Does social security affect retirement and labor supply? Evidence from Chile

Abstract

This paper explores the effects of the social security system on retirement and labor supply decisions. Due to the regulations established by Chilean social security law reform, two social security systems coexist in Chile: the "Pay-As-You-Go" and the individual account system. The coexistence of the systems allows us to better understand the effects of both social security systems on retirement and labor supply. We find that (1) larger benefits in any social security system induce earlier retirement and (2) larger variance of benefits in the individual account system induces later retirement. We do not find major impacts of social security on labor supply of individuals in the labor force.