The 2008 Chilean Reform to First-Pillar Pensions

48 Pages Posted: 19 Jan 2009

See all articles by Salvador Valdes-Prieto

Salvador Valdes-Prieto

Pontifical Catholic University of Chile - Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2009

Abstract

Chile approved in early 2008 the replacement of her two current non-contributory subsidies for the old poor for a unified program with a pioneering design, with phase-in ending in 2012. This paper describes the political economy of this reform and evaluates it with regards to efficiency and equity. The design is analogous to one adopted in Finland in 1957, with two differences: First, the subsidy withdrawal rate in response to the individual's contributory pension benefit is lower, about 30% rather than 50%. Second, preserving a tradition introduced in 1975, benefits are also withdrawn in response to per capita household income.

Keywords: social security, welfare programs, political economy of reform

JEL Classification: H55, H53, I38

Suggested Citation

Valdes-Prieto, Salvador, The 2008 Chilean Reform to First-Pillar Pensions (January 2009). CESifo Working Paper Series No. 2520, Available at SSRN: https://ssrn.com/abstract=1329901

Salvador Valdes-Prieto (Contact Author)

Pontifical Catholic University of Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile
562-686-4326 (Phone)
562-552-1310 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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