The importance of financial incentives on retirement choices: New evidence for Italy

This study exploits a new dataset in order to quantify the effectof financial incentives on retirement choices. This dataset contains -for the first time in Italy – information on seniority. In accordancewith the general finding in Gruber and Wise (2004), we find that financial incentives have an effect on retirement. The effect goes in the expected direction; when employees become eligible for pension benefits the change in financial incentives they experience is so high that their retirement probability increases in a sizable way.We also find that the procedure to impute seniority used in previousstudies leads to a sizable measurement error. Due to this measurementerror, the key parameters of the model are inconsistently estimated.Our sensitivity analysis suggests that the lack of appropriate information on seniority is an important reason for the unclear evidence so far obtained in retirement studies for Italy.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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