Regulation by Public Options: Evidence from Pension Funds

Pablo Blanchard, Sebastian Fleitas and González Valdenegro, Rodrigo

No 21152, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the equilibrium welfare effects of using state-owned enterprises (SOEs) to discipline market power. We estimate a dynamic equilibrium model of Uruguay’s individual capitalization pension system, where a high-quality SOE competes with private firms in the presence of worker inertia. We find that the presence of a SOE lowers equilibrium fees and increases investment returns. Replacing it with a private firm would more than double its fee and raise private firms’ fees by 8 percent. Reducing inertia mitigates but does not offset privatization. Comparing policy instruments, we show that direct price regulation yields higher welfare gains than competition through an SOE.

Keywords: Regulation (search for similar items in EconPapers)
JEL-codes: H4 L21 L51 N2 (search for similar items in EconPapers)
Date: 2026-02
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