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Welfare Effects of Social Security Reforms Across Europe: The Case of France and Italy

  • Raquel Fonseca
  • Thepthida Sopraseuth

This paper uses a calibrated life cycle model to quantify the distributional effects of Social Security reforms. The authors focus on two countries, Italy and France, because they adopted two different strategies to cope with aging. While France marginally modified its defined benefit pension plan, Italy switched from a defined benefit pension plan to a contributive system. They find both reforms redistribute welfare unevenly: high skilled workers are the primary winners of the French reform and self employed individuals, especially unskilled workers, are the losers under the new Italian Social Security arrangement. Finally, they estimate that the French reform only finances 20% of the expected deficit. This is in sharp contrast with the Italian reform which finances the expected deficit by cutting drastically the generosity of Social Security benefits.

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Paper provided by RAND Corporation Publications Department in its series Working Papers with number 437.

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Length: 44 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:ran:wpaper:437
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  1. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
  2. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2004. "A Quantitative Investigation of the Laffer Curve on the Continued Work Tax: The French Case," Documents de recherche 04-15, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  3. Agar Brugiavini & Vincenzo Galasso, 2003. "The Social Security Reform Process in Italy: Where do We Stand?," Working Papers wp052, University of Michigan, Michigan Retirement Research Center.
  4. Blau, David M., 2007. "Retirement and Consumption in a Life Cycle Model," IZA Discussion Papers 2986, Institute for the Study of Labor (IZA).
  5. Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
  6. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(SpecialIs), pages 79-114, 08.
  7. Whitehouse, Edward & Queisser, Monika, 2007. "Pensions at a glance: public policies across OECD countries," MPRA Paper 16349, University Library of Munich, Germany.
  8. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
  9. Gary D. Hansen & Ayse Imrohoroglu, 1990. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," UCLA Economics Working Papers 583, UCLA Department of Economics.
  10. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  11. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
  12. Vincenzo Quadrini, 1997. "Entrepreneurship, saving and social mobility," Discussion Paper / Institute for Empirical Macroeconomics 116, Federal Reserve Bank of Minneapolis.
  13. Odile Chagny & Gaël Dupont & Henri Sterdyniak & Paola Veroni, 2001. "Les réformes des systèmes de retraite en Europe," Sciences Po publications info:hdl:2441/2543, Sciences Po.
  14. Didier Blanchet & Louis-Paul Pele, 1999. "Social Security and Retirement in France," NBER Chapters, in: Social Security and Retirement around the World, pages 101-133 National Bureau of Economic Research, Inc.
  15. Guiso, Luigi & Jappelli, Tullio & Pistaferri, Luigi, 2002. "An Empirical Analysis of Earnings and Employment Risk," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 241-53, April.
  16. David A. Wise, 1996. "Advances in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise96-1, December.
  17. Jean-Olivier Hairault & François Langot, 2002. "Inégalités et réformes des retraites," Revue Française d'Économie, Programme National Persée, vol. 17(1), pages 97-159.
  18. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis.
  19. Marcello D’Amato & Vincenzo Galasso, 2002. "Assessing the Political Sustainability of Parametric Social Security Reforms: the Case of Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 61(2), pages 171-213, December.
  20. Margherita Borella, 2001. "Social Security Systems and the Distribution of Income: an Application to the Italian Case," CeRP Working Papers 08, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  21. repec:att:wimass:9430 is not listed on IDEAS
  22. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
  23. Luc Arrondel & Anne Laferrère, 1991. "Successions et héritiers à travers les données fiscales," Économie et Prévision, Programme National Persée, vol. 100(4), pages 137-159.
  24. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
  25. Agar Brugiavini, 1999. "Social Security and Retirement in Italy," NBER Chapters, in: Social Security and Retirement around the World, pages 181-237 National Bureau of Economic Research, Inc.
  26. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
  27. Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 465-89, July.
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