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Differential Mortality and the Design of the Italian System of Public Pensions

Author

Listed:
  • Graziella Caselli
  • Franco Peracchi
  • Elisabetta Barbi
  • Rosa Maria Lipsi

Abstract

. This paper considers the issue of actuarial fairness of the new Italian public pension system in view of the recent trends in old‐age mortality and the survival differences by gender, birth cohort and region of residence. After reviewing the secular trends in elderly mortality in Italy, and the evolution of regional differences in survival over the last three decades, we evaluate the impact, on the conversion factors introduced by the Dini reform, of a further decline in elderly mortality over the next few decades. We compute the conversion factors using a close approximation to the unknown formula employed in the Dini reform but allowing for gender‐ and region‐specific survival probabilities. Our results leave no doubt about the importance of frequently updating the conversion factors in the light of the rapid increase in elderly survival. The paper also quantifies to what extent gender‐ and region‐specific conversion factors may differ from their currently legislated values, that only vary by age. Finally, we recognize that the actuarial fairness of the system introduced by the recent reform can only be guaranteed on average and that, in the presence of a heterogeneous population of individuals that differ considerably in their mortality prospects, the current system implies a substantial degree of redistribution from high‐mortality groups (typically characterized by low income and low wealth) to low‐mortality groups (typically characterized by high income and high wealth).

Suggested Citation

  • Graziella Caselli & Franco Peracchi & Elisabetta Barbi & Rosa Maria Lipsi, 2003. "Differential Mortality and the Design of the Italian System of Public Pensions," LABOUR, CEIS, vol. 17(s1), pages 45-78, August.
  • Handle: RePEc:bla:labour:v:17:y:2003:i:s1:p:45-78
    DOI: 10.1111/1467-9914.17.specialissue.3
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    References listed on IDEAS

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    1. James Vaupel & Kenneth Manton & Eric Stallard, 1979. "The impact of heterogeneity in individual frailty on the dynamics of mortality," Demography, Springer;Population Association of America (PAA), vol. 16(3), pages 439-454, August.
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    Cited by:

    1. Agar Brugiavini & Franco Peracchi, 2010. "Youth Unemployment and Retirement of the Elderly: The Case of Italy," NBER Chapters, in: Social Security Programs and Retirement around the World: The Relationship to Youth Employment, pages 167-215, National Bureau of Economic Research, Inc.
    2. Javier Pla-Porcel & Manuel Ventura-Marco & Carlos Vidal-Meliá, 2017. "How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?," Documentos de Trabajo del ICAE 2017-11, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    3. Elisabetta Barbi & Oliviero Casacchia & Filomena Racioppi, 2018. "Cause-specific mortality as a sentinel indicator of current socioeconomic conditions in Italy," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 39(21), pages 635-646.
    4. Culotta, Fabrizio & Alaimo, Leonardo Salvatore & Bravo, Jorge Miguel & di Bella, Enrico & Gandullia, Luca, 2022. "Total-employed longevity gap, pension fairness and public finance: Evidence from one of the oldest regions in EU," Socio-Economic Planning Sciences, Elsevier, vol. 82(PA).
    5. Mazzaferro, Carlo & Morciano, Marcello & Savegnago, Marco, 2012. "Differential mortality and redistribution in the Italian notional defined contribution system," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(4), pages 500-530, October.
    6. Michele Belloni & Rob Alessie & Adriaan Kalwij & Chiara Marinacci, 2012. "Lifetime income and old age mortality risk in Italy over two decades," CeRP Working Papers 129, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    7. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(s1), pages 79-114, August.
    8. Anca-Stefania Jijiie & Jennifer Alonso Garcia & Séverine Arnold (-Gaille), 2019. "Mortality by socio-economic class and its impact on the retirement schemes: How to render the systems fairer?," ULB Institutional Repository 2013/300032, ULB -- Universite Libre de Bruxelles.
    9. Marcella Corsi & Carlo D’Ippoliti, 2009. "Poor Old Grandmas? A Note on the Gender Dimension of Pension Reforms," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(1), pages 35-56.
    10. Carlos Grushka, 2019. "The Within-system Redistribution of Contributory Pensions Systems: a Conceptual Framework and Empirical Method of Estimation," Commitment to Equity (CEQ) Working Paper Series 91, Tulane University, Department of Economics.

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    More about this item

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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