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The portfolio effect of pension reforms: evidence from Italy

Published online by Cambridge University Press:  29 June 2010

RENATA BOTTAZZI ,
TULLIO JAPPELLI  and
MARIO PADULA
RENATA BOTTAZZI*
Affiliation:
University of Bologna, IFS, and CHILD (e-mail: renata.bottazzi@unibo.it)
TULLIO JAPPELLI*
Affiliation:
University of Naples ‘Federico II’, CSEF, and CEPR (e-mail: tullioj@tin.it)
MARIO PADULA*
Affiliation:
University ‘Ca’ Foscari' of Venice and CSEF (e-mail: mpadula@unive.it)
*
*Corresponding author.
*Corresponding author.
*Corresponding author.
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Abstract

We estimate the portfolio effect of changes in social security wealth exploiting a decade of Italian pension reforms. The Italian Survey of Household Income and Wealth records detailed portfolio data and elicits expectations of retirement outcomes, thus allowing us to measure expected social security wealth and assess to what extent Italian households perceive the innovations brought about by the reforms. We find that households have responded to cuts in pension benefits mostly by increasing real estate wealth, and that this response is stronger among households able more accurately to estimate future social security benefits. We also compute that for the average household consumable wealth increases by 40 percent of the reduction in social security wealth.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 10 , Issue 1 , January 2011 , pp. 75 - 97
Copyright
Copyright © Cambridge University Press 2010

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