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The importance of financial incentives on retirement choices: New evidence for Italy

  • Belloni, Michele
  • Alessie, Rob

This study exploits a new dataset to quantify the effect of financial incentives on retirement choices. This dataset contains--for the first time for Italy--information on seniority. The effects of marginal incentives and social security wealth (SSW) on retirement go in the expected direction; when employees become eligible for pension benefits, the change in financial incentives they experience is so great that their retirement probability increases by 30 percentage points. We also find that the procedure used in previous Italian studies to impute seniority leads to a considerable overestimation of that variable and of SSW. We show that, due to these measurement errors, the estimate of the SSW coefficient takes the wrong sign. A comparison of retirement studies across countries (see Gruber and Wise [Gruber, J., and Wise, D., (2004). Social Security Programs and Retirement Around the World: Micro-Estimation, NBER. The University of Chicago Press, Chicago and London.]) provides prima facie evidence that a lack of good quality data often leads to wrongly signed estimates of the SSW coefficient.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 5 (October)
Pages: 578-588

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Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:578-588
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Peter Diamond & Jonathan Gruber, 1999. "Social Security and Retirement in the United States," NBER Chapters, in: Social Security and Retirement around the World, pages 437-473 National Bureau of Economic Research, Inc.
  2. Agar Brugiavini & Franco Peracchi, 2007. "Fiscal Implications of Pension Reforms in Italy," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 253-294 National Bureau of Economic Research, Inc.
  3. Klaas de Vos & Arie Kapteyn, 2004. "Incentives and Exit Routes to Retirement in the Netherlands," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 461-498 National Bureau of Economic Research, Inc.
  4. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2006. "Retirement expectations, pension reforms, and their impact on private wealth accumulation," Journal of Public Economics, Elsevier, vol. 90(12), pages 2187-2212, December.
  5. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(SpecialIs), pages 79-114, 08.
  6. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  7. Angus Deaton & Christina H. Paxson, 1993. "Saving, Growth, and Aging in Taiwan," NBER Working Papers 4330, National Bureau of Economic Research, Inc.
  8. Chan, Sewin & Stevens, Ann Huff, 2004. "Do changes in pension incentives affect retirement? A longitudinal study of subjective retirement expectations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1307-1333, July.
  9. Didier Blanchet & Louis-Paul Pele, 1999. "Social Security and Retirement in France," NBER Chapters, in: Social Security and Retirement around the World, pages 101-133 National Bureau of Economic Research, Inc.
  10. Axel Borsch-Supan & Reinhold Schnabel, 1999. "Social Security and Retirement in Germany," NBER Chapters, in: Social Security and Retirement around the World, pages 135-180 National Bureau of Economic Research, Inc.
  11. Agar Brugiavini & Franco Peracchi, 2004. "Micro-Modeling of Retirement Behavior in Italy," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 345-398 National Bureau of Economic Research, Inc.
  12. Courtney Coile & Jonathan Gruber, 2001. "Social Security Incentives for Retirement," NBER Chapters, in: Themes in the Economics of Aging, pages 311-354 National Bureau of Economic Research, Inc.
  13. repec:dgr:uvatin:20080025 is not listed on IDEAS
  14. 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.
  15. Bloemen, Hans, 2008. "Private Wealth and Job Exit at Older Age: A Random Effects Model," IZA Discussion Papers 3386, Institute for the Study of Labor (IZA).
  16. Randall K. Filer & Marjorie Honig, 2005. "Endogenous Pensions and Retirement Behavior," Economics Working Paper Archive at Hunter College 410, Hunter College Department of Economics.
  17. Spataro, Luca, 2005. "Social security incentives and retirement decisions in Italy: An empirical insight," Research in Economics, Elsevier, vol. 59(3), pages 223-256, September.
  18. Raffaele Miniaci, 1998. "Microeconometric Analysis of the Retirement Decision: Italy," OECD Economics Department Working Papers 205, OECD Publishing.
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