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The Portfolio Effect of Pension Reforms

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Author Info
Renata Bottazzi
Tullio Jappelli () (University of Naples “Federico II”)
Mario Padula () (Department of Economics, University Of Venice Cà Foscari)

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Abstract

We estimate the portfolio effect of changes in social security wealth exploiting a decade of Italian pension reforms as a source of exogenous variation. The Italian Survey of Household Income and Wealth records detailed portfolio data and elicits expectations of retirement outcomes, thus allowing us to measure the expected social security wealth and to assess to what extent Italian households perceive the innovations brought about by the reforms. We find that households have responded to the cut in pension benefits mostly by increasing real estate wealth, and that the response is stronger among households that are able to estimate more accurately future social security benefits. We also compute that for the average household consumable wealth increases by 40 percent of the reduction in social security wealth.

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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number 2009_17.

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Length: 34
Date of creation: 2009
Date of revision:
Handle: RePEc:ven:wpaper:2009_17

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Related research
Keywords: Pension Reform; Portfolio Choice; Retirement Saving;

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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  1. Giovanni Guazzarotti & Pietro Tommasino, 2008. "The Annuity Market in an Evolving Pension System: Lessons from Italy," CeRP Working Papers 77, Center for Research on Pensions and Welfare Policies, Turin (Italy). [Downloadable!]
  2. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December. [Downloadable!] (restricted)
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  3. Riccardo Cesari & Giuseppe Grandi & Fabio Panetta, 2008. "Supplementary Pension Schemes in Italy: Features,Development and Opportunities for Workers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 67(1), pages 21-73, March.
    Other versions:
  4. Agar Brugiavini, 1999. "Social Security and Retirement in Italy," NBER Chapters, in: Social Security and Retirement around the World, pages 181-237 National Bureau of Economic Research, Inc. [Downloadable!]
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  5. Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier. [Downloadable!] (restricted)
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  6. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December. [Downloadable!]
  7. Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(2), pages 491-533. [Downloadable!] (restricted)
  8. Feldstein, Martin & Pellechio, Anthony, 1979. "Social Security and Household Wealth Accumulation: New Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 361-68, August. [Downloadable!] (restricted)
  9. Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  11. Jappelli, Tullio & Pistaferri, Luigi, 2003. "Tax incentives and the demand for life insurance: evidence from Italy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1779-1799, August. [Downloadable!] (restricted)
    Other versions:
  12. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August. [Downloadable!] (restricted)
  13. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2005. "Retirement Expectations, Pension Reforms and Their Effect on Private Wealth Accumulation," CEPR Discussion Papers 4882, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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This page was last updated on 2009-11-17.

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