Nicola Sartor

Generational Accounting for Italy

Roberto Cardarelli and Nicola Sartor present generational accounting estimates for Italy which is characterised by the very low fertility rate, the high public debt and the large proportion of social expenditure targeted to the elderly. The paper points to the reduction in the intergenerational imbalance achieved in the past decade, but also to the need for further adjustments. The authors show how generational accounting translates the intertemporal budget constraint into a series of generational net fiscal positions that indicate which generation will bear the burden of consolidation. They note that the standard practice of simply comparing the fiscal position of new-born and future generations is unsatisfactory, since it assumes that living generations carry no burden and all future generations necessarily carry the same burden. In this context, there is no distinction between unsustainability and inequality. The one implies the other and viceversa. Therefore, Cardarelli and Sartor consider alternative indicators, such as the immediate and permanent change in tax or spending that would be necessary for all generations to ensure sustainability. The paper extensively analyses the impact of the pension reforms on intergenerational imbalances. It shows that the reforms introduced in recent years have largely reduced the existing imbalances and it evaluates the implications of further reforms. In particular, the authors stress the need for policy actions improving the balance between active and non-active individuals. Finally, they note that any policy reducing the debt to GDP ratio to a specific level within a specific period of time changes the generational distribution of the burden associated with the solvency constraint.

Public Policies over the Life Cycle: A Large Scale OLG Model for France, Italy and Sweden

The paper presents a large scale overlapping generation model with heterogeneous agents, where the family is the decision unit. We calibrate the model for three European countries - France, Italy and Sweden - which show marked differences in the design of some public programs. We examine the properties in terms of annual and lifetime redistribution of a number of tax-benefit programs, by studying the impact of removing from our model economies some or all of them. We find that whether one considers a life-cycle or an annual horizon, and whether behavioral responses are accounted for or not, has a large impact on the results. The model may provide useful insights for policy makers on which kind of reforms are more likely to achieve specific equity objectives.