Premium
Looking in the Wrong Place: Why Chile Provides No Evidence for Social Security Privatization
Author(s) -
White Joseph
Publication year - 2000
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/0275-1100.00029
Subject(s) - social security , business , economics , economic system , political science , market economy
The performance of Chile's system of state‐sponsored private pensions has been a major theme for advocates of privatizing U.S. Social Security. Chile's experience also has been criticized by defenders of the current U.S. system. This article explains why, though the critics deserve the upper hand, the whole discussion is misguided. The most basic issue in the policy debate is how adequately pensions could be financed through regulated individual investment in financial markets. Chilean experience offers little evidence on this question because, for the first fifteen years of the system, pensions and accumulations in the Chilean funds had little to do with the kinds of market forces that would be relevant to predicting experience anywhere.