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Household Financial Decisions After the 2008 Chilean Pension Reform

Author

Listed:
  • Alessandro Bucciol

    (Department of Economics (University of Verona))

  • Martina Manfre'

    (Department of Economics (University of Verona))

  • Gregorio Gimenez

    (University of Zaragoza)

Abstract

We evaluate the effect of the 2008 Chilean pension reform, that introduced a basic pension to the poorest part of the elder population, in terms of decisions regarding debts and assets. We apply a difference-in-difference estimation method to longitudinal survey data representative of the Chilean population. Our evidence suggests that those who started receiving basic pension increased their holding and amount of debt. It may be that some people used the basic pension as a collateral for acquiring more debt, rather than using it as a way to finance new investments. The increase in debt positions is proportionally higher when compared to the variation in asset positions. We interpret this measure as an indicator of debt sustainability. Moreover, debt ratio increases significantly more for women, who may be particularly exposed to financial shocks. This result raises concern on the potential financial vulnerability of the population that was targeted by the reform.

Suggested Citation

  • Alessandro Bucciol & Martina Manfre' & Gregorio Gimenez, 2019. "Household Financial Decisions After the 2008 Chilean Pension Reform," Working Papers 10/2019, University of Verona, Department of Economics.
    • Handle: RePEc:ver:wpaper:10/2019
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    References listed on IDEAS

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    More about this item

    Keywords

    Chile; Pension; Financial vulnerability; Gender vulnerability; Difference-in-difference;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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