Unemployment Insurance based on Individual Savings Accounts: Lessons for other Latin American and Developing Countries from Chile
(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.
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.
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