Italy is characterised by a mature pay-as-you-go social security system and by particularly adverse population projections. Given these trends, the social security contribution rate is expected to increase above its current high level. This hinders the development of employer-provided pension funds and introduces a significant wedge between labour cost and earnings that discourages both labour demand and labour supply. Any proposal to reduce payroll taxes and to reform the system in the direction of partial funding has to cope with the state of Italian public finances. Italy has to comply with the Stability and Growth Pact that imposes constraints on budget deficit and debt trends. Using micro data from the Bank of Italy"s Survey of Household Income and Wealth and official population projections, we estimate future employment trends under different demographic and macroeconomic scenarios and compute the cost of the transition. We show that it would be substantially reduced if positive effects on employment were induced by the payroll tax reduction.
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.
Volume (Year): 22 (2001) Issue (Month): 4 (December) Pages: 487-526. Download reference. The following formats are available: HTML
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Modigliani, Franco. & Ceprini, Marialuisa E. A. & Muralidhar, Arun Sundarram., 1999.
"An MIT solution to the social security crisis,"
Working papers
WP 4051-99., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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