IDEAS home Printed from https://ideas.repec.org/a/kap/reveho/v18y2020i2d10.1007_s11150-020-09479-x.html
   My bibliography  Save this article

Crowding-out in savings decisions, portfolio default adoption and home ownership: evidence from the Chilean retirement system

Author

Listed:
  • Marcela Parada-Contzen

    (Universidad de Concepción)

Abstract

This paper studies crowd-out effects across choices regarding different sources of investment and savings in the Chilean pension system (e.g., voluntary savings within and outside the retirement system, housing status, and default portfolio adoption). Because preferences over choice sets are unobserved and it is expected that individual unobserved characteristics may be correlated across decisions, I jointly estimate a dynamic reduced-form life cycle model of wealth accumulation. Simulation results indicate no short- or long-run crowd-out effects across voluntary savings accounts within and outside the retirement system. There is evidence that in the short run, there is crowding-out between mandatory savings and other forms of investments, such as home ownership or savings in the financial-banking sector. Results also show that in the long run, individuals treat home ownership and participation in voluntary retirement programs as substitute goods. Finally, the long-run effects of participating in voluntary savings programs are important in increasing active participation in portfolio decisions.

Suggested Citation

  • Marcela Parada-Contzen, 2020. "Crowding-out in savings decisions, portfolio default adoption and home ownership: evidence from the Chilean retirement system," Review of Economics of the Household, Springer, vol. 18(2), pages 543-569, June.
    • Handle: RePEc:kap:reveho:v:18:y:2020:i:2:d:10.1007_s11150-020-09479-x
    DOI: 10.1007/s11150-020-09479-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11150-020-09479-x
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11150-020-09479-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mroz, Thomas A., 1999. "Discrete factor approximations in simultaneous equation models: Estimating the impact of a dummy endogenous variable on a continuous outcome," Journal of Econometrics, Elsevier, vol. 92(2), pages 233-274, October.
    2. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    3. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    4. Michael Hurd & Pierre‐Carl Michaud & Susann Rohwedder, 2012. "The Displacement Effect of Public Pensions on the Accumulation of Financial Assets," Fiscal Studies, Institute for Fiscal Studies, vol. 33(1), pages 107-128, March.
    5. David Card & Michael Ransom, 2011. "Pension Plan Characteristics and Framing Effects in Employee Savings Behavior," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 228-243, February.
    6. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    7. Donna Gilleskie & Denise Hoffman, 2014. "Health Capital and Human Capital as Explanations for Health-Related Wage Disparities," Journal of Human Capital, University of Chicago Press, vol. 8(3), pages 235-279.
    8. Bueno, Ivonne & Perticará, Marcela, 2009. "A new approach to gender wage gaps in Chile," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    9. Betty Tao Fout & Donna B. Gilleskie, 2015. "Does Health Insurance Encourage or Crowd Out Beneficial Nonmedical Care? A Dynamic Analysis of Insurance, Health Inputs, and Health Production," American Journal of Health Economics, MIT Press, vol. 1(2), pages 125-164, Spring.
    10. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2009. "Optimal Defaults and Active Decisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1639-1674.
    11. Alok Bhargava, 2006. "Identification and Panel Data Models with Endogenous Regressors," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 3, pages 49-60, World Scientific Publishing Co. Pte. Ltd..
    12. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    13. David M. Blau, 2016. "Pensions, household saving, and welfare: A dynamic analysis of crowd out," Quantitative Economics, Econometric Society, vol. 7(1), pages 193-224, March.
    14. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, June.
    15. Kristjanpoller, Werner D. & Olson, Josephine E., 2015. "The effect of financial knowledge and demographic variables on passive and active investment in Chile's pension plan," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(3), pages 293-314, July.
    16. Engelhardt, Gary V. & Kumar, Anil, 2007. "Employer matching and 401(k) saving: Evidence from the health and retirement study," Journal of Public Economics, Elsevier, vol. 91(10), pages 1920-1943, November.
    17. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
    18. Zhou Yang & Donna B. Gilleskie & Edward C. Norton, 2009. "Health Insurance, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
    19. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security and Households' Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1075-1119.
    20. Clement Joubert, 2015. "Pension Design With A Large Informal Labor Market: Evidence From Chile," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 673-694, May.
    21. Donna Gilleskie & Euna Han & Edward Norton, 2017. "Disentangling the Contemporaneous and Dynamic Effects of Human and Health Capital on Wages over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 350-383, April.
    22. Alexander M. Gelber, 2011. "How Do 401(k)s Affect Saving? Evidence from Changes in 401(k) Eligibility," American Economic Journal: Economic Policy, American Economic Association, vol. 3(4), pages 103-122, November.
    23. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
    24. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
    25. Morales, Leonardo Fabio & Gordon-Larsen, Penny & Guilkey, David, 2016. "Obesity and health-related decisions: An empirical model of the determinants of weight status across the transition from adolescence to young adulthood," Economics & Human Biology, Elsevier, vol. 23(C), pages 46-62.
    26. Jere R. Behrman & Maria Cecilia Calderon & Olivia S. Mitchell & Javiera Vasquez & David Bravo, 2011. "First-Round Impacts of the 2008 Chilean Pension System Reform," Working Papers wp245, University of Michigan, Michigan Retirement Research Center.
    27. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    28. Arnberg, Søren & Barslund, Mikkel, 2014. "The Crowding-out Effect of Mandatory Labour Market Pension Schemes on Private Savings: Evidence from renters in Denmark," CEPS Papers 8911, Centre for European Policy Studies.
    29. Gary V. Engelhardt & Anil Kumar, 2011. "Pensions and Household Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 46(1), pages 203-236.
    30. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    31. Richard H. Thaler, 2016. "Behavioral Economics: Past, Present, and Future," American Economic Review, American Economic Association, vol. 106(7), pages 1577-1600, July.
    32. Lara Gardner & Donna B. Gilleskie, 2012. "The Effects of State Medicaid Policies on the Dynamic Savings Patterns and Medicaid Enrollment of the Elderly," Journal of Human Resources, University of Wisconsin Press, vol. 47(4), pages 1082-1127.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Madeira, 2024. "The effect of Covid pension withdrawals and the Universal Guaranteed Pension on the income of future retirees in Chile," BIS Working Papers 1176, Bank for International Settlements.
    2. Marcela PARADA‐CONTZEN, 2023. "Gender, family status and health characteristics: Understanding retirement inequalities in the Chilean pension model," International Labour Review, International Labour Organization, vol. 162(2), pages 271-303, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marcela PARADA‐CONTZEN, 2023. "Gender, family status and health characteristics: Understanding retirement inequalities in the Chilean pension model," International Labour Review, International Labour Organization, vol. 162(2), pages 271-303, June.
    2. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    3. Marta Lachowska & Michał Myck, 2018. "The Effect of Public Pension Wealth on Saving and Expenditure," American Economic Journal: Economic Policy, American Economic Association, vol. 10(3), pages 284-308, August.
    4. Juan Ayuso & Juan F. Jimeno & Ernesto Villanueva, 2019. "The effects of the introduction of tax incentives on retirement saving," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 211-249, November.
    5. Esteban García-Miralles & Jonathan M. Leganza, 2024. "Public Pensions and Private Savings," American Economic Journal: Economic Policy, American Economic Association, vol. 16(2), pages 366-405, May.
    6. Mastrogiacomo, Mauro & Dillingh, Rik & Li, Yue, 2023. "The displacement effect of compulsory pension savings on private savings. Evidence from the Netherlands, using pension funds supervisory data," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    7. Derek Messacar, 2018. "The Effects of Vesting and Locking in Pension Assets on Participation in Employer-Sponsored Pension Plans," Journal of Labor Research, Springer, vol. 39(2), pages 178-200, June.
    8. Peter van Santen, 2019. "Uncertain Pension Income and Household Saving," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 908-929, December.
    9. Andersen, Henrik Yde, 2018. "Do tax incentives for saving in pension accounts cause debt accumulation? Evidence from Danish register data," European Economic Review, Elsevier, vol. 106(C), pages 35-53.
    10. Dillingh, Rik, 2016. "Empirical essays on behavioral economics and lifecycle decisions," Other publications TiSEM 0e2143e3-bd86-4302-90eb-e, Tilburg University, School of Economics and Management.
    11. Mitchell, O.S. & Piggott, J., 2016. "Workplace-Linked Pensions for an Aging Demographic," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 865-904, Elsevier.
    12. Blau, David M., 2011. "Pensions, Household Saving, and Welfare: A Dynamic Analysis," IZA Discussion Papers 5554, Institute of Labor Economics (IZA).
    13. Leonardo Fabio Morales & Penny Gordon-Larsen & David Guilkey, 2014. "Obesity and Health-Related Decisions: An Empirical Model of the Determinants of Weight Status," Borradores de Economia 12171, Banco de la Republica.
    14. Meghir, Costas & Rivkin, Steven, 2011. "Econometric Methods for Research in Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 3, chapter 1, pages 1-87, Elsevier.
    15. Jonathan Cribb & Carl Emmerson, 2016. "What happens when employers are obliged to nudge? Automatic enrolment and pension saving in the UK," IFS Working Papers W16/19, Institute for Fiscal Studies.
    16. Morales, Leonardo Fabio & Gordon-Larsen, Penny & Guilkey, David, 2016. "Obesity and health-related decisions: An empirical model of the determinants of weight status across the transition from adolescence to young adulthood," Economics & Human Biology, Elsevier, vol. 23(C), pages 46-62.
    17. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    18. Mauro Mastrogiacomo & Yue Li & Rik Dillingh, 2022. "The displacement effect of compulsory pension savings on private savings. Evidence from the Netherlands, using pension funds supervisory data," Working Papers 747, DNB.
    19. Joubert, Clement & Todd, Petra E., 2024. "Gender pension gaps in a private retirement accounts system: A dynamic model of household labor supply and savings," Journal of Econometrics, Elsevier, vol. 243(1).
    20. Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2018. "Saving more in groups: Field experimental evidence from Chile," Journal of Development Economics, Elsevier, vol. 133(C), pages 275-294.

    More about this item

    Keywords

    Retirement income policy; Default behavior; Crowd-out effect;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:reveho:v:18:y:2020:i:2:d:10.1007_s11150-020-09479-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.