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The social security reform process in Italy: where do we stand?

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  • BRUGIAVINI, AGAR
  • GALASSO, VINCENZO

Abstract

A reform process is under way in Italy. Achieving financial sustainability of the social security system has been the first objective characterizing the reforms of 1990s, but these have also introduced rules which aim at a more actuarially fair system. Indeed the social security system prevailing in Italy, financed on a PAYG basis, was, at the end of the 1980s, clearly unsustainable and also extremely unfair to some group of workers, enacting a form of perverse redistribution which is typical of “final salary” defined benefit systems. It was also a system characterized by strong incentives to retire early. In this paper we briefly describe the different regimes of the Italian pension system in its recent history and focus on some aspects of the reform process taking place during the 1990s. Since economists and policy makers are still struggling to assess the results and the long-term effects of these reforms we provide both a survey of this debate and some fresh evidence on the evaluation of the policy changes. We carry out this analysis with a particular emphasis on two aspects which are relevant in the debate. On the one hand we stress the role of economic incentives and the overall fiscal implications of changing the systems as well as these incentives. On the other hand we emphasize the intergenerational considerations and the political implications of the ageing process of the Italian population. From our description it emerges that the overall design of the Italian reform is probably a good one, and yet some more steps need to be taken to speed up some of the positive effects of the reform process that, due the adverse demographic trends affecting PAYG systems as well as the political arena, could easily evaporate.
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  • Brugiavini, Agar & Galasso, Vincenzo, 2004. "The social security reform process in Italy: where do we stand?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(02), pages 165-195, July.
  • Handle: RePEc:cup:jpenef:v:3:y:2004:i:02:p:165-195_00
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    References listed on IDEAS

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    1. Daniele Franco, 2002. "Italy: A Never-Ending Pension Reform," NBER Chapters,in: Social Security Pension Reform in Europe, pages 211-262 National Bureau of Economic Research, Inc.
    2. Vincenzo Galasso & Paola Profeta, 2004. "Lessons for an ageing society: the political sustainability of social security systems," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 63-115, April.
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    4. Onorato Castellino & Elsa Fornero, 1997. "Privatizzare la previdenza sociale? Condizioni, modalità e limiti," Politica economica, Società editrice il Mulino, issue 1, pages 3-26.
    5. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    6. Disney, Richard, 2000. "Crises in Public Pension Programmes in OECD: What Are the Reform Options?," Economic Journal, Royal Economic Society, vol. 110(461), pages 1-23, February.
    7. Nicola Sartor & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounts for Italy," NBER Chapters,in: Generational Accounting around the World, pages 299-324 National Bureau of Economic Research, Inc.
    8. A. Javier Hamann, 1997. "The Reform of the Pension System in Italy," IMF Working Papers 97/18, International Monetary Fund.
    9. Marcello D’Amato & Vincenzo Galasso, 2002. "Assessing the Political Sustainability of Parametric Social Security Reforms: the Case of Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 61(2), pages 171-213, December.
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    11. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    12. Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
    13. Disney, Richard, 1999. "Notional accounts as a pension reform strategy : an evaluation," Social Protection and Labor Policy and Technical Notes 21302, The World Bank.
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    Cited by:

    1. Francesco C. Billari & Vincenzo Galasso, 2008. "What Explains Fertility? Evidence from Italian Pension Reforms," CSEF Working Papers 209, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Michele Belloni & Rob Alessie, 2013. "Retirement Choices in Italy: What an Option Value Model Tells Us," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(4), pages 499-527, August.
    3. Raquel Fonseca & Thepthida Sopraseuth, 2005. "Welfare Effects of Social Security Reforms Across Europe : the Case of France and Italy," CSEF Working Papers 138, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Michele Belloni & Rob Alessie & Adriaan Kalwij & Chiara Marinacci, 2013. "Lifetime income and old age mortality risk in Italy over two decades," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(45), pages 1261-1298, December.
    5. Christina Benita Wilke, 2008. "On the feasibility of notional defined contribution systems: The German case," MEA discussion paper series 08165, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Marianna Brunetti & Costanza Torricelli, 2010. "Population age structure and household portfolio choices in Italy," The European Journal of Finance, Taylor & Francis Journals, vol. 16(6), pages 481-502.
    7. Raquel Fonseca Benito & Thepthida Sopraseuth, 2007. "Welfare Effects of Social Security Reforms Across Europe The Case of France and Italy," Working Papers WR-437, RAND Corporation.
    8. Brugiavini, Agar, 2009. "Welfare reforms and labour supply in Italy," Working Paper Series 2009:29, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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