This study documents that the electoral cost of major pension reforms is lower in countries where the level of financial literacy is higher. The evidence from data on legislative elections held between 1990 and 2010 in 21 advanced countries is robust when we control for macroeconomic, demographic, and political conditions. Interestingly, these findings are not robust when we use less specific indicators of human capital as general schooling, supporting the view that knowledge of basic economic and financial concepts has distinctive features that may help reduce the electoral cost of reforms having a relevant impact on the life cycle of individuals.

Using a rich micro dataset drawn from administrative archives, we explore whether Social Security Wealth (SSW) is an important factor affecting the decision to become self-employed. We focus on the two main categories of self-employed professions covered by the Italian public pension system: craftsmen and shopkeepers. We use the large exogenous variation in individual expected SSW that occurred as a result of the policy reform process undertaken in Italy during the 1990s to identify the effect of this variable and we study how the probability of being self-employed or employed depends, amongst other things, on the difference in the expected SSW that accrues under the two alternative employment scenarios. Our key finding is that a higher difference in expected SSW from self-employment compared with employment has a positive effect on the probability of being self-employed and on the probability of switching to self-employment, whereas it has a negative effect on the probability of switching from self-employment to employment.

We study retirement incentives with an augmented reduced form option value model à la Stock and Wise (1990). We propose methodological extensions to better reflect the respective incentives faced by singles and couples. Our results show that a more comprehensive modeling of couples’ incentives leads to very different patterns of retirement incentives – particularly for women. We apply the new indicators to data from the Survey of Health, Ageing and retirement in Europe in Belgium and find two key results. First, contrary to several previous studies, we obtain a positive signed income effects. Second, we find very different retirement incentives for men and women, with little flexibility in the retirement decision for men and substantially more flexibility for women as a function of financial incentive and household composition.

The main goal of the Norwegian pension reform of 2011 is to improve long run fiscal sustainability, not least through stronger labour supply incentives. We assess to what extent the reform is likely to live up to these intentions. To this end we combine a dynamic microsimulation model, which includes a complete description of the Norwegian population and the pension system, with CGE-modelling of the effects on all government revenues and expenditures. We find that the reform is likely to make a great fiscal impact in the long run, and higher employment plays an important role in this respect.

The Multiemployer Pension Reform Act (MPRA) allows multiemployer plans facing insolvency to apply for approval from the Treasury to cut accrued benefits of plan members to prolong plan solvency—a departure from the benefit protections of Employee Retirement Income Security Act. To assess the law's impact, this paper models Central States Teamsters – by far the largest – plan to have applied under the new law to reduce benefits. Using a stochastic model of future investment returns, the probability of insolvency within 10 years drops from 50% (without cuts) to 6% (with cuts). While benefit cuts increase the overall welfare of participants by extending the plan's life, the welfare of younger retirees (under age 75) worsens and welfare of workers improves.

The central question of this paper is how international trade and specialization are affected by different designs of pension schemes and asymmetric demographic changes. In a model with two goods, two countries and two production factors, we find that countries with a relatively large unfunded pension scheme will specialize in the production of labour intensive goods. If these countries are hit by a negative demographic shock, this specialization will intensify in the long run. Eventually, these countries may even completely specialize in the production of those goods. The effects spill over to other countries, which will move away from complete specialization in capital intensive goods as the relative size of their labour intensive goods sector will also increase.