The Unintended Costs of Early Retirement Policies: Evidence from Italy’s Quota 100 Reform

This paper examines the unintended consequences of policies perceived as inequitable by leveraging Italy’s Quota 100 pension reform, which denied early retirement to workers with identical contribution histories who did not meet an age cutoff. Using SHARE data and a difference-in-differences design, we first establish that excluded workers experienced no change in unemployment or disability status, while their relative probability of being retired fell mechanically. We then document a significant deterioration in their mental health, with effects emerging immediately upon the reform’s introduction and persisting for at least two years. These effects are concentrated among workers who satisfy the contribution requirement but are denied eligibility solely on the basis of age, implicating perceived unfairness as a primary channel. Using European Social Survey data and a regression discontinuity design, we find that the reform led to a reduction in trust in institutions among age-ineligible workers. Finally, electoral data show that the League, the reform’s principal architect, suffered vote share losses in municipalities with higher concentrations of excluded workers, with penaltiesexceeding any gains accrued in areas with more beneficiaries.