by Tetyana Dubovyk; CeRP WP n. 101/10
In 1990s, several pension reforms had been adopted to insure financial sustainability of Italian Social Security system. This paper studies two main features of Amato and Dini reforms: (i) adoption of notional defined contributions formula; (ii) price indexation of benefits as compared to wage indexation prior to 1992. As the reforms envision a long phase-in period, I consider the effect of the reforms on different generations. This paper studies household decisions and welfare consequences of the reforms using general equilibrium overlapping generations framework. The major focus is on time allocation and human capital accumulation decisions of transition generations.
The economic and demographic structure of the economy is calibrated to (i) Italian macroeconomic variables in 1992, (ii) observed earnings profiles in Survey of Household Income and Wealth by Banca d’Italia (SHIW). The reforms decrease financial obligations of the pension system. The paper quantifies the effect of the reforms on transition generations.
Published: November 2010