Universidad de Chile, Facultad de Economía y Negocios, Escuela de Postgrado
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Professor Advisor
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Caputo, Rodrigo
Professor Advisor
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Clarke, Damian
Author
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Ordóñez Jofré, Félix
Admission date
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2023-05-08T20:01:21Z
Available date
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2023-05-08T20:01:21Z
Publication date
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2022
Identifier
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https://repositorio.uchile.cl/handle/2250/193291
Abstract
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This paper quantifies the efficiency, inequality and welfare consequences of
alternative social security systems. In the context of an overlapping generations
model, with ex-ante heterogeneity in productivity, we consider three alternative
social security schemes. A funded defined contribution (FDC) system, based
on individual capitalization. A notional defined contribution scheme (NDC)
with collective capitalization and a non-contributory targeted pension (NTP)
scheme, financed with taxes. Our main findings are as follows. First, a collec-
tive capitalization system, NDC, reduces pension inequality, without efficiency
losses and with overall welfare gains. Second, an FDC scheme, combined with a
non-contributory targeted pension, is Pareto efficient: it increases the replace-
ment rate of a low-productivity individual, without reducing the replacement
rate of high-productivity workers. However, it implies efficiency and welfare
losses as a consequence of distortionary taxes. Third, calibrating for Chile, we
find that it is possible to increase the replacement rate of all individuals as
well as the aggregate capital in the economy. This is possible with a suitable
combination of the three systems previously described.
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Lenguage
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en
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Publisher
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Universidad de Chile
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Type of license
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Attribution-NonCommercial-NoDerivs 3.0 United States