Early Announcement of a Public Pension Reform in Italy
What is the macroeconomic impact of announcing a pension system reform in advance? The Italian reform in 1992 represents an illustrative case to address this question. Using an overlapping-generations model, we simulate the pre-announcement of five-year increase in the retirement eligibility age within 1992 Italian pension system. The simulation results show that the transition would be characterized by a drop in the employment rate of workers ages 55 and older explaining 77 percent of the actual drop. They also predict an 8 percent increase in pensions' expenditure and explain 83 percent of the actual increase. Finally, the welfare analysis highlights a loss for almost all the transitional generations.
Volume (Year): 96 (2006)
Issue (Month): 5 (September-October)
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