Elsa Fornero

Financial Literacy and Pension Plan Participation in Italy

By requiring individuals to decide whether to participate in (newly established) pension funds, how much to contribute and how to invest their retirement wealth, pension reforms have raised concerns about the ability of households to deal with financial decisions. Using the Bank of Italys Survey on Household Income and Wealth, our empirical analysis shows that most individuals lack knowledge of basic concepts such as interest rates and inflation. Males, the more educated and residents in the Centre-North possess higher literacy. As for the effects, financial literacy has a positive and significant impact on the probability of pension plan participation.

Reforming labor markets: reflections of an economist who (unexpectedly) became the Italian Minister of Labor

Technocratic Minister of Labor in an economic emergency, with the assignment to devise two key reforms (pension system and labor market): a unique, though hard experience for an academic, confirming the gap between economic research and real life. This paper gives an account of the Italian labor market reform, an attempt to reconcile economic logic, social expectations, requests from European institutions and financial constraints. This reform survived difficult social dialogue and long Parliamentary debates and had severe communication problems; resulting however in a comprehensive law aiming at inclusion, dynamism and higher productivity and representing a chance of better prospects for the young.JEL codeJ080

Explaining why, right or wrong, (Italian) households do not like reverse mortgages

According to economic theory, elderly homeowners should be much more eager than they actually are to adopt financial instruments allowing them to borrow against home equity. This paper investigates the determinants of interest for the Italian elderly in one such instrument, the reverse mortgage. We draw from a unique dataset, UniCredit’s 2007 survey on household savings, and use a discrete choice model (ordered probit) to perform our empirical analysis. Out of 1,200 respondents, roughly 60% claimed to have no interest in the product, while the remaining 40% expressed various degrees of appeal, from quite low to very high. Three main findings emerge from our analysis: first, homeowners who are prepared to sell their home are more likely to be interested in the product. Second, respondents perceive reverse mortgages as personal debt, even though the burden of repaying the loan lies with their heirs, and debt aversion predicts low interest. Third, homeowners who are more concerned about their standard of living in retirement are more likely to be interested in the product. We find, however, no conclusive evidence supporting our a priori notion that greater financial literacy is a predictor of higher interest in RMs.

Adequacy of Saving for Old Age in Europe

Household saving rates and wealth levels are very heterogeneous – both across and within countries, varying with respect not only to age, cohort, and time, but also to education, family size, health and so forth. Given these differences, in what sense is it possible to look into the adequacy of retirement savings? And on what grounds is the question relevant? The concept of (retirement) savings adequacy combines two dimensions: a well-structured institutional design for an efficient sharing and diversification of risks, and sensible individual behaviour with respect to the time allocation of resources, in a given market and institutional context.

Absenteeism, Childcare and the Effectiveness of Pension Reforms

Both economic and epidemiological literature has shown that perceived high strain at work and lack of social infrastructures are good predictors of sick-leave. The latter is particularly relevant in countries where facilities for children and care services are scarce and women are asked to fill the gap. The Italian 2011 pension reform significantly restricted age and seniority requirements for retirement, especially for women in private employment. We investigated whether older Italian employed women reacted to the postponement of retirement by increasing their sick-leave. The empirical analysis offers unequivocal evidence that this has indeed been the case, in particular for low-income grandmothers living in regions with a poor supply of childcare services. Radical reforms risk losing some of their effectiveness if they are not accompanied by parallel measures designed to introduce the welfare provisions previously indirectly and inadequately provided by the pension system, such as care facilities.