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The Life-Cycle Effects of Pension Reforms: A Structural Approach

Daminato, Claudio LU and Padula, Mario (2023) In Journal of the European Economic Association
Abstract
To assess the life-cycle welfare effects of pension reforms, we provide a dynamic stochastic model of saving, portfolio choice, and retirement featuring a rich characterisation of the pension system. Relying on the exogenous variation from a sequence of Italian pension reforms, we identify and estimate the model, which is then used to draw implications of alternative pension policies. The validated model predicts substantial social security wealth effects on retirement, with the offset between public pension wealth and private savings softened when households can adjust their retirement decisions. We further find important distributional effects of pension reforms, with households’ welfare decreasing more the later in the working life they... (More)
To assess the life-cycle welfare effects of pension reforms, we provide a dynamic stochastic model of saving, portfolio choice, and retirement featuring a rich characterisation of the pension system. Relying on the exogenous variation from a sequence of Italian pension reforms, we identify and estimate the model, which is then used to draw implications of alternative pension policies. The validated model predicts substantial social security wealth effects on retirement, with the offset between public pension wealth and private savings softened when households can adjust their retirement decisions. We further find important distributional effects of pension reforms, with households’ welfare decreasing more the later in the working life they face the reform. Our findings have implications for the design of pension policies and the support they might generate. (Less)
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author
and
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
D15 - Intertemporal Household Choice, Life Cycle Models and Saving, E21 - Consumption, Wealth, H31-Household, H55-Social Security and Public Pensions, J26 - Retirement, Saving, Retirement Policies
in
Journal of the European Economic Association
publisher
Wiley-Blackwell
external identifiers
  • scopus:85184877044
ISSN
1542-4774
DOI
10.1093/jeea/jvad049
language
English
LU publication?
yes
id
81662b45-7d2e-46c2-b3dd-3889e66ac826
date added to LUP
2023-11-11 09:49:57
date last changed
2024-03-12 12:49:40
@article{81662b45-7d2e-46c2-b3dd-3889e66ac826,
  abstract     = {{To assess the life-cycle welfare effects of pension reforms, we provide a dynamic stochastic model of saving, portfolio choice, and retirement featuring a rich characterisation of the pension system. Relying on the exogenous variation from a sequence of Italian pension reforms, we identify and estimate the model, which is then used to draw implications of alternative pension policies. The validated model predicts substantial social security wealth effects on retirement, with the offset between public pension wealth and private savings softened when households can adjust their retirement decisions. We further find important distributional effects of pension reforms, with households’ welfare decreasing more the later in the working life they face the reform. Our findings have implications for the design of pension policies and the support they might generate.}},
  author       = {{Daminato, Claudio and Padula, Mario}},
  issn         = {{1542-4774}},
  keywords     = {{D15 - Intertemporal Household Choice; Life Cycle Models and Saving; E21 - Consumption; Wealth; H31-Household; H55-Social Security and Public Pensions; J26 - Retirement; Saving; Retirement Policies}},
  language     = {{eng}},
  publisher    = {{Wiley-Blackwell}},
  series       = {{Journal of the European Economic Association}},
  title        = {{The Life-Cycle Effects of Pension Reforms: A Structural Approach}},
  url          = {{http://dx.doi.org/10.1093/jeea/jvad049}},
  doi          = {{10.1093/jeea/jvad049}},
  year         = {{2023}},
}