Decision Making in Individual Account Pension Systems Pubblico

Abstract

This dissertation studies different aspects of decision making in individual account pension systems. I use data from Chile, the pioneer country in adopting a fully-funded individual account pension system as the main source of retirement savings for workers.
The first chapter examines the relative importance of health and wealth for the retirement decision in the context of a mature individual account pension system. Overall, health factors seem to be the most important determinant of retirement in Chile, as opposed to recent research for the US that finds that wealth prevails as the main determinant of retirement. This result might be due to the fact that individual account pension systems are age neutral and do not provide real economic incentives for retirement. Besides contributing to knowledge about how pension system structure might affect retirement behavior, results of this research are useful for policymakers around the world considering the adoption of a fully-funded individual account pension system.
The second chapter investigates whether the child bonus policy included in the recent Chilean pension reform generated incentives for women to have children and whether it affected the timing of birth. Results suggest that the child bonus policy increases fertility preferences, but this effect cannot be confirmed for births. Effects on fertility preferences, however, vary for different groups of women. They seem to be stronger for single women, as well as for higher order births. The child bonus policy also seems to have shortened the time to a birth, especially for single women and first births, even though these effects are not statistically significant.
The third chapter investigates the role of financial literacy and pension system knowledge on the retirement savings investment choice of workers. I find that financial literacy and especially pension knowledge present a statistically significant and positive effect on the probability of making an active investment decision, but that only financial literacy affects the choice of investment fund itself. These results suggest that investing in financial and pension system education might be an important strategy for governments to motivate active investment choices and provide workers with tools to make appropriate investment decisions.

Table of Contents

CHAPTER ONE
RETIREMENT DECISION IN INDIVIDUAL ACCOUNT PENSION SYSTEMS 1
I. Introduction.............................................................................................................. 2
II. Previous Literature.................................................................................................. 5
III. Institutional Setting............................................................................................. 13
IV. Data..................................................................................................................... 15
V. Methodology......................................................................................................... 21
VI. Results................................................................................................................. 23
VII. Conclusion.......................................................................................................... 33
References.................................................................................................................. 35
CHAPTER TWO
CHILD BONUS AND FERTILITY - EVIDENCE FROM THE 2008 CHILEAN PENSION REFORM.................................................................................................................................... 68
I. Introduction............................................................................................................ 69
II. Related Literature................................................................................................. 74
III. Child Bonus in Chile........................................................................................... 76
IV. Empirical Strategy............................................................................................... 79
V. Data....................................................................................................................... 84
VI. Results................................................................................................................. 87
VII. Conclusion.......................................................................................................... 91
References.................................................................................................................. 93
Appendix.................................................................................................................. 105
CHAPTER THREE
THE ROLE OF FINANCIAL LITERACY AND PENSION KNOWLEDGE ON THE INVESTMENT OF RETIREMENT SAVINGS............................................................................ 107
I. Introduction.......................................................................................................... 108
II. Previous Literature.............................................................................................. 111
III. Chilean Pension System..................................................................................... 114
IV. Data................................................................................................................... 116
V. Empirical Methodology....................................................................................... 120
V.1 Active investment choice.............................................................................. 120
V.2 Choice of type of pension fund..................................................................... 121
VI. Empirical Results............................................................................................... 122
VI.1 Active investment choice............................................................................. 122
VI.2 Choice of type of pension fund................................................................... 124
VII. Conclusion........................................................................................................ 125
References................................................................................................................ 127
Appendix.................................................................................................................. 137

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School	Laney Graduate School
Department	Economics
Degree	PhD
Submission	Dissertation
Language	English
Research Field	Economics, Labor Economics, General
Parola chiave	individual accounts retirement child bonus pension knowledge pension system financial literacy
Committee Chair / Thesis Advisor	Markowitz, Sara, Emory University
Committee Members	Kay, Stephen, Federal Reserve Bank of Atlanta Frisvold, David, Emory University Francis, Andrew, Emory University

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