Individual heterogeneity and pension choices

TY - JOUR

T1 - Individual heterogeneity and pension choices

T2 - Evidence from Italy

AU - Gallo, Giovanni

AU - Torricelli, C.

AU - van Soest, Arthur

PY - 2018/4

Y1 - 2018/4

N2 - The 2007 Italian pension reform allowed transferring future severance pay contributions into a pension fund. Although this was accompanied by an information campaign advising employees to make the transfer, only a minority of them did so. We analyze the heterogeneity in employees’ choices using micro panel data from the Bank of Italy household survey. Two are the main findings. First, the decision to transfer and pension fund participation after the reform are more likely for more (financially) educated and older individuals, with high household income and wealth, and less likely for female employees, in the South, and in small firms. Second, framing the analysis within the Elaboration Likelihood Model highlights that the cognitive processes underlying the decision on pension fund participation may be quite different. The decision consciousness is lower for employees working in small firms, where employers have an incentive to stimulate workers to deny the transfer.

AB - The 2007 Italian pension reform allowed transferring future severance pay contributions into a pension fund. Although this was accompanied by an information campaign advising employees to make the transfer, only a minority of them did so. We analyze the heterogeneity in employees’ choices using micro panel data from the Bank of Italy household survey. Two are the main findings. First, the decision to transfer and pension fund participation after the reform are more likely for more (financially) educated and older individuals, with high household income and wealth, and less likely for female employees, in the South, and in small firms. Second, framing the analysis within the Elaboration Likelihood Model highlights that the cognitive processes underlying the decision on pension fund participation may be quite different. The decision consciousness is lower for employees working in small firms, where employers have an incentive to stimulate workers to deny the transfer.

KW - pension savings

KW - severance pay

KW - financial literacy

KW - elaboration likelihood model

KW - cognitive skills

U2 - 10.1016/j.jebo.2018.02.016

DO - 10.1016/j.jebo.2018.02.016

M3 - Article

VL - 148

SP - 260

EP - 281

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

SN - 0167-2681

ER -