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Distributive Properties of Pensions Systems: A Simulation of the Italian Transition from Defined Benefit to Notional Defined Contribution

  • Margherita Borella

    ()

    (University of Turin and CeRP - Collegio Carlo Alberto)

  • Flavia Coda Moscarola

    ()

    (University of Turin and CeRP - Collegio Carlo Alberto)

We analyse the distribution of pension benefits induced by pension systems moving from a defined benefit formula to a notional defined contribution one. We focus on the reforms that took place in Italy between 1992 and 2004, differently affecting various cohorts of workers. We develop a micro-simulation model that enables to compute pension benefits for heterogeneous individuals belonging to different cohorts, according to pre- and post-reform rules. We find that the defined benefit system is highly redistributive along many dimensions, not just earnings. With the phasing in of the NDC system, redistribution in all dimensions is gradually reduced.

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Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 65 (2006)
Issue (Month): 1 (May)
Pages: 95-126

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Handle: RePEc:gde:journl:gde_v65_n1_p95-126
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  1. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
  2. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  3. Agar Brugiavini, 1997. "Social Security and Retirement in Italy," NBER Working Papers 6155, National Bureau of Economic Research, Inc.
  4. Mark Huggett & Gustavo Ventura, 1998. "On the Distributional Effects of Social Security Reform," Working Papers 9801, Centro de Investigacion Economica, ITAM.
  5. Hugett, M. & Ventura, G., 1997. "On the Distributional Effects of Social Security Reform," UWO Department of Economics Working Papers 9710, University of Western Ontario, Department of Economics.
  6. Cathal O'Donoghue, 2001. "Dynamic Microsimulation: A Methodological Survey," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 4(2), December.
  7. Margerita Borella, 2004. "The distributional impact of pension system reforms: an application to the Italian case," Fiscal Studies, Institute for Fiscal Studies, vol. 25(4), pages 415-437, December.
  8. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2000. "The Progressivity of Social Security," NBER Working Papers 7520, National Bureau of Economic Research, Inc.
  9. Carlo Bianchi & Marzia Romanelli & Pietro A. Vagliasindi, 2003. "Microsimulating the Evolution of Italian Pension Benefits: the Role of Retirement Choices and Lowest Pensions Indexing," LABOUR, CEIS, vol. 17(SpecialIs), pages 139-173, 08.
  10. Castellino, Onorato, 1995. "Redistribution between and within generations in the Italian social security system," Ricerche Economiche, Elsevier, vol. 49(4), pages 317-327, December.
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