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Microsimulation of pension reforms: behavioural versus nonbehavioural approach

Published online by Cambridge University Press:  23 November 2009

MARGHERITA BORELLA  and
FLAVIA CODA MOSCAROLA
MARGHERITA BORELLA
Affiliation:
University of Turin and CeRP – Collegio Carlo Alberto (e-mail: borella@econ.unito.it)
FLAVIA CODA MOSCAROLA
Affiliation:
CeRP – Collegio Carlo Alberto (e-mail: coda@cerp.unito.it)
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Abstract

We analyse the impact of various pension regimes, as shaped by recent Italian reforms, on retirement age, adequacy issues, and redistribution. We add to the literature on microsimulation by accounting for individuals' reactions to financial incentives when deciding to retire. We find that shifting from a generous defined benefit (DB) system to an actuarially fair notional defined contribution (NDC) system induces individuals, particularly men, to postpone retirement. Voluntary postponement of retirement would grant employees a replacement rate comparable to that obtained in the pre-reform DB regime, while the self-employed experience a substantial reduction in their replacement rate.

Keywords

C63H55J26Microsimulationpublic pensionsretirement

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Type
Articles
Information
Journal of Pension Economics & Finance , Volume 9 , Issue 4 , October 2010 , pp. 583 - 607
Copyright
Copyright © Cambridge University Press 2009

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