The Importance of Financial Incentives on Retirement Choices: New Evidence for Italy

Tinbergen Institute Discussion Paper No. TI 08-052/3

35 Pages Posted: 23 May 2008

See all articles by Michele Belloni

Michele Belloni

Ca Foscari University of Venice - Dipartimento di Economia; Center for Research on Pensions and Welfare Policies (CeRP); Netspar

Rob Alessie

Utrecht University - School of Economics; VU University Amsterdam - Department of Economics

Date Written: May 2008

Abstract

This study exploits a new dataset in order to quantify the effect of financial incentives on retirement choices. This dataset contains for the first time in Italy information on seniority. In accordance with the general finding in Gruber and Wise (2004), we find that financial incentives have an effect on retirement. The effect goes in the expected direction; when employees become eligible for pension benefits the change in financial incentives they experience is so high that their retirement probability increases in a sizable way. We also find that the procedure to impute seniority used in previous studies leads to a sizable measurement error. Due to this measurement error, the key parameters of the model are inconsistently estimated. Our sensitivity analysis suggests that the lack of appropriate information on seniority is an important reason for the unclear evidence so far obtained in retirement studies for Italy.

Keywords: retirement, social security wealth, seniority, unobserved heterogeneity

JEL Classification: J2

Suggested Citation

Belloni, Michele and Alessie, R.J.M. (Rob), The Importance of Financial Incentives on Retirement Choices: New Evidence for Italy (May 2008). Available at SSRN: https://ssrn.com/abstract=1136093 or http://dx.doi.org/10.2139/ssrn.1136093

Michele Belloni (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Center for Research on Pensions and Welfare Policies (CeRP) ( email )

Via Real Collegio, 30
Moncalieri, Turin 10024
Italy

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

R.J.M. (Rob) Alessie

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
31 30 253 9814 (Phone)
31 30 253 7373 (Fax)

HOME PAGE: http://www2.econ.uu.nl/users/alessie/

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6047 (Phone)
+31 20 444 6005 (Fax)

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