCTOBER.
    3. Bravo, Jorge H., 2001. "The Chilean Pension System: A Review of Some Remaining Difficulties After 20 Years of Reform," Discussion Paper 7, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    4. Cristián Larroulet Vignau, 2003. "Public policies and national dvelopment," Past Working Papers 30, Universidad del Desarrollo, School of Business and Economics.
    5. Cristián Larroulet Vignau, 2003. "Políticas públicas para el desarrollo," Past Working Papers 20, Universidad del Desarrollo, School of Business and Economics.
    6. Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 692-711, December.
    7. Axel Börsch-Supan, 2000. "Was lehrt uns die Empirie in Sachen Rentenreform?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 1(4), pages 431-451, November.
    8. Francisco Gallego & Felipe Morandé & Raimundo Soto, 2001. "El Ahorro y el Consumo de Bienes Durables Frente al Ciclo Económico en Chile: ¿Consumismo, Frugalidad, Racionalidad?," Working Papers Central Bank of Chile 96, Central Bank of Chile.
    9. Axel Börsch-Supan & Christopher Quinn, 2015. "Taxing Pensions and Retirement Benefits in Germany," CESifo Working Paper Series 5636, CESifo Group Munich.
    10. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, Elsevier.
    11. Axel Börsch-Supan, 2003. "What are NDC Pension Systems? What Do They Bring to Reform Strategies?," MEA discussion paper series 03042, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    12. Cuadros, Jéssica & Jiménez, Luis Felipe, 2003. "Expanding the coverage of pension systems in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    13. David Law, 2016. "Retirement income policy and national savings," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(1), pages 29-50, April.
    14. Alonso, Javier & Sánchez, Rosario & Tuesta, David, 2014. "Un modelo para el sistema de pensiones en el Perú: Diagnóstico y recomendaciones," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 27, pages 81-98.
    15. Marek Louzek, 2008. "Pension system reform in Central and Eastern Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 20(1), pages 119-131.

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