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Impacts of an employer’s contributory pillar: evidence from Chile

Year: 2025

Type: article

Abstract: We estimate labor demand elasticities to predict the employment effects of an employer’s contributory pillar in Chile’s pension system. The Chilean system has been a model for reform in many countries worldwide. We find labor demand to be inelastic, with baseline estimates ranging from −0.27 to −0.91. We predict that the implementation of an employer contributory pillar with contribution rates of 1% increase would increase unemployment rates by 0.20 to 0.71 percentage points (pp) from a baseline unemployment of 6.51%. Our results show sizable differences in labor demand elasticities and employment impacts by industry and workforce characteristics. Simulations imply implementing a uniform employer contributory pillar would especially reduce employment for low-skilled workers and workers in industries where labor is easily substitutable.

Source: Journal of Pensions Economics and Finance

DOI: 10.1017/s1474747224000131

Authors: Marcela Parada-Contzen, Lucas Provoste, Cristóbal Sanhueza, James Traina, Uyen Tran

Institutions: University of Concepción, New York University, Arizona State University

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,550