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The Economics of an Ageing Population

Macroeconomic Issues

Edited by Paolo Onofri

The Economics of an Ageing Population studies the effects of demographic transition on the economies of industrialised countries. The authors demonstrate that an ageing population does not necessarily lead to a reduction in growth, providing that the working population are more productive and save a greater percentage of their income. They look in detail at the examples of Italy and Japan, two countries which have the fastest ageing populations in Europe and the world respectively.
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Chapter 7: Pension reforms, tax incentives and saving in Italy

Massimo Baldini, Paolo Bosi, Maria Cecilia Guerra, Carlo Mazzaferro and Paolo Onofri


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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