RIEB Discussion Paper Series No.2026-10

Title

Effects of Early Pension Withdrawal on Pre-Retirement Labour Supply: Evidence from Chile during the COVID-19 Pandemic

Abstract

Although the defined contribution pension system in Chile had not permitted pension withdrawals before retirement age, the Chilean Congress approved laws allowing early withdrawals as an economic support measure in response to the COVID-19 pandemic. This study empirically analysed the effects of mainly the third early pension withdrawal on pre-retirement labour supply using data from a nationally and regionally representative household survey for 2022. To address potential endogeneity from self-selection into pension withdrawals, we applied inverse probability weighting based on propensity score estimation. The results showed that individuals who withdrew their pensions worked longer hours and had a higher probability of employment. These effects were more pronounced among women, while they were statistically insignificant for men. The findings were robust to household-level analysis, which additionally showed that pension savings withdrawn by women were more likely to be used for home repairs. Therefore, the early pension withdrawal, rather than reducing labour supply through the income effect, encouraged female labour supply, possibly due to improved remote-work conditions.

Keywords

Early pension withdrawal; Labour supply; Chile; Inverse probability weighting; Propensity score; COVID-19

JEL Classification

H55, J22, J26, J32

Inquiries

Yoshimichi MURAKAMI
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Aya NORITAKE
Graduate School of Economics, Kobe University