Gender Pension Gaps in a Private Retirement Accounts System : A Dynamic Model of Household Labor Supply and Savings

This paper develops and estimates a dynamic model of individuals' and couples' labor supply, savings, and retirement decisions to analyze how the design of a privatized pension system affects gender pension gaps. Chile has one of the longest running nationwide private retirements accounts systems in the world, operating since 1980. It has served as a model for many countries and was reformed in 2008 to alleviate old- age poverty and reduce gender pension gaps. The paper estimates the dynamic model using pre-reform data and compares the model's short-term predictions with available evidence on the reform's causal impacts. The analysis finds that household structure is an important determinant of the behavioral and distributional impacts of the reform. The paper evaluates how actual and counterfactual changes in the pension system design affect men's and women's economic decisions, pension receipts, and program costs over a longer time horizon. Three design features significantly reduce gender pension gaps: expanding minimum pension benefit eligibility, providing a per-child pension bonus, and increasing women's retirement age to be equal to men's.