The Effects of the Minimum Pension Reform in a Defined Contribution Pension System: The Case of Chile
7 September, 2022 12:00 hrs
Abstract: Using longitudinal data on roughly 16,800 low-income workers, I estimate the effects of a reform that introduced a solidarity pillar on the Chilean defined contribution pension system. I specifically test for a negative effect on the propensity to save for retirement that would have arisen from the disincentives caused by the introduction of an implicit tax on pension savings, as predicted by a theoretical life-cycle model. Empirically, I document a negative and significant effect on the propensity to save for retirement among workers with historically low incomes and contribution densities. However, the estimated disincentive effect shows a significantly smaller magnitude than the predictions of a standard neoclassical model. Moreover, I find no evidence of disincentives being concentrated among mid-age and old workers, which is another clear prediction of the models. The model can rationalize other facts obtained from the data: stronger negative effect for low-income female workers, a reduction in hours of work, and an effect concentrated among occupations where informality is more common.
Location:
Sala de Consejo, Beauchef 851, piso 4 | Departamento de Ingeniería Industrial, UCHILE
Speaker:
Jorge Sabat
MIPP Chile 2024