IDEAS home Printed from https://ideas.repec.org/a/ifs/fistud/v22y2001i4p487-526..html
   My bibliography  Save this article

Funding a PAYG pension system: the case of Italy

Author

Listed:
  • Lorenzo Forni
  • Raffaela Giordano

Abstract

Italy is characterised by a mature pay-as-you-go social security system and by particularly adverse population projections. Given these trends, the social security contribution rate is expected to increase above its current high level. This hinders the development of employer-provided pension funds and introduces a significant wedge between labour cost and earnings that discourages both labour demand and labour supply. Any proposal to reduce payroll taxes and to reform the system in the direction of partial funding has to cope with the state of Italian public finances. Italy has to comply with the Stability and Growth Pact that imposes constraints on budget deficit and debt trends. Using micro data from the Bank of Italy"s Survey of Household Income and Wealth and official population projections, we estimate future employment trends under different demographic and macroeconomic scenarios and compute the cost of the transition. We show that it would be substantially reduced if positive effects on employment were induced by the payroll tax reduction.

Suggested Citation

  • Lorenzo Forni & Raffaela Giordano, 2001. "Funding a PAYG pension system: the case of Italy," Fiscal Studies, Institute for Fiscal Studies, vol. 22(4), pages 487-526., December.
  • Handle: RePEc:ifs:fistud:v:22:y:2001:i:4:p:487-526.
    as

    Download full text from publisher

    File URL: http://www.ifs.org.uk/fs/articles/0050a.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
    2. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
    3. 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.
    4. Onorato Castellino & Elsa Fornero, 1997. "Privatizzare la previdenza sociale? Condizioni, modalità e limiti," Politica economica, Società editrice il Mulino, issue 1, pages 3-26.
    5. Franco, D. & Gokhale, J. & Guiso, L. & Kotlikoff, L.J. & Sartor, N., 1991. "Generational Accounting - The Case of Italy," Papers 18, Boston University - Department of Economics.
    6. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    7. Fornero, Elsa, 1995. "Totally unfunded vs. partially funded pension systems: the case of Italy," Ricerche Economiche, Elsevier, vol. 49(4), pages 357-374, December.
    8. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
    9. Kotlikoff, Laurence, 1996. "Privatizing School Security at Home and Abroad," American Economic Review, American Economic Association, vol. 86(2), pages 368-372, May.
    10. Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
    11. Modigliani, Franco. & Ceprini, Marialuisa E. A. & Muralidhar, Arun Sundarram., 1999. "An MIT solution to the social security crisis," Working papers WP 4051-99., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    12. Martin Feldstein, 1997. "Transition to a Fully Funded Pension System: Five Economic Issues," NBER Working Papers 6149, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

    Statistics

    Access and download statistics

    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:ifs:fistud:v:22:y:2001:i:4:p:487-526.. 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: (Emma Hyman). General contact details of provider: http://edirc.repec.org/data/ifsssuk.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.