The impact of the Chilean pension withdrawals during the Covid pandemic on the future savings rate

Carlos Madeira

Journal of International Money and Finance, 2022, vol. 126, issue C

Abstract: Chile implemented pension withdrawals during the pandemic at a much larger scale than other OECD countries. Estimating a life cycle model with survey data, I find that households consume a significant fraction of their non-contributory pension wealth, implying a tradeoff between improving public pensions and increasing savings. Counterfactual simulations show that the pandemic pension withdrawals may decrease the future savings rate by 1.7%. Furthermore, policy reforms may decrease the aggregate savings rate by 0.2% for each percentage point of solidarity tax from current workers. The solidarity taxes increase substantially the pension income of poor retirees, but their effects decline over time.

Keywords: Savings; Pension wealth; Life cycle; Crowding-out; Covid pandemic (search for similar items in EconPapers)
JEL-codes: D14 E21 H31 H55 O54 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:126:y:2022:i:c:s0261560622000535

DOI: 10.1016/j.jimonfin.2022.102650

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