Freedom and Other Variables in the Choice of Public Pension Systems

There are three types of public pension systems popular throughout the world: Pay-As-You-Go (defined benefit), Funded (defined contribution), and Mixed. The latter two systems were largely adopted in the 1990s after Chile successfully built its Funded system. In this paper we analyze the choice of these types of pension system, identifying factors that affect countries' choice. Several measures of freedom - economic and political - are associated with these choices. The estimated effects of the two freedoms on pension choice and percent elderly are quite interesting and intuitive.