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Voluntary Savings, Financial Behavior and Pension Finance Literacy: Evidence from Chile


  • Oscar Landerretche
  • Claudia Martínez


Chileans have limited knowledge of the pension system, its rules and the consequences involved in their personal decisions within it. Using a variation in the household composition- having a pensioner in the household- as an instrument, we show that Chileans with more knowledge about the pension system are more likely to have additional financial savings, but not within the voluntary pension saving plans offered by the pension system. We find that getting one additional answer right in the pension literacy survey (out of six) generates approximately a 50% additional chance that the individual will save at least in one of the surveyed periods, and a 25% percent additional chance that the individual will save in both surveyed periods. We also test for evidence that pension literacy affects worker choices regarding their pension savings (what we call financial gymnastics). We find that more literate workers are more likely to engage in pension fund type switching and that independent workers are more likely to voluntarily enter the pension system as affiliates if they have more pension finance literacy. Getting one additional answer right in the pension literacy survey (out of six) increases in 20% the probability of pension fund type switching and in 30% the probability of voluntary affiliation to the pension system of self- employed workers.

Suggested Citation

  • Oscar Landerretche & Claudia Martínez, 2011. "Voluntary Savings, Financial Behavior and Pension Finance Literacy: Evidence from Chile," Working Papers wp328, University of Chile, Department of Economics.
  • Handle: RePEc:udc:wpaper:wp328

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    1. Alberto Arenas de Mesa & David Bravo & Jere R. Behrman & Olivia S. Mitchell & Petra E. Todd, 2006. "The Chilean Pension Reform Turns 25: Lessons From the Social Protection Survey," NBER Working Papers 12401, National Bureau of Economic Research, Inc.
    2. De Mesa, Alberto Arenas & Bertranou, Fabio, 1997. "Learning from social security reforms: Two different cases, Chile and Argentina," World Development, Elsevier, vol. 25(3), pages 329-348, March.
    3. Giovanni Mastrobuoni, 2007. "Do better–informed workers make better retirement choices? A test based on the Social Security Statement," Carlo Alberto Notebooks 51, Collegio Carlo Alberto.
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    1. repec:eso:journl:v:48:y:2017:i:4:p:489-514 is not listed on IDEAS
    2. Castro, Rubén & Fortunato, Andrés, 2015. "Is financial literacy an economic good?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    3. Vogel, E.E. & Saravia, G. & Astete, J. & Díaz, J. & Riadi, F., 2015. "Information theory as a tool to improve individual pensions: The Chilean case," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 424(C), pages 372-382.
    4. Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
    5. Antonia Grohmann, 2017. "Financial Literacy and Financial Behavior: Evidence from the Emerging Asian Middle Class," Discussion Papers of DIW Berlin 1702, DIW Berlin, German Institute for Economic Research.
    6. Margherita Calderone, 2014. "The Role of Financial Literacy and of Financial Education Interventions in Developing Countries," DIW Roundup: Politik im Fokus 34, DIW Berlin, German Institute for Economic Research.

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