New papers from the Social Science Research Network

"First-Round Impacts of the 2008 Chilean Pension System Reform" 
Michigan Retirement Research Center Research Paper No. WP 2011-245

JERE R. BEHRMAN, University of Pennsylvania - Department of Economics
Email: jbehrman@econ.upenn.edu
MARIA CECILIA CALDERON, affiliation not provided to SSRN
Email: ceciliacalderon@sinectis.com.ar
OLIVIA S. MITCHELL, University of Pennsylvania - Insurance & Risk Management Department, National Bureau of Economic Research (NBER), University of Pennsylvania - Business & Public Policy Department
Email: mitchelo@wharton.upenn.edu
JAVIERA VASQUEZ, affiliation not provided to SSRN
Email: Javiera.vasquez@gmail.com
DAVID BRAVO, University of Chile
Email: dbravo@decon.facea.uchile.cl

Chile's innovative privatized pension system has been lauded as possible model for Social Security system overhauls in other countries, yet it has also been critiqued for not including a strong safety net for the uncovered sector. In response, the Bachelet government in 2008 implemented reforms to rectify this shortcoming. Here we offer the first systematic effort to directly evaluate the reform's impacts, focusing on the new Basic Solidarity Pension for poor households with at least one person age 65. Using the Social Protection Survey, we show that targeted poor households received about 2.4 percent more household annual income, with little evidence of crowding-out of private transfers. We also suggest that recipient household welfare probably increased due to slightly higher expenditures on basic consumption including healthcare, more leisure hours, and improved self-reported health. While measured short-run effects are small, follow-ups will be essential to gauge longer-run outcomes.

"Differences in Portfolios Across Countries: Economic Environment Versus Household Characteristics" 
Review of Economics and Statistics, Forthcoming

DIMITRIS CHRISTELIS, Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II, Center for Financial Studies (CFS)
Email: dimitris.christelis@gmail.com
DIMITRIS GEORGARAKOS, University of Frankfurt, Center for Financial Studies (CFS)
Email: Georgarakos@wiwi.uni-frankfurt.de
MICHAEL HALIASSOS, Goethe University Frankfurt - Faculty of Economics and Business Administration, Goethe University Frankfurt - Center for Financial Studies (CFS), CEPR, Goethe University Frankfurt - House of Finance
Email: Haliassos@wiwi.uni-frankfurt.de

We use cross-country micro-data and counterfactual methods to document international differences in ownership and holdings of stocks, private businesses, homes, and mortgages among older households in thirteen countries. We decompose these differences into two parts, related to population characteristics and economic environments. Shortly prior to the recent financial crisis, US households tended to invest more in stocks and less in homes, and to have larger mortgages than Europeans of similar characteristics. Differences in ownership and amounts are primarily linked to differences in economic environments that are more pronounced among European countries than among US regions, suggesting considerable potential for harmonization.

"German Private Pension Law: Current State and Future Directions" 
IMAGINING THE IDEAL PENSION SYSTEM: INTERNATIONAL PERSPECTIVES, Dana M. Muir and John A. Turner, eds., Upjohn Institute, 2011

MARKUS ROTH, University of Marburg - Faculty of Law
Email: markus.roth@staff.uni-marburg.de

Germany's occupational pension system should provide employees with investment choices and encourage higher participation rates. The latter goal should be realized through automatic enrollment in occupational pension schemes, giving employees the possibility to opt-out. Incentives for automatic enrollment should be set by the Occupation Pensions Act or by tax law, at least with regard to large employers. Cost-effective individual choices for employees should be promoted through including defined contribution pensions in the German Occupational Pensions Act. Offering investment alternatives with different risk profiles would allow employees to find solutions corresponding with their individual risk preferences. In light of typical German saving behavior and the corresponding expectations of beneficiaries, a traditional insurance product should be chosen as the default investment product.

"Social Security Benefits: Windfall Elimination Provision" 
Orange County Lawyer, Vol. 35, No. 12, p. 30, December 2011

FRANCINE J. LIPMAN, University of Nevada, Las Vegas - William S. Boyd School of Law
Email: lipman@chapman.edu
JAMES E. WILLIAMSON, San Diego State University - College of Business Administration
Email: james.williamson@sdsu.edu

Twenty-five percent of all public employees, or more than five million state and local workers as well as one million federal workers, participate in alternative plans to Social Security. These employers and employees do not pay Social Security taxes or receive Social Security credit for their wages. These non-Social Security pension benefits can supplement and diversify a retirement income portfolio that includes Social Security benefits if the worker can structure his career to otherwise qualify for Social Security benefits. Not surprisingly the interplay of Social Security with alternative pensions can be confusing and does have traps for the unwary, including the windfall elimination provision, but rewards for strategic planners. This article will describe this interplay and demonstrate undue hardships in the existing structure and suggest strategies for maximizing aggregate retirement income benefits.