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Individual heterogeneity and pension choices: How to communicate an effective message?

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  • Giovanni Gallo

    ()

  • Costanza Torricelli

    ()

  • Arthur van Soest

    ()

Abstract

We use the Elaboration Likelihood Model (ELM) to explain how communication influences the heterogeneity in pension choices. To this end we exploit the 2007 Italian reform that allowed transferring future severance pay contributions into a pension fund and was accompanied by an information campaign with a clear message. According to ELM, individuals follow either a “central route” or a “peripheral route” depending on their motivation and ability to think, and eventually change or retain their initial attitude. Based on Logit models and data from the Bank of Italy Survey on Household Income and Wealth, we find that the decision to transfer the severance pay into a pension fund was taken by more educated and older individuals, with high household income. Since the reform was mainly directed at low income and younger individuals, this result suggest that the information campaign was not very effective. Moreover, our findings show that generic financial literacy does not significantly affect decision consciousness, pointing at a more relevant role in the elaboration process for: the individual’s comprehension of the specific choice object (pension funds), cognitive skills, and influential contextual factors (i.e., unions and employer’s pressure).

Suggested Citation

  • Giovanni Gallo & Costanza Torricelli & Arthur van Soest, 2016. "Individual heterogeneity and pension choices: How to communicate an effective message?," Center for the Analysis of Public Policies (CAPP) 0136, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
  • Handle: RePEc:mod:cappmo:0136
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    1. repec:bap:journl:190101 is not listed on IDEAS
    2. Massimo Baldini & Giovanni Gallo & Costanza Torricelli, 2017. "Past Income Scarcity and Current Perception of Financial Fragility," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0064, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    3. Chiara Pederzoli & Costanza Torricelli, 2019. "The impact of the Fundamental Review of the Trading Book: A preliminary assessment on a stylized portfolio," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0075, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    4. Stefano Cosma & Francesca Pancotto & Paola Vezzani, 2018. "Customer Complaining and Probability of Default in Consumer Credit," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0068, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".

    More about this item

    Keywords

    pension choices; Elaboration Likelihood Model; financial literacy;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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