Social Security Wealth and Retirement Decisions in Italy

36 Pages Posted: 28 Oct 2003

See all articles by Agar Brugiavini

Agar Brugiavini

Ca Foscari University of Venice - Dipartimento di Economia

Franco Peracchi

University of Rome Tor Vergata - Department of Economics and Finance; University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS); EIEF

Abstract

This paper uses administrative data to study the retirement decisions of Italian private-sector non-agricultural employees during the period 1977-97. Our analysis tries to assess the importance of the financial incentives built into the social security system. The basic idea is very simple: at any given age, and based on the available information, workers compare the expected present value of two alternatives: retiring today or working one more year, and then choose the best one.

A key role in this kind of comparisons is played by social security wealth, whose level and changes reflect the expectations about the profile of future earnings and the institutional features of the social security system. The various incentive measures that we consider differ in the precise weight given to the social security wealth that workers accrue as they continue to work.

Our model does not provide a structural representation of the retirement process. A worker's decision is modeled here following a 'quasi reduced-form' approach, with the incentive measures entering as predictors of the worker's choice in addition to standard variables. The estimated models are then used to predict retirement probabilities under alternative policies that change social security wealth and derived incentive measures.

Suggested Citation

Brugiavini, Agar and Peracchi, Franco, Social Security Wealth and Retirement Decisions in Italy. Available at SSRN: https://ssrn.com/abstract=440039

Agar Brugiavini (Contact Author)

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

Cannaregio 873
Venice, 30121
Italy

Franco Peracchi

University of Rome Tor Vergata - Department of Economics and Finance ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy

EIEF ( email )

via Sallustiana 62
Rome, 00187
Italy

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