October 2009
This paper analyzes the welfare effects of the Italian social security system in an economy with uncertainty on wages, financial market returns and life expectancy. The introduction of a pension system reproducing the Italian statutory scheme turns out to decrease ex-ante individual welfare, unless restrictions are assumed on retirement behavior. Overall, risk insurance effects of social security play a minor role in determining welfare variations. The new Italian NDC pension system is shown to yield a slight ex-ante welfare improvement from a purely risk-insurance perspective. This relative gain stems from risk diversification across working-life wages in computing benefits.
Keywords: social security reforms, uncertainty, risk insurance
JEL Classification: [E620] Fiscal Policy [H210] Taxation and Subsidies : Efficiency; Optimal Taxation [H310] Fiscal Policies and Behavior of Economic Agents : Household [H550] Social Security and Public Pensions
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Devis Geron devis.geron@unipd.it
