Impacts of Chilean Pension Reform 2008

Chile's pension system has been critiqued for not includig a strong safety net for the uncovered sector. In response, the Bachelet government in 2008 implemented reforms to rectify this shortcoming. In this article, Behrman, et al. (2011) offer the first systematic effort to directly evaluate the reform's impacts, focusing on the new Basic Solidarity Pension for poor households with at least one person aged 65+. Using the Social Protection Survey, the authors show that targeted poor household received about 2.4 percent more household annual income, with little evidence of crowding-out of private transfers. The authors also suggest that recipient household welfare probably increasaed due to slightly higher expenditures on basic consumption including healthcare, more leisure hours, and improved self-reported health. While measured short-run effects are small, follow-ups will be essential to gauge longer-run outcomes.