Working Paper: CEPR ID: DP7380
Authors: Renata Bottazzi; Tullio Jappelli; Mario Padula
Abstract: We estimate the portfolio effect of changes in social security wealth exploiting a decade of Italian pension reforms as a source of exogenous variation. The Italian Survey of Household Income and Wealth records detailed portfolio data and elicits expectations of retirement outcomes, thus allowing us to measure the expected social security wealth and to assess to what extent Italian households perceive the innovations brought about by the reforms. We find that households have responded to the cut in pension benefits mostly by increasing real estate wealth, and that the response is stronger among households that are able to estimate more accurately 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.
Keywords: pension reform; portfolio choice; retirement saving
JEL Codes: E21; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduction in social security wealth (H55) | increase in real assets (E22) |
| reduction in social security wealth (H55) | increase in safe financial assets (G19) |
| better information about social security benefits (H55) | stronger response to reforms (E69) |
| overall increase in consumable wealth (E21) | reduction in social security wealth (H55) |
| reduction in social security wealth (H55) | concerns about adequacy of retirement savings (D14) |
| pension reforms (H55) | household wealth allocation (G51) |