Effects of future pension benefits on pre‐retirement labor supply: Evidence from Chile

Oscar Becerra

Review of Development Economics, 2023, vol. 27, issue 1, 198-219

Abstract: In this paper, I estimate the effect of future pension benefits on pre‐retirement labor supply for a representative sample of Chilean workers. Using nonlinear patterns in pension benefit formulas and a reform that permanently changed non‐contributory pensions, I estimate the effect of pension accrual and expected pension wealth on labor force and contributory‐sector participation, labor earnings, and hours worked. I find that the effect is concentrated on the impact of pension accrual on the probability to contribute to the pension system. The effect is heterogeneous and is concentrated among middle‐aged workers, low‐skilled workers, and workers with higher financial literacy.

Date: 2023
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