Pension Funds’ Contribution to the Enhancement of Aggregate Private Saving : A Panel Data Analysis for Emerging Economies

We carried out an analysis of fully-funded pension regimes based on individual accounts implemented since the 1980s in six Latin American countries (Argentina, Chile, Colombia, Mexico, Peru and Uruguay), in order to ascertain whether they were conducive to increasing aggregate savings and helped to strengthen domestic stock markets. To this end, we used a version of the life-cycle model. We also studied the impact on private savings of a group of economic and demographic variables which the related literature usually links to the performance of both defined-benefit and defined-contribution pension systems. The impact of individual accounts systems upon aggregate private savings was assessed under different scenarios such as: homogeneous and heterogeneous individuals, voluntary and compulsory contributions and loose and tight borrowing constraints. The theoretical analysis made it possible to prove that only under mandatory contributions and operating liquidity restrictions would private savings be unambiguously increased by pension fund assets