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

  • BRUGIAVINI, AGAR
  • GALASSO, VINCENZO

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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Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 3 (2004)
Issue (Month): 02 (July)
Pages: 165-195

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Handle: RePEc:cup:jpenef:v:3:y:2004:i:02:p:165-195_00
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  1. Vincenzo Galasso & Paola Profeta, 2003. "Lessons for an Aging Society: The Political Sustainability of Social Security Systems," Working Papers 244, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Castellino Onorato & Fornero Elsa, 1997. "Privatizzare la previdenza sociale? Condizioni, modalità e limiti," Politica economica - Journal of Economic Policy (PEJEP), Società editrice il Mulino, issue 1, pages 3-26.
  3. 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.
  4. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  5. Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
  6. 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.
  7. Disney, Richard, 1999. "Notional accounts as a pension reform strategy : an evaluation," Social Protection Discussion Papers 21302, The World Bank.
  8. D'Amato, Marcello & Galasso, Vincenzo, 2002. "Assessing the Political Sustainability of Parametric Social Security Reforms: The Case of Italy," CEPR Discussion Papers 3439, C.E.P.R. Discussion Papers.
  9. Diamond, Peter A., 2002. "Social Security Reform," OUP Catalogue, Oxford University Press, number 9780199247899.
  10. 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.
  11. Disney, Richard, 2000. "Crises in Public Pension Programmes in OECD: What Are the Reform Options?," Economic Journal, Royal Economic Society, vol. 110(461), pages F1-23, February.
  12. A. Javier Hamann, 1997. "The Reform of the Pension System in Italy," IMF Working Papers 97/18, International Monetary Fund.
  13. 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.
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