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Title: Mandatory savings, information and welfare : theory and empirical evidence
Author: Cuevas, Conrado
ISNI:       0000 0004 7431 6710
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2017
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In Chapter 1 we document how pension investments by individuals in the Chilean social security system are influenced by portfolio recommendations of Happy and Loaded, a pension advice firm. Following H&L's recommendations about which of five portfolios to invest in, investors shift amounts that often exceed 20% of portfolios value and 1.3% of Chilean annual GDP, in a week. We uncover what drives investment recommendations, the resulting return consequences for the Chilean stock market and social security portfolios, and the characteristics of followers and their investment outcomes. Paradoxically, investors who followed H&L's advice would have earned more by sticking with their original portfolio over time, regardless of the portfolio selected. These findings provide a cautionary tale for the design of privatized social security systems. In chapter 2 we study the value of public information in a stochastic pure exchange economy where agents trade assets in financial markets to reallocate risk, and a subset of those agents face a mandatory savings constraint. As the mandatory savings constraint depends on equilibrium prices, changes in information may allow a Planner that faces the same constraints as the agents in terms of the available assets, information, and savings constraints, to obtain Pareto improvements relative to the equilibrium without information. Changes in information cause the posteriors to change, thus affecting equilibrium prices and shifting the constraints that the Planner has to satisfy. We provide conditions for the arrival of new information before trading to obtain ex-post and ex-ante welfare improvements relative to the initial equilibrium without information. The reaction of prices to the arrival of new information is key in our analysis. We relate the value of information in exchange economies with the literature on Bayesian persuasion.
Supervisor: Not available Sponsor: Comisión Nacional de Investigación Científica y Tecnológica (Chile) ; University of Warwick
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HB Economic Theory