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Retirement Expectations and Pension Reforms

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Abstract

We estimate the effect of pension reforms on households' expectations and wealth accumulation decisions. We rely on self-reported expectations to measure perceived social security benefits and to a series of pension reforms as a source of exogenous variations in pension wealth. Two parameters are crucial to estimate pension wealth: the age at which workers expect to retire and the ratio of pension benefits to pre-retirement income (the replacement rate). The Survey of Household Income and Wealth, a large representative sample of the Italian population, elicits these expectations from 1989 to 2000, a period spanning intense pension reforms. These reforms had different impact on different cohorts and employment groups, providing a quasi-experimental framework to study the effect of pension reforms on expectations and household saving. We find substantial offset between private wealth and perceived pension wealth. However, the Italian pension reforms of the 1990s had only limited impact on household saving rates, because people have not yet fully adjusted their expectations of future benefits

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 92.

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Date of creation: 02 Feb 2003
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Publication status: Published in Journal of Public Economics, 2006, vol. 90, pages 2167-2213
Handle: RePEc:sef:csefwp:92

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Keywords: business groups; financially constrained entry; internal capital markets; multimarket competition;

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  1. Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR & CES & MSH, vol. 16(32), pages 7-50, 04.
  2. Jeff Dominitz & Charles F. Manski & Jordan Heinz, 2002. "Social Security Expectations and Retirement Savings Decisions," JCPR Working Papers 273, Northwestern University/University of Chicago Joint Center for Poverty Research.
  3. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  4. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
  5. B. Douglas Bernheim, 1989. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Chapters, in: The Economics of Aging, pages 335-358 National Bureau of Economic Research, Inc.
  6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  7. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  8. Michael D. Hurd & Kathleen McGarry, 1993. "Evaluation of Subjective Probability Distributions in the HRS," NBER Working Papers 4560, National Bureau of Economic Research, Inc.
  9. Richard Disney & Sarah Tanner, 1999. "What can we learn from retirement expectations data?," IFS Working Papers W99/17, Institute for Fiscal Studies.
  10. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  11. Agar Brugiavini, 1997. "Social Security and Retirement in Italy," NBER Working Papers 6155, National Bureau of Economic Research, Inc.
  12. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," Working Papers wp012, University of Michigan, Michigan Retirement Research Center.
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Cited by:
  1. Boeri, Tito & Tabellini, Guido, 2005. "Does Information Increase Political Support for Pension Reform?," CEPR Discussion Papers 5319, C.E.P.R. Discussion Papers.

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