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Key Findings Details

The Impact of Private Participation on Disability Costs: Evidence from Chile
Estelle James, Alejandra Cox Edwards and Augusto Iglesias Palau
WP 2007-161

  • The public disability insurance system in Chile differs from the traditional one in that it is largely pre-funded and the disability assessment procedure includes participation by private pension funds and insurance companies, who finance the benefit and have an interest in controlling costs.
  • We hypothesize that these procedures and incentives will keep system costs low, by cutting the incidence of successful disability claims.
  • Disability hazard rates are only 20-35% as high in the new system as in the old.  Mortality rates among disabled pensioners suggest that the new system has accurately targeted those with more severe medical problems.