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Household Financial Decisions After the 2008 Chilean Pension Reform

Alessandro Bucciol (), Martina Manfre' () and Gregorio Gimenez
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Martina Manfre': Department of Economics (University of Verona)

No 10/2019, Working Papers from University of Verona, Department of Economics

Abstract: We evaluate the effect of the 2008 Chilean pension reform, that introduced a basic pension to the poorest part of the elder population, in terms of decisions regarding debts and assets. We apply a difference-in-difference estimation method to longitudinal survey data representative of the Chilean population. Our evidence suggests that those who started receiving basic pension increased their holding and amount of debt. It may be that some people used the basic pension as a collateral for acquiring more debt, rather than using it as a way to finance new investments. The increase in debt positions is proportionally higher when compared to the variation in asset positions. We interpret this measure as an indicator of debt sustainability. Moreover, debt ratio increases significantly more for women, who may be particularly exposed to financial shocks. This result raises concern on the potential financial vulnerability of the population that was targeted by the reform.

Keywords: Chile; Pension; Financial vulnerability; Gender vulnerability; Difference-in-difference (search for similar items in EconPapers)
JEL-codes: I38 D14 (search for similar items in EconPapers)
Pages: 28
Date: 2019-06
New Economics Papers: this item is included in nep-age
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