IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v16y2009i5p578-588.html
   My bibliography  Save this article

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

Author

Listed:
  • Belloni, Michele
  • Alessie, Rob

Abstract

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.

Suggested Citation

  • Belloni, Michele & Alessie, Rob, 2009. "The importance of financial incentives on retirement choices: New evidence for Italy," Labour Economics, Elsevier, vol. 16(5), pages 578-588, October.
    • Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:578-588
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927-5371(09)00010-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    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. 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.
    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. 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.
    6. 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.
    7. Angus S. Deaton & Christina Paxson, 1994. "Saving, Growth, and Aging in Taiwan," NBER Chapters, in: Studies in the Economics of Aging, pages 331-362, National Bureau of Economic Research, Inc.
    8. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, March.
    9. 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.
    10. David A. Wise, 1994. "Studies in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise94-1, March.
    11. Randall Filer & Marjorie Honig, 2005. "Endogenous Pensions and Retirement Behavior," CESifo Working Paper Series 1547, CESifo.
    12. 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.
    13. 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.
    14. Hans G. Bloemen, 2016. "Private wealth and job exit at older age: a random effects model," Empirical Economics, Springer, vol. 51(2), pages 763-807, September.
    15. Raffaele Miniaci, 1998. "Microeconometric Analysis of the Retirement Decision: Italy," OECD Economics Department Working Papers 205, OECD Publishing.
    16. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(SpecialIs), pages 79-114, August.
    17. 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.
    18. Jonathan Gruber & David A. Wise, 2007. "Social Security Programs and Retirement around the World: Fiscal Implications of Reform," NBER Books, National Bureau of Economic Research, Inc, number grub07-1, March.
    19. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, March.
    20. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(s1), pages 79-114, August.
    21. 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.
    22. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    23. Jonathan Gruber & David A. Wise, 2007. "Introduction to "Social Security Programs and Retirement around the World: Fiscal Implications of Reform"," NBER Chapters, in: Social Security Programs and Retirement around the World: Fiscal Implications of Reform, pages 1-42, National Bureau of Economic Research, Inc.
    24. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. García-Pérez, J. Ignacio & Jiménez-Martín, Sergi & Sánchez-Martín, Alfonso R., 2013. "Retirement incentives, individual heterogeneity and labor transitions of employed and unemployed workers," Labour Economics, Elsevier, vol. 20(C), pages 106-120.
    2. Pilar García-Gómez & Sílvia Garcia-Mandicó & Sergi Jiménez-Martín & Judit Vall-Castelló, 2018. "Trends in Employment and Social Security Incentives in the Spanish Pension System, 1980–2016," NBER Chapters, in: Social Security Programs and Retirement around the World: Reforms and Retirement Incentives, pages 317-371, National Bureau of Economic Research, Inc.
    3. Pilar Garcia-Gomez & Titus J. Galama & Eddy van Doorslaer & Angel Lopez-Nicolas, 2017. "Interactions Between Financial Incentives and Health in the Early Retirement Decision," Tinbergen Institute Discussion Papers 17-044/V, Tinbergen Institute.
    4. C Machado & Miguel Portela, 2014. "Hours of work and retirement behaviour," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-22, December.
    5. Flavia Coda Moscarola & Elsa Fornero & Steinar Strøm, 2016. "Absenteeism, childcare and the effectiveness of pension reforms," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-18, December.
    6. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    7. Denis Fougère & Pierre Gouëdard, 2021. "The effects of financial incentives and disincentives on teachers' retirement decisions: Evidence from the 2003 French pension reform," Working Papers hal-03465859, HAL.
    8. Agnese Romiti & Maria Cristina Rossi, 2011. "Should we Retire Earlier in order to Look After our Parents? The Role of immigrants," CeRP Working Papers 124, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    9. Jun, Hankyung, 2020. "Social security and retirement in fast-aging middle-income countries: Evidence from Korea," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    10. 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).
    11. Fougère, Denis & Gouëdard, Pierre, 2021. "The effects of financial incentives and disincentives on teachers' retirement decisions: Evidence from the 2003 French pension reform," CEPR Discussion Papers 16673, C.E.P.R. Discussion Papers.
    12. Peri, Giovanni & Romiti, Agnese & Rossi, Mariacristina, 2013. "Immigrants, Household Production and Women's Retirement," IZA Discussion Papers 7549, Institute of Labor Economics (IZA).
    13. Decoster, André & Capéau, Bart, 2016. "Getting tired of work, or re-tiring in absence of decent job opportunities? Some insights from an estimated Random Utility/Random Opportunity model on Belgian data," EUROMOD Working Papers EM4/16, EUROMOD at the Institute for Social and Economic Research.
    14. Vera Rivera, Carolina, 2020. "Modelo de riesgo competitivo en los “Senior Workers”: evidencia del mercado laboral chileno," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 33, pages 143-179, May.
    15. Flavia Coda Moscarola & Riccardo Calcagno & Elsa Fornero, 2017. "oo busy to stay at work. How willing are Italian workers “to pay†for earlier retirement?," Economics Bulletin, AccessEcon, vol. 37(3), pages 1694-1707.
    16. Demirguc-Kunt,Asli & Klapper,Leora & Panos,Georgios A., 2016. "Saving for old age," Policy Research Working Paper Series 7693, The World Bank.
    17. 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.
    18. Danzer, Alexander M., 2010. "Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe," IZA Discussion Papers 4726, Institute of Labor Economics (IZA).
    19. Peri, Giovanni & Romiti, Agnese & Rossi, Mariacristina, 2015. "Immigrants, domestic labor and women's retirement decisions," Labour Economics, Elsevier, vol. 36(C), pages 18-34.
    20. Flavia Coda Moscarola & Margherita Borella, 2015. "The 2011 Pension Reform in Italy and its Effects on Current and Future Retirees," CeRP Working Papers 151, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    21. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michele Belloni & Rob Alessie, 2008. "The Importance of Financial Incentives on Retirement Choices," Tinbergen Institute Discussion Papers 08-052/3, Tinbergen Institute.
    2. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    3. Agnese Romiti & Maria Cristina Rossi, 2011. "Should we Retire Earlier in order to Look After our Parents? The Role of immigrants," CeRP Working Papers 124, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    4. 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.
    5. Ranzani, Marco, 2006. "Social Security and Labour Supply: the Italian 1992 Reform as a Natural Experiment," MPRA Paper 16569, University Library of Munich, Germany, revised Dec 2008.
    6. 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.
    7. Agar Brugiavini & Franco Peracchi & David A. Wise, 2002. "Pensions and Retirement Incentives. A Tale of Three Countries: Italy, Spain and the USA," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 61(2), pages 131-169, December.
    8. Isabel Cairó-Blanco, 2010. "An empirical analysis of retirement behaviour in Spain: partial versus full retirement," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(3), pages 325-356, July.
    9. Cristiano Antonelli, 2017. "The Engines of the Creative Response: Reactivity and Knowledge Governance," Economía: teoría y práctica, Universidad Autónoma Metropolitana, México, vol. 47(2), pages 9-30, Julio-Dic.
    10. Barbara Hanel, 2010. "Disability Pensions and Labor Supply," Working Papers 086, Bavarian Graduate Program in Economics (BGPE).
    11. Chiara Ardito, 2017. "Rising pension age in Italy: Employment response and Program substitution," LABORatorio R. Revelli Working Papers Series 155, LABORatorio R. Revelli, Centre for Employment Studies.
    12. Hakola, Tuulia, 2002. "Alternative Approaches to Model Withdrawals from the Labour Market – A Literature Review," Working Paper Series 2003:4, Uppsala University, Department of Economics.
    13. Alonso-Ortiz, Jorge, 2014. "Social security and retirement across the OECD," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 300-316.
    14. 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.
    15. 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.
    16. Hanel, Barbara, 2012. "The effect of disability pension incentives on early retirement decisions," Labour Economics, Elsevier, vol. 19(4), pages 595-607.
    17. Hanel, Barbara, 2010. "Financial incentives to postpone retirement and further effects on employment -- Evidence from a natural experiment," Labour Economics, Elsevier, vol. 17(3), pages 474-486, June.
    18. Luca Spataro, 2002. "New Tools in Micromodeling Retirement Decisions: Overview and Applications to the Italian Case," CeRP Working Papers 28, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    19. Michele Boldrin & Pilar García-Gómez & Sergi Jiménez-Martín, 2010. "Social Security Incentives, Exit from the Workforce and Entry of the Young," NBER Chapters, in: Social Security Programs and Retirement around the World: The Relationship to Youth Employment, pages 261-294, National Bureau of Economic Research, Inc.
    20. Kevin Milligan & Tammy Schirle, 2008. "Improving the Labour Market Incentives of Canada's Public Pensions," Canadian Public Policy, University of Toronto Press, vol. 34(3), pages 281-304, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:578-588. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.