Pension Reform Options in Chile : Some Tradeoffs

Author/Editor:

Marika Santoro

Publication Date:

March 13, 2017

Electronic Access:

Free Full Text (PDF file size is 879 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

In this paper, we study the macroeconomic impact of pension reform options in Chile, using a dynamic general equilibrium model. The main reform proposal considers raising contributions (employer side) and vehicle additional proceeds to individual accounts and to increase the support of solidarity pensions. We model increased contributions as a labor tax. We find the impact of this reform on GDP to be negative in the near to the medium run, with GDP declining by 0.5 percent by 2021, as a result of labor tax distortions which lead to a fall in labor supply, investment and to a loss in competitiveness. We also illustrate the main macroeconomics tradeoffs by analyzing alternative reforms, such as using revenues only to improve future pensions or a reform package funded by a mix of higher contributions and indirect taxes.

Series:

Working Paper No. 17/53

Subject:

English

Publication Date:

March 13, 2017

ISBN/ISSN:

9781475586206/1018-5941

Stock No:

WPIEA2017053

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

21

Please address any questions about this title to publications@imf.org