The Role of Credibility and Fundamentals in a Funded Pension System: A Markov Switching Analysis for Australia and Iceland

Since the turn of the millennium the problem of credibility of the social security system has spread to the private pension funds sector. This is evident for those countries, like Australia and Iceland, that have very large funded pensions assets as a result of strong pension reforms. The problem of trust could prevent pension fund investment from continuing to grow, weakening the privatization of the social security system. The objective of this study is to obtain new insights into the determinants of pension funds. We focus our analysis on the Australian and Icelandic experiences to study the credibility of pension fund performance and, as a consequence, of pension reform. Our credibility indicator is derived from a CAPM time-varying model. It can be used to investigate, using a Markov switching model, the linkages between economic fundamentals and the credibility of pension fund investment and the asymmetric effects of the fundamentals in the two regimes of low and hight credibillity. Our findings make a contribution to modelling policy credibility as a non-linear process with two distinct regimes. We also found large differences in the value of the coefficients for all macroeconomic variables between the low and high credibility regimes. This evidence strongly supports the hypothesis that the effects of macroeconomic fundamental variables on the level of credibility are asymmetric in all countries.Credibility, pension funds, Kalman filter, Markov switching model

Determinants of different internal migration trends: the Italian experience

This paper investigates the determinants of interregional migration in Italy for the period 1985-2006, during which different migration trends took place. In so doing, in addition to the traditional variables of Harris and Todaro model, the impact of housing prices and externalities variables were studied. Our results, using a dynamic panel GMM, show that the H-T model, due to the complexity of the internal migration process, omits some important economic and non-economic variables and may not be representative of migration flow in Italy. Furthermore, our analysis confirms our intuition that for different periods we have to take into account different determinants.Interregional Migration, House prices, Income, Unemployment, Italy, Panel Data

LA PREVIDENZA SOCIALE ITALIANA TRA RIFORME FATTE E DA FARE

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LA RIFORMA DEI SISTEMI PREVIDENZIALI: IL DIBATTITO TEORICO E POLITICO

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Happy PIIGS

This paper investigates the causality dynamics between happiness and per capita GDP growth and the impact of the recent financial crisis using a VAR-GARCH model for 10 European EMU countries divided in peripheral and non-peripheral members. The rationale of the analysis is to look at the two different dimensions (mean and variance) of economic growth and happiness within a time-series framework.The results show that GDP growth has significant positive effects on happiness in all countries considered, particularly in the PIIGS countries; happiness volatility responds positively to economic uncertainty. The size of this effect is bigger following the most recent crisis period, especially for the PIIGS countries. Our findings confirm the important role played by economic growth in determining population happiness and, most importantly, provides new evidence on the existence of causality linkages between economic uncertainty and happiness volatility

Determinants of different internal migration trends: the Italian experience

This paper investigates the determinants of interregional migration in Italy for the period 1985-2006, during which different migration trends took place. In so doing, in addition to the traditional variables of Harris and Todaro model, the impact of housing prices and externalities variables were studied. Our results, using a dynamic panel GMM, show that the H-T model, due to the complexity of the internal migration process, omits some important economic and non-economic variables and may not be representative of migration flow in Italy. Furthermore, our analysis confirms our intuition that for different periods we have to take into account different determinants

Determinants of different internal migration trends: the Italian experience

This paper investigates the determinants of interregional migration in Italy for the period 1985-2006, during which different migration trends took place. In so doing, in addition to the traditional variables of Harris and Todaro model, the impact of housing prices and externalities variables were studied. Our results, using a dynamic panel GMM, show that the H-T model, due to the complexity of the internal migration process, omits some important economic and non-economic variables and may not be representative of migration flow in Italy. Furthermore, our analysis confirms our intuition that for different periods we have to take into account different determinants

Financial crisis and the convergence of European welfare provision

The paper seeks to evaluate whether and to what extent the recent global financial crisis and its economic aftermaths had any impact on the dynamics of the European countries’ national welfare provisions. Relying on the most recent available data on 16 Western countries, covering the period 1990-2013, the analysis examines the behaviour of per capita levels of total social expenditure and its main functions: old age-survivors-incapacity related, labour and healthcare. The empirical analysis reveals the presence of a strong conditional convergence process of per capita total public social expenditure and that devolved to functions attracting most of the social resources. The 2007 financial crisis did not change the old age-survivors-incapacity and labour policies’ convergence trend while it contributed to increase differences among national indicators of total social provision and health sector with the latter presenting a turnaround with respect to the period before the crisis. Healthcare is confirmed to be a less productive sector and therefore the one that most may be cut in presence of resources availability constraints

Happy PIIGS?

This paper investigates the causality dynamics between happiness and per capita GDP growth and the impact of the recent financial crisis using a VAR-GARCH model for 10 European EMU countries divided in peripheral and non-peripheral members. The rationale of the analysis is to look at the two different dimensions (mean and variance) of economic growth and happiness within a time-series framework. The results show that GDP growth has significant positive effects on happiness in all countries considered, particularly in the PIIGS countries; happiness volatility is responsive to economic uncertainty. The size of this effect is bigger following the most recent crisis period, especially for the PIIGS countries. Our findings confirm the important role played by economic growth in determining population happiness and, most importantly, provides new evidence on the existence of causality linkages between economic uncertainty and happiness volatility

A note on social security design. Means tested vs universal programs

Due to the slowdown of demographic and economic growth in developed countries, it has been argued that universal programs in social security should be replaced by means test programs. This reshuffling of the social security system would achieve a double objective: on the one hand it would protect people in need, on the other hand, by reducing the tax rate, it would allow reducing distortions in choices made by working generations, who will also be able to profit from larger expected returns provided in fully funded systems. With the aim of reconsidering the welfare foundations of the argument provided above, in this paper we extend the basic overlapping generations model provided in Feldstein (1985,1987) to the case of heterogeneous labor income. The results show that, in dynamically efficient economies, the argument has to be considered carefully: equilibrium tax rate in a means tested program is lower than under a universal program as long as the returns warranted by a pay as you go system are sufficiently high so that incentive constraints in the means test programs are binding