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Differential mortality and redistribution in the Italian notional defined contribution system

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  • MAZZAFERRO, CARLO
  • MORCIANO, MARCELLO
  • SAVEGNAGO, MARCO

Abstract

In this paper, we adopt a financial measure (net present value ratio) to assess the extent of the redistribution of lifetime earnings operated by the introduction of a notional defined contribution (NDC) system in the Italian PAYGO system. Our simulations are based on a representative sample of the Italian population consisting of individuals born between 1975 and 2000. We identify three channels of redistribution: between genders (from men to women), along educational lines (from the less-well-educated to the highly educated) and between diverse lifetime-earnings quintiles (from the poor to the rich). This happens because certain groups of individuals systematically live shorter-than-average lives (men, the less well-educated and the poor), whereas others live longer-than-average lives (women, the highly educated and the rich) and, at the same time, the NDC system does not take into account such differences. Comparison between the old defined benefit system and the reformed NDC one shows that intergenerational fairness has improved sensibly but differences between gender and educational levels remained nearly the same. Sensitivity analysis and the consideration of survival pensions in our simulations confirm the general trends of our base case.

Suggested Citation

  • Mazzaferro, Carlo & Morciano, Marcello & Savegnago, Marco, 2012. "Differential mortality and redistribution in the Italian notional defined contribution system," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(4), pages 500-530, October.
    • Handle: RePEc:cup:jpenef:v:11:y:2012:i:04:p:500-530_00
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    2. Angelo Marano & Carlo Mazzaferro & Marcello Morciano, 2012. "The strengths and failures of incentive mechanisms in notional defined contribution pension systems," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 71(1), pages 33-70, October.
    3. Morciano, Marcello & Hancock, Ruth M. & Pudney, Stephen E., 2015. "Birth-cohort trends in older-age functional disability and their relationship with socio-economic status: Evidence from a pooling of repeated cross-sectional population-based studies for the UK," Social Science & Medicine, Elsevier, vol. 136, pages 1-9.
    4. Fabrizio Culotta, 2021. "Life Expectancy Heterogeneity and Pension Fairness: An Italian North-South Divide," Risks, MDPI, vol. 9(3), pages 1-22, March.
    5. Javier Pla-Porcel & Manuel Ventura-Marco & Carlos Vidal-Meliá, 2017. "How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?," Documentos de Trabajo del ICAE 2017-11, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    6. Anca-Stefania Jijiie & Jennifer Alonso Garcia & Séverine Arnold (-Gaille), 2019. "Mortality by socio-economic class and its impact on the retirement schemes: How to render the systems fairer?," ULB Institutional Repository 2013/300032, ULB -- Universite Libre de Bruxelles.

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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