First-Round Impacts of the 2008 Chilean Pension System Reform

By Jere R. Behrman (University of Pennsylvania)

Maria Cecilia Calderon (Population Council)
Olivia S. Mitchell (Wharton School, University of
Pennsylvania)
Javiera Vasquez (Universidad de Chile)
David Bravo (Universidad de Chile)


URL: http://d.repec.org/n?u=RePEc:mrr:papers:wp245&r=ltv

Chile’s innovative privatized pension system has been lauded as
possible model for Social Security system overhauls in other
countries, yet it has also been critiqued for not including a
strong safety net for the uncovered sector. In response, the
Bachelet government in 2008 implemented reforms to rectify this
shortcoming. Here we offer the first systematic effort to
directly evaluate the reform’s impacts, focusing on the new Basic
Solidarity Pension for poor households with at least one person
age 65+. Using the Social Protection Survey, we show that
targeted poor households received about 2.4 percent more
household annual income, with little evidence of crowding-out of
private transfers. We also suggest that recipient household
welfare probably increased due to slightly higher expenditures on
basic consumption including healthcare, more leisure hours, and
improved self-reported health. While measured short-run effects
are small, follow-ups will be essential to gauge longer-run
outcomes.