Hostname: page-component-76fb5796d-dfsvx Total loading time: 0 Render date: 2024-04-26T09:43:12.741Z Has data issue: false hasContentIssue false
  • English
  • Français

The effectiveness of incentives to postpone retirement: evidence from Italy

Published online by Cambridge University Press:  14 December 2017

IRENE FERRARI
IRENE FERRARI*
Affiliation:
MEA (Munich Center for the Economics of Aging), Max Planck Institute for Social Law and Social Policy, Munich, Germany (e-mail: ferrari@mea.mpisoc.mpg.de)
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper investigates whether financial incentives may be used as an effective device to induce workers to postpone retirement by evaluating the Italian so-called ‘super-bonus’ reform. The bonus consisted of economic incentives given for a limited period to private sector workers who had reached the requirements for seniority pension but who chose to postpone retirement. Using data from the Bank of Italy Survey on Household Income and Wealth, this paper assesses the effect of the bonus on the decision to postpone retirement, by comparing private and public workers before and after the reform. Results suggest a 30% reduction in seniority retirement probability, despite the fact that, when changes in social security wealth are taken into account, the bonus actually provided a negative incentive for most workers. Results also suggest that the effect of the reform was driven by low-income workers. Some evidence is presented showing that liquidity constraints and financial (il)literacy may help to interpret these results.

Keywords

J26H55J21J14Labour supplyretirementpolicy evaluationsocial security incentivesdifference-in-differences
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Issue 2 , April 2019 , pp. 220 - 246
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I wish to thank my advisor, Matthew Wakefield, for his invaluable help and support throughout my graduate studies. I also would like to thank an anonymous referee, Rob Alessie, Richard Blundell and Axel Boersch-Supan for useful comments and all the partecipants to the EEA-ESEM (Toulouse), Netspar (Venice), IAAE (London), 17th IZA European Summer School in Labor Economics(Buch/Ammersee) and MEA Seminar. I am grateful to Carl Emmerson for providing me with computer code. A previous version of this paper has circulated with the title: ‘The Effectiveness of Incentives to Postpone Retirement: an Evaluation of the Italian “Super-Bonus” Reform’.

References

Ai, C. and Norton, E. C. (2003) Interaction terms in logit and probit models. Economics Letters, 80(1): 123–129.Google Scholar
Atalay, K. and Barrett, G. F. (2015) The impact of age pension eligibility age on retirement and program dependence: evidence from an Australian experiment. Review of Economics and Statistics, 97(1): 71–87.Google Scholar
Belloni, M. and Alessie, R. (2009) The importance of financial incentives on retirement choices: new evidence for Italy. Labour Economics, 16(5): 578–588.Google Scholar
Blundell, R., Dias, M. C., Meghir, C. and Reenen, J. (2004) Evaluating the employment impact of a mandatory job search program. Journal of the European Economic Association, 2(4): 569–606.Google Scholar
Börsch-Supan, A., Brugiavini, A., Jürges, H., Mackenbach, J., Siegrist, J. and Weber, G. (2005) Health, Ageing and Retirement in Europe: First Results from the Survey of Health, Ageing and Retirement in Europe. Mannheim, Germany: Mannheim Research Institute for the Economics of Aging (MEA).Google Scholar
Bottazzi, R., Jappelli, T., and Padula, M. (2006) Retirement expectations, pension reforms, and their impact on private wealth accumulation. Journal of Public Economics, 90(12): 2187–2212.Google Scholar
Brugiavini, A. and Peracchi, F. (2003) Social security wealth and retirement decisions in Italy. Labour, 17(s1): 79–114.Google Scholar
Brugiavini, A. and Peracchi, F. (2004) Micro-modeling of retirement behavior in Italy. In Gruber, J. and Wise, D.A. (Eds.), Social Security Programs and Retirement around the world: Micro-estimation. Chicago: University of Chicago Press, pp. 345–398.Google Scholar
Burtless, G. (2004) Pension reform and labor force exit: cross-national evidence. Paper prepared for the “International Forum of the Collaboration Projects” meetings in Tokyo, Japan, February 2004, sponsored by the Economic and Social Research Institute (ESRI).Google Scholar
D'Addio, A. C., Keese, M., and Whitehouse, E. (2010) Population ageing and labour markets. Oxford Review of Economic Policy, 26(4): 613–635.Google Scholar
Deidda, M. (2014) Precautionary saving under liquidity constraints: evidence from Italy. Empirical Economics, 46(1): 329–360.Google Scholar
Disney, R., Emmerson, C., and Wakefield, M. (2010) Tax reform and retirement saving incentives: take-up of stakeholder pensions in the UK. Economica, 77(306): 213–233.Google Scholar
Euwals, R., and Trevisan, E. (2014) Early retirement and financial incentives: differences between high and low wage earners. IZA Discussion Papers 8466, Institute for the Study of Labor (IZA), Bonn, Germany.Google Scholar
Fornero, E., and Monticone, C. (2011) Financial literacy and pension plan participation in Italy. Journal of Pension Economics and Finance, 10(04): 547–564.Google Scholar
Gruber, J., and Wise, D. (1998) Social security and retirement: an international comparison. The American Economic Review, 88(2): 158–163.Google Scholar
Gruber, J., and Wise, D. A. (1999). Social Security and Retirement Around the World. Number grub99-1 in NBER Books. Chicago: National Bureau of Economic Research, Inc., University of Chicago Press.Google Scholar
Gruber, J., and Wise, D. A. (2004) Social Security Programs and Retirement Around the World: Micro-Estimation. Chicago: University of Chicago Press.Google Scholar
Hanel, B., and Riphahn, R. T. (2012) The timing of retirement new evidence from Swiss female workers. Labour Economics, 19(5): 718–728.Google Scholar
ISTAT (2015) Mortality tables. http://dati.istat.it/Index.aspx?DataSetCode=DCIS_MORTALITA1 (accessed 21 August 2015).Google Scholar
Krueger, A. B., and Pischke, J.-S. (1992) The effect of social security on labor supply: a cohort analysis of the notch generation. Journal of Labor Economics, 10(4): 412–437.Google Scholar
Manoli, D., and Weber, A. (2016) Nonparametric evidence on the effects of financial incentives on retirement decisions. American Economic Journal: Economic Policy, 8(4): 160–182.Google Scholar
Mastrobuoni, G. (2009) Labor supply effects of the recent social security benefit cuts: empirical estimates using cohort discontinuities. Journal of Public Economics, 93(11): 1224–1233.Google Scholar
Pencavel, J. (2001) The response of employees to severance incentives: the university of California's faculty, 1991–94. Journal of Human Resources, 36(1): 58–84.Google Scholar
Ranzani, M. (2006) Social security wealth and the 90s reforms: a natural experiment and some policy simulations. http://www.webmeets.com/files/papers/SAE/2006/348/Ranzani2006.pdfGoogle Scholar
Wooldridge, J. (2009) Introductory Econometrics: A Modern Approach. Canada: South-Western Cengage Learning.Google Scholar