COES
Unemployment Insurance based on Individual Savings Accounts: Lessons for other Latin American and Developing Countries from Chile
Revista Académica
Año de Publicación: 2017

During recent years, several middle income developing countries have implemented unemployment  insurance  systems  based  on  a  financing  mechanism  which  relies  principally  on individual savings  accounts. In some cases, these  savings  accounts  are  complemented  by  a minimal shared  funding  mechanism  (a  «solidarity  pillar») that  aims to  even  out  the  risk  of unemployment  among  the  insured. These  unemployment  compensation  systems  have  been much lauded and promoted by multilateral international institutions because they are considered  to be  easy  to  establish  and  administer,  have  low  fiscal  funding  requirements, and limit the risk of moral hazard  associated  with  more  traditional  insurance  systems. This  paper analyses  how  the  Chilean  unemployment  insurancesavings  account  (UISA)  system,  which  was the first such system to be implemented, has worked since its establishment in 2002.

Medio de publicación: Repositorio Academico de la Universidad de Chile
Como citar: Sehnbruch, K.; Carranza Navarrete, R, (2017) Unemployment Insurance based on Individual Savings Accounts: Lessons for other Latin American and Developing Countries from Chile, en: Repositorio Academico de la Universidad de Chile, URL: http://repositorio.uchile.cl/handle/2250/138976

(Disponible solo en inglés:) In recent years, unemployment protection systems based on individual savings have been instituted in several developing countries. Chile was one of the first countries to establish such a system, which at the time was widely referred to as a model for other countries. Since its institution in 2002, the Chilean UISA has gradually been rolled out to cover the wage-earning population to the point that since 2009 its administrative data can be considered to be representative of this segment of the labour force. This paper examines how the Chilean UISA works, both in terms of its coverage and levels of benefits and how it is different from a traditional unemployment insurance. We undertake a detailed analysis of the administrative data produced by the UISA system, which also enables us to examine the functioning of the Chilean labour market. Based on the interaction between employment characteristics and the conditions imposed by the benefit system, we assess the efficacy of the system and analyse whether the UISA can indeed serve as a model for other developing countries.