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Social security coverage in Chile, 1990-2001 (English)

This empirical paper identifies the main forces that influenced the coverage of the new Chilean pension system during the 1990s. I find that government policy determined coverage to a large extent. The key policies in this respect in order of importance were: the level of the Minimum Salary, the level of the flat commission charged by pension fund managers, the rate of economic growth, and the size of subsidies given to workers when they use state hospitals. If the governments of Chile in the 1990s had used these policy levers in a range of different ways, then contributors as of August 2001 could have been anywhere between 3.3 and 4.3 million workers. My second finding - from non econometric evidence - is that the Minimum Salary applies to reported earnings rather than actual earnings. Thus, increasing the Minimum Salary does not appear to reduce coverage by inducing formal-sector employers to fire low productivity workers but does so by forcing poor workers to save more for old age and by reducing the amount of Minimum Pension subsidy that they can expect. The third result is that the net impact of raising the Minimum Pension floor is not statistically different from zero. To explain this I present a simple model that shows that an increase in the level of the Minimum Pension floor has two effects on coverage, of opposing signs, so the net impact is uncertain.

Details

  • Author

    Valdes Prieto,Salvador

  • Document Date

    2004/01/01

  • Document Type

    Departmental Working Paper

  • Report Number

    30495

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Chile,

  • Region

    Latin America & Caribbean,

  • Disclosure Date

    2010/07/01

  • Doc Name

    Social security coverage in Chile, 1990-2001

  • Keywords

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Citation

Valdes Prieto,Salvador

Social security coverage in Chile, 1990-2001 (English). Background paper for regional study on social security reform Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/853631468769210178/Social-security-coverage-in-Chile-1990-2001