Assessing Chile’s pension system: challenges and reform options

This paper takes stock of Chile’s defined contribution pension system and assesses reform options aimed at increasing replacement rates. An international comparison shows that, despite being quite influential when established, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics, declining global returns, higher-than-expected informality in the labor market, and, more recently, to legislation allowing for pension savings withdrawals to counter the effects from the COVID-19 pandemic. We find that a reform that raises contribution rates and the retirement age would significantly improve replacement rates and lower fiscal costs associated with the system, especially if accompanied by complementary policies to boost workers’ contribution density

Essays on economic growth and informational frictions

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2011.Cataloged from PDF version of thesis.Includes bibliographical references.This thesis consists of three chapters on Economic Growth and Informational Frictions. Chapter 1 investigates the relation between financial development, R&D expenditure and aggregate growth. It provides empirical evidence that financial development has a large positive effect on both growth and R&D, and that the effect of financial development on growth is likely to be explained by its effect on R&D. I also study a general equilibrium model in with predictions which are consistent with the empirical regularities mentioned above. In particular, aggregate growth increases as financial development increases. The model also predicts that financial development produces large welfare gains, specially at low levels of financial development. Finally I show that the model studied suggests that R&D policy is welfare improving and that policy should be conditional on the level of financial development. Chapter 2 gives an empirical assessment of the world income distribution. In particular, I take a CES production function implied by a Skill-Biased technical change model and fit this production function to the data. The calibration results give evidence of the importance of including different skills to account for the observed income differences over time. I also show that the calibration exercise is validated by the estimated values of the parameters of the model. In Chapter 3 I study a model of entry under uncertainty. In particular, I analyze an economy where potential entrants make entry decisions after receiving noisy signals of the true demand levels for the different sectors of the economy. I show that equilibrium strategies depend on the precision of the signals received by agents. When precision is low the equilibrium of the game is a pure strategy equilibrium where agents enter the sector for which they receive a higher signal. On the other hand when precision is high the optimal strategy is to randomize over which sector to enter. The model also highlights the non-monotonic relations between the discrepancy between the equilibrium and efficient entry levels and both the precision of the signal and the true relative demand between sectors.by Samuel Pienknagura.Ph.D

The macroeconomic and socioeconomic effects of structural reforms in Latin America and the Caribbean

This paper estimates the macroeconomic effects of market-oriented reforms in Latin America and the Caribbean using the IMF Structural Reform database. We find that large changes in the reform index have positive effects on GDP that exceed 2 percent after five years. Furthermore, reforms boost employment, investment, exports, and imports and reduce export concentration, in addition to favoring tradable sectors. The evidence on the effects of reforms on business confidence is mixed, and the effects on total factor productivity are positive, but less precisely estimated. Nonetheless, our results also indicate that the effects of reforms have not been uniform across different segments of the population. Our results are robust to the use of an instrumental variables approach that exploits regional waves of reform to deal with endogeneity concerns. These findings bring to the forefront the need to consider accompanying policies to ensure that reforms promote inclusive growth

How far has globalization gone? A tale of two regions

En este documento estudiamos la evolución de la globalización comercial en América Latina y Asia durante los últimos 25 años y cuantificamos su impacto económico. Basándonos en modelos de gravedad estructural, estimamos un proxy de la globalización del comercio que captura la facilidad de comerciar a escala internacional con respecto a comerciar a escala nacional. Los resultados indican patrones similares de globalización del comercio entre las dos regiones, pero un alto grado de heterogeneidad dentro de ellas. La globalización del comercio ha sido particularmente fuerte en la agricultura, la minería y las manufacturas, pero se ha rezagado en los servicios. La heterogeneidad dentro de la región está asociada a un conjunto de instrumentos de política comercial, incluidos los aranceles, las medidas no arancelarias, la membresía en la Organización Mundial del Comercio y los acuerdos comerciales. A continuación, cuantificamos las implicaciones económicas de las tendencias de globalización estimadas. Las simulaciones de un modelo de comercio multisectorial apuntan a impactos heterogéneos a largo plazo de la globalización en el PIB (algunos países muestran ganancias sustanciales y otros experimentan grandes pérdidas), sin que ningún sector desempeñe un papel preponderante.We study the globalization of trade in Latin America and Asia over the past 25 years and quantify its economic impact. Employing structural gravity models, we first estimate a proxy of trade globalization that captures the ease of trading internationally with respect to trading domestically. The results indicate similar trade globalization patterns in the two regions, albeit with a high degree of heterogeneity within them. Trade globalization has been particularly strong in agriculture, mining and manufacturing, but has lagged in services. Within-region heterogeneity is associated with a set of trade policy instruments, including tariffs, non-tariff measures, WTO membership and trade agreements. Next, we quantify the economic implications of the estimated globalization trends. Simulations of a multi-sector trade model point to heterogeneous long-term impacts of globalization on GDP (some countries exhibiting substantial gains and others experiencing large losses), with no single sector playing a predominant role

Macroprudential policies from a microprudential angle: A note

The standard macroprudential models focus on externalities and treat all prudential instruments as alternative, but equivalent, forms of Pigouvian taxes. This paper explicitly models individual banks’ risk choices and shows that different prudential instruments affect banks’ risk-taking incentives differently. Thus, conflicts may arise between the micro- and macroprudential stance

Are all trade agreements equal? the role of distance in shaping the effect of economic integration agreements on trade flows

How does geographic distance affect the impact of trade agreements on bilateral exports, and through what channels? This paper examines these questions in a gravity model context for different types of goods for 185 countries over the period 1965–2010. Three stylized facts emerge. First, although economic integration agreements have a positive impact on trade flows, geographic distance significantly decreases their effect. Second, this phenomenon is in large part explained by the impact of economic integration agreements on intermediate goods. These results hold when controlling for trade agreement depth, measured by the type of agreement and content of provisions, and economic similarity among trading partners. Third, this paper finds either a smaller negative effect or no effect on the interaction between distance and economic integration agreements for non-intermediates. This underscores that while economic integration agreements promote trade in all goods, there is an additional benefit to intermediates which diminishes faster with distance

Ensayos de historia económica. Cien años del Banco de la República

El 23 de julio de 1923 tuvo lugar la fundación del Banco de la Republica. Su diseño siguió las recomendaciones de la misión dirigida por Edwin Kemmerer, el asesor norteamericano que por esa misma época lidero el establecimiento de bancos centrales con características similares en todos los países andinos de Suramérica: Ecuador, Perú, Bolivia y Chile. El centenario de esa fecha constituye una gran oportunidad para reflexionar sobre el papel que ha cumplido el Banco en la historia económica colombiana durante el siglo transcurrido desde su fundación. Gracias al apoyo del Banco de Desarrollo de America Latina-CAF, y de su presidente Sergio Diaz-Granados, hemos podido publicar en este libro cinco ensayos de gran relevancia para dicha reflexión. Los primeros cuatro fueron elaborados por autores que aparte de ser ampliamente reconocidos como historiadores, han sido también actores importantes de la política económica de Colombia y han estado vinculados directamente al Banco y a su Junta Directiva. Jose Antonio Ocampo presidio la Junta en dos oportunidades como ministro de Hacienda, entre agosto de 1996 y noviembre de 1997 y entre agosto de 2022 y abril de 2023, y fue codirector entre 2018 y 2019. Miguel Urrutia fue gerente general durante doce años a partir de 1993 y había sido previamente codirector desde la creación de la Junta Independiente por parte de la Constitución de 1991. Antonio Hernández Gamarra, por su parte, fue codirector entre 1996 y 2001 y Carlos Caballero, quien en este articulo esta acompañado de Pilar Esguerra como coautora, lo fue entre 2001 y 2003 […

Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Capital Goods Trade, Relative Prices, and Economic Development

Abstract International trade in capital goods has quantitatively important effects on economic development through two channels: capital formation and aggregate TFP. We embed a multi country, multi sector Ricardian model of trade into a neoclassical growth framework. Our model matches several trade and development facts within a unified framework: the world distribution of capital goods production and trade, cross-country differences in investment rate and price of final goods, and cross-country equalization of price of capital goods. Reducing barriers to trade capital goods allows poor countries to access more efficient means of capital goods production abroad, leading to relatively higher capitaloutput ratios. Meanwhile, poor countries can specialize more in their comparative advantage-non-capital goods production-and increase their TFP. The income gap between rich and poor countries declines by 40 percent by eliminating barriers to trade capital goods