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Is There an Endogenous Problem if Sustainability on the Pay-as-you-go Social Security System? Using the Chilean Experience as an Experiment


  • Rodrigo Cerda

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)


The paper provides empirical evidence about the effects of the "pay-as-you-go" and the individual account social security systems over the family choice variables such as fertility rate, schooling, and time spent on children and it links those effects with the sustainability of the fiscal budget on the "pay-as-you-go"system. The paper uses the 1998 CASEN database from Chile. On the database, the "pay-as-you-go" and the individual account systems coexist for individuals 35 years and older as result of the regulations established by the 1981 social security reform law. The results show that the numbers of children per family and female labor supply are depressed by increases on the "pay-as-you-go" payroll tax rate. Those effects produce an endogenous sustainability problem over the fiscal budget, as the number of individuals paying taxes and the amount of taxes paid by females decrease endogenously over time. The individual system does not show effect at all over the family decision choice analyzed.

Suggested Citation

  • Rodrigo Cerda, 2002. "Is There an Endogenous Problem if Sustainability on the Pay-as-you-go Social Security System? Using the Chilean Experience as an Experiment," Documentos de Trabajo 203, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:203

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor


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