Edited by Paolo Onofri
Chapter 7: Pension reforms, tax incentives and saving in Italy
Massimo Baldini, Paolo Bosi, Maria Cecilia Guerra, Carlo Mazzaferro and Paolo Onofri 1. INTRODUCTION During the 1990s, the Italian public pension system underwent two important reforms, which radically changed its nature. These reforms did not change the general pay-as-you-go framework, but they did change the rules for determination of the beneﬁts. First, there was a shift from earningsrelated pensions to a notional deﬁned contribution system. Second, a new indexation rule of pension beneﬁts was introduced: since 1993, beneﬁts have no longer been indexed to changes in the nominal wage rate; they are indexed only to the inﬂation rate. Meanwhile, the whole decade was characterised by repeated, even if not very successful, eﬀorts to support the start of a private funded pillar (either occupational, or individual) of the overall pension system. In this chapter this experience is evaluated under diﬀerent proﬁles. In Section 2, we study the eﬀects of the pension reforms on the household saving rate and private wealth accumulation. The study is carried out using the Bank of Italy’s Survey of Household Income and Wealth. After an analysis of the determinants of the age proﬁle of the household’s saving rate and the pattern of ﬁnancial wealth accumulation, we evaluate the possible eﬀects of the reforms ﬁrst on the saving rate, with a diﬀerence-indiﬀerences approach, and then on the proﬁle of private non-pension wealth, computing the substitution rate between private and net social security wealth. The...
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