Social Security Reforms in Chile: Effects on Poverty, Labor Supply, and Savings


August 2023


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This dissertation examines the effects of Chile’s solidarity pensions on retirement behavior, poverty reduction in old age, and the consequences of early pension withdrawals during the COVID-19 pandemic. The first study analyzes the impact of expanded solidarity pensions on retirement decisions and poverty rates using a life cycle model for married males and data from the Chilean Social Protection Survey (EPS). The findings show that increased mini- mum pensions discourage labor force participation and lead to earlier retirements, while also reducing poverty among individuals over 65. The second study focuses on the consequences of early pension withdrawals during the pandemic. Using a life cycle model and taking ad- vantage of a supplementary section in the EPS on early withdrawals during the pandemic, the research assesses the effects of these withdrawals on pension wealth, saving rates, and replacement rates. The findings indicate that early withdrawals significantly reduce private pension savings at retirement, resulting in lower replacement rates. However, the inclusion of solidarity pensions helps mitigate the reduction in replacement rates, particularly bene- fiting those who made withdrawals in their 40s and individuals with middle incomes. This dissertation provides valuable insights for policymakers and individuals regarding pension reforms and retirement decisions.



Economics, General