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An Assessment of the Italian 2007 Second Pillar Reform: a simulation approach

Author

Listed:
  • Corsini, Lorenzo
  • Pacini, Pier Mario
  • Spataro, Luca

Abstract

In this paper we aim at assessing the outcomes of the 2007 Italian reform of the complementary social security and to identify the determinants behind them. The reform gave relevant incentives to workers to switch from investing about 7% of their gross wages into a compulsory defned benefit scheme inside the firm (which took the form of a termination indemnity payment, the TFR scheme) to an external pension fund. We provide a theoretical framework to model workers' choice problem of switching between these pension schemes and we then perform an agent-based simulation taking into account all the details of the reform. Our simulations are able to replicate the Italian data in term of adhesion rates to complementary social security and also to identify some of the key determinants of that outcome, like the fiscal incentives, the financial literacy and the expectations on the rate of returns of pension funds.

Suggested Citation

  • Corsini, Lorenzo & Pacini, Pier Mario & Spataro, Luca, 2010. "An Assessment of the Italian 2007 Second Pillar Reform: a simulation approach," MPRA Paper 25922, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25922
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    References listed on IDEAS

    as
    1. Nicholas Barr & Peter Diamond, 2006. "The Economics of Pensions," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(1), pages 15-39, Spring.
    2. Joshua D. Rauh, 2006. "Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans," Journal of Finance, American Finance Association, vol. 61(1), pages 33-71, February.
    3. Maria Cozzolino & Fernando Di Nicola, 2006. "Il futuro dei fondi pensione: opportunità e scelte sulla destinazione del TFR," ISAE Working Papers 64, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Agent Based Simulation; Pension Schemes; Second Pillar;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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