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The distributional impact of pension system reforms: an application to the Italian case

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  • Margerita Borella

Abstract

Between 1992 and 1995, the Italian pension system was deeply reformed, and it is now moving from an earnings-related to a contribution-based scheme. The pre-1992 system was generous and redistributive; however, often redistribution operated from the poor to the rich, notably because the benefit formula was based on the last years of earnings, thus benefiting workers with steep earnings profiles. The new contribution-based scheme may enhance equity by removing (some of) the inequities implicit in the previous system. Simulations calibrated on Italian male employees show that the contribution-based scheme reduces inequality among all groups considered, with the exception of college graduates employed in the private sector. When taking into account the average level of the benefit as well as its distribution, the analysis shows mixed results depending on the worker’s number of years of contribution and on their retirement age, as well as on the steepness of their earnings profile.

Suggested Citation

  • 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.
  • Handle: RePEc:ifs:fistud:v:25:y:2004:i:4:p:415-437
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    References listed on IDEAS

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    1. Rabin, Matthew, 2002. "A perspective on psychology and economics," European Economic Review, Elsevier, vol. 46(4-5), pages 657-685, May.
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    Cited by:

    1. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.
    2. Serena Trucchi, 2011. "How credit markets affect homeownership: an explanation based on differences between Italian regions," CeRP Working Papers 122, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    3. Margherita Borella & Flavia Coda Moscarola, 2006. "Distributive Properties of Pensions Systems: A Simulation of the Italian Transition from Defined Benefit to Notional Defined Contribution," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 65(1), pages 95-126, May.
    4. Lixin He, 2008. "The distributional effects of public pension reform in urban China," Psychometrika, Springer;The Psychometric Society, vol. 3(2), pages 255-276, June.
    5. 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).

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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