Advertisement

Critical Issues of Public Pension System: The Italian Case

  • Roberta MelisEmail author
  • Alessandro Trudda
Chapter
  • 17 Downloads

Abstract

This chapter addresses the issue of the financial sustainability of public PAYG pension schemes. Criticalities and, in particular, demographic risks affecting those schemes have been analysed. A possible solution to reduce demographic risk impact is presented, that is the introduction of a funded component to balance the PAYG part when the ratio of contributors-pensioners is decreasing. A cost-benefit analysis is presented in order to verify how the sustainability of a public pension scheme improves, given the actual and future demographic trends, and to quantify the cost in terms of public debt. Finally, an application to Italian pension data is performed.

Keywords

Public pension system Demographic risk Sustainability Funded component 

References

  1. Andersen, T. M. (2012). Fiscal sustainability and demographics – Should we save or work more? Journal of Macroeconomics, 34, 264–280.CrossRefGoogle Scholar
  2. Auerbach, A. J., & Lee, R. (2009). Notional defined contribution pension systems in a stochastic context: Design and stability. In J. Brown, J. Liebman, & D. A. Wise (Eds.), Social security policy in a changing environment (pp. 43–68). University of Chicago Press, USA.Google Scholar
  3. Baldacci, E., & Tuzi, D. (2003). Demographic trends and pension system in Italy: An assessment of 1990s reforms. Labour, 17, 209–240.CrossRefGoogle Scholar
  4. Borsch-Supan, A. H. (2010). Social impact of the crisis - Demographic challenges and the pension system. European Parliament’s Special Committee on the Financial, Economic and Social Crisis, IP/A/CRIS/NT/2009–06 PE. 429.995.Google Scholar
  5. Castellino, O., & Fornero, E. (1999). From PAYG to funding in Italy: A feasible transition? The Geneva Papers on Risk and Insurance. Issues and Practice, 24(4), 473–487.CrossRefGoogle Scholar
  6. Colombo, L., & Haberman, S. (2005). Optimal contribution in a defined benefit pension scheme with stochastic new entrants. Insurance: Mathematics and Economics, 37(2), 335–354.Google Scholar
  7. Devolder, P., & Melis, R. (2015). Optimal mix between pay as you go and funding for pension liabilities in a stochastic framework. Astin Bulletin, 45(03), 551–575.CrossRefGoogle Scholar
  8. Disney, R. (2000). Crises in public pension programmes in OECD: What are the reform options? Economic Journal Features, 110, 1–23.Google Scholar
  9. European Commission. (2017) Adequacy and sustainability of pensions. European Semester Thematic Factsheets.Google Scholar
  10. Gronchi, S., & Nisticò, S. (2008). Theoretical foundations of pay-as-you-go defined-contribution pension schemes. Metroeconomica, 59(2), 131–159.CrossRefGoogle Scholar
  11. ISTAT. (2017a) Previsioni della popolazione italiana 2017-2067, ISTAT.Google Scholar
  12. ISTAT. (2017b). Il futuro demografico del Paese. Previsioni regionali della popolazione residente al 2065. Statistiche report. ISTAT, https://www.istat.it/it/files/2018/05/previsioni_demografiche.pdf.
  13. Melis, R., & Trudda, A. (2010). Demographic risk indicators in pay-as-you-go pension funds. Problems and Perspectives in Management, 8(4), 117–126.Google Scholar
  14. Melis, R., & Trudda, A. (2012). Solvency indicators for partially unfunded pension funds. Investment Management and Financial Innovations, 9(4), 71–77.Google Scholar
  15. OECD (2017a). Pensions at a Glance 2017: OECD and G20 indicators. Paris: OECD Publishing.  https://doi.org/10.1787/19991363.
  16. OECD. (2017b). Demographic old-age dependency ratios: Historical and projected values, 1950–2075. In Demographic and economic context. Paris: OECD Publishing.  https://doi.org/10.1787/pension_glance-2017-table61-en.
  17. Palmer, E. (2000). The Swedish pension reform model: Framework and issues. (Social Protection Discussion Paper 12, 23086), The World Bank.Google Scholar
  18. Settergren, O. (2001). The automatic balance mechanism of the Swedish pension system. Wirtschaftspolitishe Blatter, 4, 239–249.Google Scholar
  19. Settergren, O., & Mikula, B. D. (2005). The rate of return of pay-as-you-go pension system: A more exact consumption model of interest. Journal of Pension Economics and Finance, 4, 115–138.CrossRefGoogle Scholar
  20. Vidal-Melia, C., Boado-Penas, M., & Settergren, O. (2009). Automatic balance mechanism in pay-as-you-go pension system. The Geneva Papers on Risk and Insurance. Issues and Practice, 34(2), 287–317.CrossRefGoogle Scholar
  21. Wang, X., Williamson, J. B., & Cansoy, M. (2016). Developing countries and systemic pension reforms: Reflections on some emerging problems. International Social Security Review, 69(2), 85–106.CrossRefGoogle Scholar
  22. Whiteford, P., & Whitehouse, E. (2006). Pension challenges and pension reforms in OECD countries. Oxford Review of Economic Policy, 22(1), 78–94.CrossRefGoogle Scholar

Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Department of Economics and BusinessUniversity of SassariSassariItaly

Personalised recommendations