Hostname: page-component-8448b6f56d-c4f8m Total loading time: 0 Render date: 2024-04-24T06:27:28.640Z Has data issue: false hasContentIssue false
  • English
  • Français

Self-employment in Italy: the role of Social Security Wealth

Published online by Cambridge University Press:  24 August 2017

MARGHERITA BORELLA  and
MICHELE BELLONI
MARGHERITA BORELLA
Affiliation:
University of Torino, CeRP-Collegio Carlo Alberto and Netspar, Torino, Italy (e-mail: margherita.borella@unito.it)
MICHELE BELLONI
Affiliation:
University Ca’ Foscari of Venezia, CeRP-Collegio Carlo Alberto and Netspar, Venezia, Italy
Get access Rights & Permissions [Opens in a new window]

Abstract

Using a rich micro dataset drawn from administrative archives, we explore whether Social Security Wealth (SSW) is an important factor affecting the decision to become self-employed. We focus on the two main categories of self-employed professions covered by the Italian public pension system: craftsmen and shopkeepers. We use the large exogenous variation in individual expected SSW that occurred as a result of the policy reform process undertaken in Italy during the 1990s to identify the effect of this variable and we study how the probability of being self-employed or employed depends, amongst other things, on the difference in the expected SSW that accrues under the two alternative employment scenarios. Our key finding is that a higher difference in expected SSW from self-employment compared with employment has a positive effect on the probability of being self-employed and on the probability of switching to self-employment, whereas it has a negative effect on the probability of switching from self-employment to employment.

Keywords

J26J62L26H55Self-employmentSocial Security WealthSocial Security reforms
Type
Article
Information
Journal of Pension Economics & Finance , Volume 18 , Issue 1 , January 2019 , pp. 31 - 65
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

We would like to thank Mariacristina De Nardi, Stefan Hochguertel, Mauro Mastrogiacomo and the participants at the Netspar International Pension Workshop (Leiden, 2016) for their helpful comments. The financial support from the Netspar Large Vision grant ‘A “second and a half” pillar for the self-employed?’ is gratefully acknowledged.

References

Attanasio, O. P. and Brugiavini, A. (2003) Social security and households’ saving. The Quarterly Journal of Economics, 118(3): 1075–1119.Google Scholar
Attanasio, O. P. and Rohwedder, S. (2003) Pension wealth and household saving: evidence from pension reforms in the United Kingdom. American Economic Review, 93(5): 1499–1521.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
Blanchflower, D. G. (2000) Self-employment in OECD countries. Labour Economics, 7(5): 471–506.Google Scholar
Blanchflower, D. G. and Oswald, A. J. (1990) Self-employment and the enterprise culture. In Jowell, R., Witherspoon, S., and Brook, L. (eds), British Social Attitudes: The 1990 Report. Aldershot: Gower Press, pp. 127–143.Google Scholar
Blanchflower, D. G. and Oswald, A. J. (1998) What makes and entrepreneur? Journal of Labour Economics, 16(1): 26–60.Google Scholar
Blau, D. M. (1987) A time-series analysis of self-employment in the United States. The Journal of Political Economy, 95(3): 445–467.Google Scholar
Borella, M. and Coda Moscarola, F. (2006) Distributive properties of pension systems: a simulation of the Italian transition from defined benefit to notional defined contribution. Giornale degli Economisti e Annali di Economia, 65(1): 95–125.Google Scholar
Borella, M. and Coda Moscarola, F. (2011) Microsimulation of pension reforms: behavioural versus nonbehavioural. Journal of Pension Economics and Finance, 9(4): 583–607.Google Scholar
Borella, M. and Coda Moscarola, F. (2015) The 2011 Pension Reform in Italy and its Effects on Current and Future Retirees. CeRP Working Paper, 151/15, Center for Research on Pensions and Welfare Policies, Turin (Italy).Google Scholar
Bruce, D. (2000) Effects of the United States tax system on transitions into self-employment. Labour Economics, 7(5): 545–574.Google Scholar
Bruce, D. (2002) Taxes and entrepreneurial endurance: evidence from the self-employed. National Tax Journal, 55(1): 5–24.Google Scholar
Brugiavini, A. and Peracchi, F. (2004) Micro-modeling of retirement behavior in Italy. In Gruber, J. and Wise, D. (eds), Social Security Programs and Retirement Around the World: Micro-Estimation. Chicago: The University of Chicago Press, pp. 345–398. NBER, chap. 6.Google Scholar
Cagetti, M. and De Nardi, M. (2006) Entrepreneurship, frictions, and wealth. Journal of Political Economy, 114(5): 835–870.Google Scholar
Crompton, S. (1993) The Renaissance of Self-Employment, Perspectives on Income and Employment. Statistics Canada. pp. 22–32, Cat. 75-001E.Google Scholar
Evans, D. S., and Jovanovic, B. (1989) An estimated model of entrepreneurial choice under liquidity constraints. Journal of Political Economy, 97(4): 808–827.Google Scholar
Evans, D. S. and Leighton, L. S. (1989) Some empirical aspects of entrepreneurship. American Economic Review, 79(3): 519–535.Google Scholar
Hansson, A. (2012) Tax policy and entrepreneurship: empirical evidence from Sweden. Small Business Economics, 38(4): 495–513.Google Scholar
Li, Y., Mastrogiacomo, M., Hochguertel, S., and Bloemenx, H. (2016) The role of wealth in the start-up decision of new self-employed: evidence from A pension policy reform. Labour Economics, 41: 280–290.Google Scholar
Long, J. E. (1982) The income tax and self-employment. National Tax Journal, 35(1): 31–42.Google Scholar
Mastrogiacomo, M. and Belloni, M. (2015) Becoming self-employed at ages 50+: true entrepreneurship or exclusion from (wage-)employment? In Börsch-Supan, A., Litwin, H., Myck, M., Kneip, T. and Weber, G. (eds), Ageing in Europe – Supporting Policies for an Inclusive Society. First results from the 5th Wave of the Survey of Health, Ageing and Retirement in Europe, Chapter 22, Berlin, De Gruyter, pp. 245–255.Google Scholar
OECD (2016) Entrepreneurship at a Glance 2016. Paris: OECD Publishing. http://dx.doi.org/10.1787/entrepreneur_aag-2016-en.Google Scholar
Quinn, J. F. (1980) Labor force participation patterns of older self-employed workers. Social Security Bulletin, 43: 17–28.Google Scholar
Schuetze, H. J. (2000) Taxes, economic conditions and recent trends in self-employment: a Canada-U.S. comparison. Labour Economics, 7(5): 507–544.Google Scholar
Stabile, M. (2004) Payroll taxes and the decision to be self-employed. International Tax and Public Finance, 11(1): 31–53.Google Scholar
Torrini, R. (2005) Cross-country differences in self-employment rates: the role of institutions. Labour Economics, 12(5): 661–683.Google Scholar
Zissimopoulos, J. M. and Karoly, L. A. (2007) Transitions to self-employment at older ages: the role of wealth, health, health insurance and other factors. Labour Economics, 14(2): 269–295.Google Scholar