Microsimulation of Pension Reforms: Behavioural versus Nonbehavioural Approach

byi Margherita Borella and Flavia Coda Moscarola; CeRP WP N. 86/09



We analyse the impact of various pension regimes, as shaped by recent Italian reforms, on retirement age, adequacy issues, and redistribution. We add to the literature on microsimulation by accounting for individuals’ reactions to financial incentives when deciding to retire. We find that shifting from a generous defined benefit (DB) system to an actuarially fair notional defined contribution (NDC) system induces individuals, particularly men, to postpone retirement. Voluntary postponement of retirement and, above all, participation in the second pillar would grant a comprehensive replacement rate (first plus second pillars) comparable to that obtained with the first pillar alone in the pre-reform DB regime.

JEL: C63, H55, J26

Keywords: Microsimulation, public pensions, retirement.

April 2009

WP_86.pdf (PDF document 411Kb)