IDEAS home Printed from https://ideas.repec.org/p/hit/piedp1/10.html
   My bibliography  Save this paper

Italy: The Search for a Sustainable PAYG Pension System

Author

Listed:
  • Franco, Daniele

Abstract

During the 1990s the reform of the pension system had been at the core of the effort to consolidate Italian public finances and ensure long-term fiscal sustainability. The reform process began in 1992 when a quarter of perspective public sector pension liabilities was abruptly cancelled. A second major reform, in 1995, aimed primarily at reducing distortions in the labour market and at making the system more fair. This latter reform began a shift from a defined benefit to a defined contribution system. The Italian system will remain on a PAYG basis, but each individual will hold a notional social security account. Pensions will be related to accumulated contributions and to retirement age. The introduction of the defined contribution pensions aims at mimicking the incentive effects of funded pensions, while avoiding the need to pre-fund future liabilities. Over the last decade, pension expenditure trends have been substantially adjusted down. Microeconomic incentives have been improved. Distributive effects have been largely redesigned. However, the reform process is not yet over. Italian pension spending, which is proportionally higher than that in any other western industrial country, is still expected to increase as a share of GDP. This also depends on the very low fertility rate and the relatively high life expectancy. Moreover, some reforms have been implemented without adequate analysis of their implications and they include solutions which may result unsustainable in the long-run. This lengthy reform process generates uncertainty, limits the microeconomic benefits of the actuarial approach introduced by the 1995 reform, and induces elderly workers to retire from the work-force as soon as they are in the condition to for fear of possible cuts in benefits. An actuarially based pension system, such as that introduced in Italy in 1995, can deliver the expected labour market benefits only if the link between contributions and benefits is transparent and perceived as stable by citizens. This may not be the case in Italy, where a large number of workers are not affected by the new pension regime and where public opinion expects further reforms.

Suggested Citation

  • Franco, Daniele, 2001. "Italy: The Search for a Sustainable PAYG Pension System," Discussion Paper 10, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:piedp1:10
    Note: International Seminar on Pensions, 5-7 March, 2001, Sano-shoin Hall, Hitotsubashi University, Tokyo, Japan, Organised by The Project on Intergenerational Equity (PIE), The Institute of Economic Research, Hitotsubashi University
    as

    Download full text from publisher

    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/14515/pie_dp10.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Edward Palmer, 1999. "Exit from the Labor Force for Older Workers: Can the NDC Pension System Help?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 24(4), pages 461-472, October.
    2. Nicola Sartor & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounts for Italy," NBER Chapters, in: Generational Accounting around the World, pages 299-324, National Bureau of Economic Research, Inc.
    3. Mr. A. J Hamann, 1997. "The Reform of the Pension System in Italy," IMF Working Papers 1997/018, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carla Morrone & Maria Teresa Bianchi & Anna Attias, 2020. "A New Approach for Proper Reporting of Pension Benefit Obligations in the Financial Statements of “Old Funds” for Professionals," International Business Research, Canadian Center of Science and Education, vol. 13(8), pages 117-117, August.
    2. Schmähl, Winfried, 2005. "Nationale Rentenreformen und die Europäische Union: Entwicklungslinien und Einflusskanäle," Working papers of the ZeS 03/2005, University of Bremen, Centre for Social Policy Research (ZeS).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniele Franco, 2002. "Italy: A Never-Ending Pension Reform," NBER Chapters, in: Social Security Pension Reform in Europe, pages 211-262, National Bureau of Economic Research, Inc.
    2. Brugiavini, Agar & Galasso, Vincenzo, 2004. "The social security reform process in Italy: where do we stand?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(2), pages 165-195, July.
    3. Kotlikoff, Laurence J., 2002. "Generational policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 27, pages 1873-1932, Elsevier.
    4. James, Estelle, 1998. "New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions," The World Bank Research Observer, World Bank, vol. 13(2), pages 271-301, August.
    5. Villa, Miguel & Rivadeneira S., Luis, 1999. "El proceso de envejecimiento de la población en América Latina y el Caribe: una expresión de la transición demográfica," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34671, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Laura Cavalli & Alessandro Bucciol & Paolo Pertile & Veronica Polin & Nicola Sartor & Alessandro Sommacal, 2012. "Modelling life-course decisions for the analysis of interpersonal and intrapersonal redistribution," Working Papers 25/2012, University of Verona, Department of Economics.
    7. John B. Williamson & Matthew Williams, 2005. "Notional Defined Contribution Accounts," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(2), pages 485-506, April.
    8. Barbot-Coldevin, Jöelle, 1999. "Gender-based inequalities: the greater vulnerability of older women," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34682, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    9. Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1998. "Asymmetries in Housing and Financial Market Institutions and EMU," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(3), pages 54-80, Autumn.
    10. Andrews, Gary S., 1999. "The challenges of ageing for current and future society," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34681, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Hennis, Anselm J., 1999. "Health care for older persons in a Caribbean country," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34680, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    12. Lattes, Zulma Recchini de, 1999. "Tendencias y perspectivas del envejecimiento de la población femenina y masculina en Argentina," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34672, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Carvalho, José Alberto Magno de & Andrade, Flávia Cristina Dumond, 1999. "Envejecimiento de la población brasileña: oportunidades y desafíos," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34673, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Chackiel, Juan, 1999. "El envejecimiento de la población latinoamericana: ¿hacia una relación de dependencia favorable?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34684, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    15. Polin, Veronica & Sartor, Nicola, 2009. "Family Intertemporal Fiscal Incidence: A new Methodology for Assessing Public Policies," MPRA Paper 25570, University Library of Munich, Germany.
    16. Robert Fenge & Martin Werding, 2004. "Ageing and the tax implied in public pension schemes: simulations for selected OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 159-200, June.
    17. Emilio Bisetti & Carlo Favero, 2014. "Measuring the Impact of Longevity Risk on Pension Systems: The Case of Italy," North American Actuarial Journal, Taylor & Francis Journals, vol. 18(1), pages 87-103.
    18. Arenas de Mesa, Alberto, 1999. "El sistema de pensiones en Chile: resultados y desafíos pendientes," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34692, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    19. Whitehouse, Edward, 2001. "Pension systems in 15 countries compared: the value of entitlements," MPRA Paper 14751, University Library of Munich, Germany.
    20. John McHale, 2001. "The Risk of Social Security Benefit-Rule Changes: Some International Evidence," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 247-290, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:piedp1:10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Resources Section, Hitotsubashi University Library (email available below). General contact details of provider: https://edirc.repec.org/data/cihitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.