IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

The macroeconomics of pension reform: The case of severance pay reform in Italy

Listed author(s):
  • Sergio Cesaratto


    (University of Siena, Italy)

In the last two decades Italy implemented a number of reforms of the public pay-as-you-go (PAYG) scheme that curtailed future pensions. Governments therefore felt the need to increase the number of workers contributing to fully funded (FF) schemes to offset the expected fall in public pensions. In the private sector an existing saving fund, the severance pay scheme (Trattamento di fine rapporto or TFR) was used to expand the anaemic existing FF pillar. The macroeconomic content of the reform seems fragile since the economy’s amount of precautionary saving has not changed. The question is why a bolder reform aiming at creating an additional new old-age saving scheme has not been attempted by the Italian Government. The answer presumably has to do with troubles surrounding the macroeconomics of pension reforms, in particular the difficulties of setting up a FF scheme from scratch or by diverting resources from an existing PAYG program. Not surprisingly, no reform was attempted in the public sector where the TFR works on a PAYG basis. An ancillary argument to defend the reform relies on presumed higher returns from private pension funds (PFs) compared to the old TFR. In this light, the paper examines the non-exiting financial performance of the PFs. The instability of financial markets, even before the current crises, and the fondness of workers for the old TFR are finally used to explain the low popularity of the reform. All in all, the reform seems to be more in the nature of political window-dressing, consisting in a change in management of an existing saving fund, in order to show that something has been done to preserve the future standard of living of retirees.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Edward Elgar Publishing in its journal Intervention. European Journal of Economics and Economic Policies.

Volume (Year): 8 (2011)
Issue (Month): 1 ()
Pages: 69-89

in new window

Handle: RePEc:elg:ejeepi:v:8:y:2011:i:1:p69-89
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Peter Diamond & Nicholas Barr, 2006. "(UBS Pensions Series 041) The Economics of Pensions," FMG Discussion Papers dp563, Financial Markets Group.
  2. Nicholas Barr & Peter Diamond, 2006. "The Economics of Pensions," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 15-39, Spring.
  3. Nicholas Barr, 2006. "(UBS Pensions Series 040) Pensions: Overview of Issues," FMG Discussion Papers dp562, Financial Markets Group.
  4. Sergio Cesaratto, 2005. "Pension Reform and Economic Theory," Books, Edward Elgar Publishing, number 2081.
  5. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, May.
  6. Sergio Cesaratto, 2007. "Are PAYG and FF Pension Schemes Equivalent Systems? Macroeconomic Considerations in the Light of Alternative Economic Theories," Review of Political Economy, Taylor & Francis Journals, vol. 19(4), pages 449-473.
  7. Barr, Nicholas, 2006. "Pensions: overview of the issues," LSE Research Online Documents on Economics 2631, London School of Economics and Political Science, LSE Library.
  8. Phil Agulnik & Julian Le Grand, 1998. "Tax relief and partnership pensions," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 403-428, November.
  9. Agulnik, Philip & Le Grand, Julian, 1998. "Tax relief and partnership pensions," LSE Research Online Documents on Economics 4652, London School of Economics and Political Science, LSE Library.
  10. Joan Robinson, 1953. "The Production Function and the Theory of Capital," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 81-106.
  11. Riccardo Cesari & Giuseppe Grande & Fabio Panetta, 2007. "La Previdenza Complementare in Italia: Caratteristiche, Sviluppo e Opportunità per i Lavoratori," CeRP Working Papers 60, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  12. Le Grand, Julian & Agulnik, Philip, 1998. "Tax relief and partnership pensions," LSE Research Online Documents on Economics 51408, London School of Economics and Political Science, LSE Library.
  13. Nicholas Barr, 2006. "Pensions: Overview of the Issues," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 1-14, Spring.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:elg:ejeepi:v:8:y:2011:i:1:p69-89. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Craven)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.