Both types of savers are present in all countries. The question is in what ratio. An investment of retirement funds in private assets can contribute to the development of capital markets, as it has in Chile. But industrial countries have little to gain. And some developing countries might not have the regulatory ability to carry out the necessary capital market reform.
Actual markets work differently than idealized models.
While privatization is thought to be a route to greater efficiency and lower costs, a surprising aspect of the privatized Chilean retirement system has been its high administrative costs. A good defined contribution system can look easier to design. But good and bad versions of all schemes exist. Design and, above all, what s politically possible are everything.