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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)
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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 

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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’.

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