The effects of social security on the distribution of wealth in Italy

The degree of substitutability between social security wealth and private wealth is a widely discussed topic. Much less effort is devoted to study the distributive properties of a measure of wealth which sums the future streams of pension benefits net of the contributions to the other traditional components of households net worth (financial and real activities, net of liabilities). This paper has two aims. By using the last six crosssections of the Bank of Italy Survey of Income and Wealth, firstly it estimates an “augmented” measure of net worth which incorporates social security wealth, and secondly it examines the composition and the distribution of such augmented wealth among Italian households in the period 1991-2002. Augmented wealth is found to have fallen in the last decade as a product of two opposite forces, an increase in net worth and a parallel stronger decline in social security wealth, due to the two main pension reforms in 1992 and 1995. Wealth inequality, after rising steeply at the beginning of the 1990s, levelled off in the second part of the period. The major contribution to the upwards movement mainly came from social security wealth, whose distribution, although less unequal than the real and financial one, widened in the first part of the decade at a much faster pace.