T-DYMM: The Treasury Dynamic Microsimulation Model of the Italian Pension System

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 11

41 Pages Posted: 4 Dec 2013

See all articles by Alessandra Caretta

Alessandra Caretta

Ministry of Economy and Finance, Italy

Sara Flisi

Giacomo Brodolini Foundation

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury

Michele Raitano

Sapienza University of Rome

Simone Tedeschi

Sapienza University of Rome, Italy - Department of Economics and Law

Date Written: November 15, 2013

Abstract

The long-term development of the social security system is a crucial policy issue in terms of both financial sustainability and adequacy, which constitute a difficult trade-off facing the policy maker. The particular complexity of this issue, also in the light of demographic dynamics and the recent economic crisis, has encouraged the development of dynamic microsimulation models as to analyse the distributive effects of pension reforms in the long run.

This study presents T-DYMM, a dynamic microsimulation model developed within a European funded project runned by the Treasury Department of the Italian Ministry of the Economy and Finance in collaboration with the Fondazione G. Brodolini.

The distinct character of T-DYMM compared to other models is, above all, its innovative dataset, Ad-SILC, which includes microdata needed to estimate conditional probabilities of transitions across alternative employment states and parameters of wage equations. The estimated coefficient are then used to simulate transition probabilities in T-DYMM and wage dynamics, taking into account fragile careers.

A number of simulations are presented on the distributive effects related to the latest legislative changes affecting the Italian pension system. To better exploit adequacy concerns, replacement rates are shown after personal income taxation, long run poverty rates are projected as well as trends of beneficiaries of social assistance allowance and minimum pension supplement as a ratio of total pensioners.

Keywords: Dynamic microsimulation, pensions, job transitions, distributive analysis

JEL Classification: C1, C53, H23, H55, J24, J26

Suggested Citation

Caretta, Alessandra and Flisi, Sara and Frale, Cecilia and Raitano, Michele and Tedeschi, Simone, T-DYMM: The Treasury Dynamic Microsimulation Model of the Italian Pension System (November 15, 2013). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 11, Available at SSRN: https://ssrn.com/abstract=2362775

Alessandra Caretta (Contact Author)

Ministry of Economy and Finance, Italy ( email )

Via XX Settembre 97
Rome, Rome 00187
Italy

Sara Flisi

Giacomo Brodolini Foundation ( email )

Via Barberini n. 50
Rome, 00187
Italy
+390644249625 (Phone)
+390644249565 (Fax)

HOME PAGE: http://www.fondazionebrodolini.it

Cecilia Frale

Government of the Italian Republic (Italy) - Department of the Treasury ( email )

Via XX Settembre, 87
Rome, 00197
Italy

Michele Raitano

Sapienza University of Rome ( email )

Via del Castro Laurenziano 9
Roma, Rome 00161
Italy

HOME PAGE: http://https://sites.google.com/a/uniroma1.it/micheleraitano-eng/

Simone Tedeschi

Sapienza University of Rome, Italy - Department of Economics and Law ( email )

Via del Castro Laurenziano 9
Rome, 00161
Italy

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