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A general equilibrium evaluation of the sustainability of the new pension reforms in Italy

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  • Riccardo Magnani

    (CEPII - Centre d'études prospectives et d'informations internationales - CEPII, CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)

Abstract

Most European countries have recently introduced pension system reforms to face the financial problem related to population ageing. Italy is not an exception. The reforms introduced during the Nineties (Amato Reform in 1992 and Dini Reform in 1995), even if they will produce a strong reduction in pension benefits, are generally considered not sufficient to adequately face the population ageing problem. For this reason, in 2004, the Berlusconi government introduced a new reform that increases the retirement age to 60 years from January 2008 onwards, to 61 years from 2010 and to 62 from 2014. In 2007, the left-wing government replaced this reform with a softer one that fixes the minimum retirement age at 58 from 2008. Using an applied overlapping-generations general equilibrium model with endogenous growth due to human capital accumulation, we analyse the impact of the new reforms on the macroeconomic system and in particular on the long-run sustainability of the pension system. We show that the increase in the retirement age would permit to reduce pension deficits in the short and medium run, while in the long run these reforms would become completely ineffective. ©

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Paper provided by HAL in its series Post-Print with number halshs-00627727.

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Date of creation: 2011
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Publication status: Published, Research in Economics, 2011, 5-35
Handle: RePEc:hal:journl:halshs-00627727

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Keywords: pension reforms; applied OLG models; immigration; endogenous growth;

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  1. BOUZAHZAH, Mohamed & DE LA CROIX, David & DOCQUIER, Frédéric, . "Policy reforms and growth in computable OLG economies," CORE Discussion Papers RP -1669, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
  3. Riccardo Magnani, 2006. "Vieillissement de la population en Italie et efficacité des réformes Amato et Dini : un modèle d'équilibre général à générations imbriquées," Post-Print halshs-00628134, HAL.
  4. Fougere, Maxime & Merette, Marcel, 1999. "Population ageing and economic growth in seven OECD countries," Economic Modelling, Elsevier, vol. 16(3), pages 411-427, August.
  5. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2004. "Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 04064, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  6. Sadahiro, Akira & Shimasawa, Manabu, 2003. "The computable overlapping generations model with an endogenous growth mechanism," Economic Modelling, Elsevier, vol. 20(1), pages 1-24, January.
  7. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(2), pages 300-323, April.
  8. Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers 1762, C.E.P.R. Discussion Papers.
  9. Aglietta, Michel & Chateau, Jean & Fayolle, Jacky & Juillard, Michel & Le Cacheux, Jacques & Le Garrec, Gilles & Touze, Vincent, 2007. "Pension reforms in Europe: An investigation with a computable OLG world model," Economic Modelling, Elsevier, vol. 24(3), pages 481-505, May.
  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  11. Mayer, Jochen & Riphahn, Regina T., 1999. "Fertility Assimilation of Immigrants: Evidence from Count Data Models," IZA Discussion Papers 52, Institute for the Study of Labor (IZA).
  12. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
  13. Chateau, Jean & Chojnicki, Xavier & Magnani, Riccardo, 2009. "Disparities in pension systems and financial flows among European countries," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 8(01), pages 1-33, January.
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