IDEAS home Printed from https://ideas.repec.org/p/sdp/sdpwps/47.html
   My bibliography  Save this paper

The effect of the Chilean Pension Reform on Wealth Accumulation

Author

Listed:
  • Ximena Quintanilla

    () (Studies Division, Chilean Pension Supervisor)

Abstract

Chile went through a major pension system reform in 1981, replacing the state managed pay-as-you-go system by a privately-managed fully funded scheme. The reform implied a rather important increase in the net present value of expected pension wealth for most of those who opted-out to the new arrangement. We investigate the extent to which households substitute this increase by decreasing accumulation of other wealth. As the decision to either stay in the old system or to opt-out to the new one was not random, we follow an instrumental variable approach that allow us to overcome the unobserved heterogeneity problem. Using data from the Social Protection Survey we find two suitable instruments that we apply to two different subsamples. The displacement effect between expected pension wealth and non-pension wealth is estimated to be in the range of 30%. Among the possible reasons for the incomplete offset are imperfect information, the desire to compensate for new risks faced and habit formation..

Suggested Citation

  • Ximena Quintanilla, 2011. "The effect of the Chilean Pension Reform on Wealth Accumulation," Working Papers 47, Superintendencia de Pensiones, revised Sep 2011.
  • Handle: RePEc:sdp:sdpwps:47
    as

    Download full text from publisher

    File URL: http://www.spensiones.cl/redirect/files/doctrab/DT00047.pdf
    File Function: Revised version, 2011
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
    2. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1.
    3. Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, vol. 57(1), pages 117-146, October.
    4. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security and Households' Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1075-1119.
    5. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
    6. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages 153-170, March.
    7. James Banks & Carl Emmerson & Gemma Tetlow, 2005. "Estimating pension wealth of ELSA respondents," IFS Working Papers W05/09, Institute for Fiscal Studies.
    8. Raquel Carrasco & José M. Labeaga & J. David López-Salido, 2005. "Consumption and Habits: Evidence from Panel Data," Economic Journal, Royal Economic Society, vol. 115(500), pages 144-165, January.
    9. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    pension wealth; private wealth;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sdp:sdpwps:47. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andres Otero). General contact details of provider: http://edirc.repec.org/data/spegvcl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.