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Impact of Social Security Reform on Labor Force Participation Rates of Pensioners and Nonpensioners: Evidence from Chile

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  • Alejandra Cox Edwards
  • Estelle James

Abstract

Recent research argues that pension systems influence the worker'sdecision to retire. The experience of Chile, which radically changedits pension system in 1981, offers an opportunity to test this hypothesis.Chile shifted from a defined-benefit plan to an actuarially fair defined-contributionplan, exempted pensioners from the pension payroll tax, and tightenedearly retirement restrictions. We estimate the impact of the 1981reform on the probability of dropping out of the labor force. We findlarge effects: Labor force participation rose dramatically among oldermen who approached retirement age after 1981, in contrast to the declineobserved before. (c) 2010 by The University of Chicago. Allrights reserved.

Suggested Citation

  • Alejandra Cox Edwards & Estelle James, 2010. "Impact of Social Security Reform on Labor Force Participation Rates of Pensioners and Nonpensioners: Evidence from Chile," Journal of Human Capital, University of Chicago Press, vol. 4(2), pages 130-172.
    • Handle: RePEc:ucp:jhucap:v:4:y:2010:i:2:p:130-172
    DOI: 10.1086/657080
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