Social Security and Wealth Accumulation in Developing Economies: Evidence from the 1981 Chilean Reform

Wealth holdings are particularly important in developing economies as they allow individuals to insure themselves against income shocks in the absence of developed financial markets. In this paper, we test whether the existence of future social security benefits impacts wealth holdings by using the...

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Bibliographic Details
Published in:World development 2008-10, Vol.36 (10), p.2029-2044
Main Author: Cerda, Rodrigo A.
Format: Article
Language:English
Subjects:
Assets
Chile
Developing countries
Econometrics
Economic development
Estimates
Latin America
LDCs
Liability
Markets
Reforms
Social insurance
Social security
Studies
Wealth
wealth social security Latin America Chile
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Summary:Wealth holdings are particularly important in developing economies as they allow individuals to insure themselves against income shocks in the absence of developed financial markets. In this paper, we test whether the existence of future social security benefits impacts wealth holdings by using the 1981 Chilean social security reform. Our estimates are based on the EPS 2004, which contains detailed data on wealth holdings (assets and liabilities) and social security account balances. By means of different econometric methods, we find no impact of social security on wealth accumulation, with the exception of poorer individuals. In that case, each additional peso in social security wealth depresses other types of wealth by almost 0.1 pesos, mainly in regard to real estate.
ISSN:0305-750X
1873-5991
DOI:10.1016/j.worlddev.2008.01.008