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Early Retirement From The Labour Market: Policy Experiments In The Italian Case

In: Industry And Labor Dynamics The Agent-Based Computational Economics Approach

Author

Listed:
  • PIETRO A. VAGLIASINDI

    (Department of International Economics, Finance and Law, University of Parma, Italy)

  • MARZIA ROMANELLI

    (Sant’Anna School of Advanced Studies - LEM, Pisa, Italy)

  • CARLO BIANCHI

    (Department of Economics, University of Pisa, Italy)

Abstract

The substantial changes in the Italian pension system over the last decade subsequent to the Amato, Dini, Prodi and Berlusconi reforms have given raise to a renewed debate on re-designing pension system and in particular seniority pensions. Workers respond quickly to different incentives present in the pension systems and to expected government policies, especially through their retirement choices. These reactions, in turn, can or should inform government policy design to contrast the consequences of the ageing process. Based on the not fully satisfactory way of addressing such issues, this paper aims to shed some new light on the transition from one pension regime to another. After a brief review of the economic literature, this paper presents a bit more evidence on early retirement and its future evolution using dynamic ageing methodology, considering an economy, with heterogeneous workers, whose retirement age depends on expected utility. We examine behavioural changes estimating the age of retirement along the current pension reform path, assuming different behavioural regimes and policies, using a model calibrated to reproduce the main Italian demographic and economic features and retirement dynamics. We find a tendency to postpone the exit from labour market, especially when workers maximise their benefits flow coming from all incomes, instead of sole pension benefits. In this case, pension expenditures grow faster, because savings, due to retirement postponement, are compensated by higher benefits. Finally, we consider how future trends of inequality and poverty among pensioners can be negatively affected by the government seniority pension reform and propose possible remedies.

Suggested Citation

  • Pietro A. Vagliasindi & Marzia Romanelli & Carlo Bianchi, 2004. "Early Retirement From The Labour Market: Policy Experiments In The Italian Case," World Scientific Book Chapters, in: Roberto Leombruni & Matteo Richiardi (ed.), Industry And Labor Dynamics The Agent-Based Computational Economics Approach, chapter 9, pages 164-196, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789812702258_0009
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    Cited by:

    1. Paolo Pertile & Veronica Polin & Pietro Rizza & Marzia Romanelli, 2015. "The fiscal disadvantage of young Italians: a new view on consolidation and fairness," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(1), pages 27-51, March.

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