Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-25T19:01:41.676Z Has data issue: false hasContentIssue false
  • English
  • Français

Differential mortality and redistribution in the Italian notional defined contribution system

Published online by Cambridge University Press:  01 June 2012

CARLO MAZZAFERRO ,
MARCELLO MORCIANO  and
MARCO SAVEGNAGO
CARLO MAZZAFERRO
Affiliation:
Department of Economics, University of Bologna, CAPP and CHILD
MARCELLO MORCIANO
Affiliation:
Health Economics Group, University of East Anglia, CAPP and ISER
MARCO SAVEGNAGO
Affiliation:
Bank of Italy1 and University of Rome ‘Tor Vergata’
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

H55I38J11differential mortalityNDCre-distributionmicro-simulation
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 4 , October 2012 , pp. 500 - 530
Copyright
Copyright © Cambridge University Press 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Baldini, M. (2001) MAPP98: un Modello di Analisi delle Politiche Pubbliche. Materiali di discussione del Dipartimento di Economia Politica, 331: 1–25. University of Modena and Reggio Emilia.Google Scholar
Bank of Italy (2004) I bilanci delle famiglie italiane nell'anno 2002. Supplementi al Bollettino Statistico – note metodologiche e informazioni statistiche, Rome.Google Scholar
Becker, G. S. (1973) A Theory of Marriage: Part I. Journal of Political Economy, 81(4): 813–846.Google Scholar
Belloni, M. and Maccheroni, C. (2006) Actuarial neutrality when longevity increases: an application to the Italian pension system. CeRP Working Paper, Nr. 47/06.Google Scholar
Borella, M. and Coda Moscarola, F. (2006) Distributive properties of pensions systems: a simulation of the Italian transition from defined benefit to notional defined contribution. Giornale degli Economisti, 65(1): 95–126.Google Scholar
Borella, M. and Coda Moscarola, F. (2010) Microsimulation of pension reforms: behavioural versus nonbehavioural approach. Journal of Pension Economics and Finance, 9(04): 583–607.Google Scholar
Bottazzi, R., Jappelli, T. and Padula, M. (2006) Retirement expectations, pension reforms, and their impact on private wealth accumulation. Journal of Public Economics, 90(12): 2187–2212.CrossRefGoogle Scholar
Brandolini, A. (1999) The distribution of personal income in post-war Italy: source description, data quality, and the time pattern of income inequality. Giornale degli Economisti, 58(2): 183–239.Google Scholar
Brown, J. R. (2002) Differential mortality and the value of individual account retirement annuities. In Feldstein, M. and Liebman, J. B. (eds), The Distributional Aspects of Social Security and Social Security Reform. Chicago, University of Chicago Press for NBER, pp. 401–46.Google Scholar
Candela, S., Cavuto, S. and Luberto, F. (2005) Condizioni socioeconomiche e mortalitá nella popolazione di Reggio Emilia. Azienda USL di Reggio Emilia, Dipartimento di Sanit Pubblica, Unit di Epidemiologia.Google Scholar
Caselli, G., Peracchi, F., Balbi, E. and Lipsi, R. M. (2003) Differential mortality and the design of the Italian system of public pensions. Labour, 17(0): 45–78.Google Scholar
Coronado, J. L., Fullerton, D. and Glass, T. (2000) The progressivity of social security. NBER Working Paper, Nr 7520.Google Scholar
Creedy, J., Disney, R. and Whitehouse, E. (1993) The earnings-related state pension, indexation and lifetime redistribution in the U.K. Review of Income and Wealth, 39(3): 257–278.Google Scholar
Deaton, A. and Paxson, C. (2004) Perspectives on the economics of aging. Wise, David A., ed., NBER Conference Report series. Chicago and London: University of Chicago Press, 247–80.Google Scholar
Disney, R. and Emmerson, C. (2005) Public pension reform in the United Kingdom: what effect on the financial well-being of current and future pensioners? Fiscal Studies, 26(1): 55–81.Google Scholar
Disney, R. (1999) Notional accounts as a pension reform strategy: an evaluation. World Bank Social Protection Discussion Paper Series, Nr. 9928.Google Scholar
Fornero, E. and Castellino, O. (2001) La riforma del sistema previdenziale italiano. Opzioni e proposte. Bologna: Il Mulino.Google Scholar
Franco, D. (2001) Italy: The search for a sustainable PAYG pension system. Center for Intergenerational Studies, Nr. 10, Institute of Economic Research, Hitotsubashi University.Google Scholar
Harris, A. R. and Sabelhaus, J. (2005) How does differential mortality affect social security finance and progressivity? Congressional Budget Office Working Paper No. 2005–5.Google Scholar
Huisman, M., Kunst, A. E., Andersen, O., Bopp, M., Borgan, J-K., Borrell, C., Costa, G., Deboosere, P., Desplanques, G., Donkin, A., Gadeyne, S., Minder, C., Regidor, E., Spadea, T., Valkonen, T. and Mackenbach, J. P. (2004) Socioeconomic Inequalities in Mortality among Elderly People in 11 European Populations. Journal of Epidemiology and Community Health, 58: 468–475.Google Scholar
Gronchi, S. and Nisticó, S. (2008) Theoretical foundations of pay-as-you-go defined-contribution pension schemes. Metroeconomica, 59(2): 131–159.Google Scholar
ISTAT (2001) La mortalitá differenziale secondo alcuni fattori socio-economici – anni 1991–1992. Collana Informazioni, n. 27, Rome.Google Scholar
ISTAT (2005) Decessi: caratteristiche demografiche e sociali. Anno 2001. Rome.Google Scholar
ISTAT (2008) Previsioni demografiche, 1 gennaio 2007 – 1 gennaio 2051. Rome.Google Scholar
ISFOL (2006) PLUS participation Labour Employment Survey. (eds Mandrone E. and D. Radicchia). Rome.Google Scholar
Kunst, A. E., Geurts, J. and Van Der Berg, J. (1995) International variation in socioeconomic inequalities in self reported health. Journal of Epidemiology and Community Health, 49(2): 117–123.Google Scholar
Leombruni, R., Richiardi, M., Demaria, M. and Costa, G. (2010) Aspettative di vita, lavori usuranti ed equitá del sistema previdenziale. Prime evidenze dal Work Histories Italian Panel. Epidemiologia e Prevenzione, 34(4): 150–158.Google Scholar
Liebman, J. B. (2002) Redistribution in the Current U.S. social security system. In Feldstein, M. and Liebman, J. B. (eds), The Distributional Aspects of Social Security and Social Security Reform. Chicago, University of Chicago Press for NBER, 11–48.Google Scholar
Lindbeck, A. and Persson, M. (2003) The gains from pension reform. Journal of Economic Literature, 41(1): 74–112.Google Scholar
Maccheroni, C. (2008) Diseguaglianze nella durata della vita per grado d'istruzione in Italia all'inizio degli anni 2000. Dondena Working Paper No.3.Google Scholar
Mazzaferro, C. and Morciano, M. (2008) CAPP_DYN a dynamic microsimulation model for Italy. CAPP Working Paper Nr. 48.Google Scholar
Morciano, M. (2007) Un modello di microsimulazione a popolazione dinamica per l'analisi del sistema di protezione sociale italiano. Bologna: unpublished PhD Thesis, University of Bologna. http://amsdottorato.cib.unibo.it/147/1/TESI_MORCIANO_MARCELLO.pdfGoogle Scholar
Nelissen, J. H. M. (1999) Mortality differences related to socioeconomic status and the progressivity of old-age pensions and health insurance: the Netherlands. European Journal of Population, 15: 77–97.Google Scholar
Orcutt, G. H., Mertz, J., Quinke, H. (eds) (1986) Microanalytic Simulation Models to Support Social and Financial Policy. Amsterdam: North-Holland.Google Scholar
O'Donoghue, C. (2001) Dynamic microsimulation: a methodological survey. Brazilian Electronic Journal of Economics, 4(2).Google Scholar
Preston, S. H. and Elo, I. T. (1995) Are educational differential in mortality increasing in the United States? PARC Working Paper Nr. 95-01.Google Scholar
RGS – Ragioneria Generale Dello Stato (2009) Le tendenze di medio-lungo periodo del sistema pensionistico e sanitario, Nr. 11, Rome.Google Scholar
Sartor, N. and Franco, D. (2006) Notional defined contribution in Italy unsatisfactory present, uncertain future. In Holzmann, R. and Palmer, E. (eds), Pension Reform: Issues and Prospects for Non-Financial Defined Contribution (NDC) Scheme. World Bank, Washington, DC.Google Scholar
Settergren, O. and Mikula, B. D. (2006) The rate of return of pay as you go pension systems. In Holzmann, R. and Palmer, E. (eds), Pension Reform: Issues and Prospects for Non-Financial Defined Contribution (NDC) Scheme. World Bank, Washington, DC.Google Scholar
Valdes-Prieto, S. (2000) The financial stability of notional account pensions. Scandinavian Journal of Economics, 100(3): 395–417.Google Scholar
Valdes-Prieto, S. (2006) A market method to endow NDC systems with automatic financial stability. In Holzmann, R. and Palmer, E. (eds), Pension Reform: Issues and Prospects for Non-Financial Defined Contribution (NDC) Scheme, World Bank, Washington, DC.Google Scholar
Whitehouse, E. and Zaidi, A. (2008) Socio-economic differences in mortality: implications for pensions policy? Social, Employment and Migration Working Papers Nr. 71, OECD, Paris.Google Scholar