Modelling Private Wealth Accumulation and Spend-down in the Italian Microsimulation Model CAPP_DYN: A Life-Cycle Approach

In microsimulation literature a limited number of models include a module aimed at analyzing and projecting the evolution of privat e wealth over time. However, this issue appears crucial in order to comprehensively evaluate the li kely distributional effects of institutional reforms adopted to cope with population ageing. In this work we describe the implementation in the Italian dynamic micro simulation model CAPP_DYN of a new module in which households\u2019 savings and asset allocation are modelled. In parti cular, we aim to account for possible behavioural responses to pension reforms in househo ld savings. To this end, we rely on an approximate life cycle structural framework for est imating saving behaviour, while adopting a traditional stochastic micro simulation approach fo r asset allocation. In line with Ando and Nicoletti Altimari (2004), we emphasize the role of lifetime economic resources in households\u2019 consumption decisions, yet we further account for i nternal habit formation and subjective expectations on pension outcomes in the econometric stage. In addition, we model intergenerational transfers of private wealth in a probabilistic fashio

From banks' strategies to financial (in)stability

This paper aims to shed light on the emergence of systemic risk in credit systems. By developing an interbank market with heterogeneous financial institutions granting loans on different network structures, we investigate which market architecture is more resilient to liquidity shocks and how the risk spreads over the modeled system. In our model, credit linkages evolve endogenously via a fitness measure based on different banks' strategies. Each financial institution, in fact, applies a strategy based on a low interest rate, a high supply of liquidity or a combination of them. Interestingly, the choice of the strategy influences both the banks' performance and the network topology. In this way, we are able to identify the most effective tactics adapt to contain contagion and the corresponding network topology. Our analysis shows that, when financial institutions combine the two strategies, the interbank network does not condense and this generates the most efficient scenario in case of shocks.The research leading to these results has received funding from the European Union, Seventh Framework Programme FP7, under grant agreement MATHEMACS, n0 : 318723 and FinMaP n0 : 612955. The authors are grateful for funding this research from the Universitat Jaume I under the project P11B2012 27

The Introduction of a Private Wealth Module in CAPP_DYN: an Overview

Household saving rate in Italy declined over the last two decades.This trend still persists despite three pension reforms have been enacted since the beginning of the nineties. In this paper we search further evidence of general macroeconomic effects through the analysis of households behaviour. In the first part of the paper we use data from five surveys of the Bank of Italy Surveys of Household Income and Wealth (SHIW) to estimate the lifetime profiles of saving and wealth accumulation. Estimates show that the age profile of the propensity to save has been influenced more by cohort effects than by general trend effects; whereas the age profile of the ratios of financial assets to disposable income has been subject to relevant trend effects. In the second part of the paper we analyse the effects of pension reforms on saving behaviour of Italian Households. Firstly we use a difference-in-difference estimator in order to test whether the groups more severely hit by the reforms actually increased their saving rate relative to the other groups. Then we estimate the Social Security Net Wealth (SSWN) for each individual in the SHIW in the analysed period (1989-2000). Finally we estimate the substitution coefficient between SSWN and private wealth taking into account that the reaction of saving to a change in SSWN depends also on age of the individual. Our results show that the reduction of SSWN is unequally distributed across individuals. The cut is stronger for self employed, young workers and women. Most of the groups more severely hit by the reforms did not increase their saving rate relative to the control group: younger households, in particular, did not increase the saving rate. On the whole a reduction of one Euro in SSWN seems to induce, on the average, a compensating increase in private wealth by about fifty cents. The substitution coefficient between private and social security wealth is higher for the richest and oldest part of the sample. Finally when we split the sample observations by year we find that the more dramatised is the impact of the reform, the higher is the substitution coefficient.Pension reform; household saving; social security wealth; difference-in-difference

From banks' strategies to financial (in)stability

This paper aims to shed light on the emergence of systemic risk in credit systems. By developing an interbank market with heterogeneous financial institutions granting loans on different network structures, we investigate what market architecture is more resilient to liquidity shocks and how the risk spreads over the modeled system. In our model, credit linkages evolve endogenously via a fitness measure based on different banks strategies. Each financial institution, in fact, applies a strategy based on a low interest rate, a high supply of liquidity or a combination of them. Interestingly, the choice of the strategy in uences both the banks' performance and the network topology. In this way, we are able to identify the most effective tactics adapt to contain contagion and the corresponding network topology. Our analysis shows that, when financial institutions combine the two strategies, the interbank network does not condense and this generates the most efficient scenario in case of shocks

Modelling Private Wealth Accumulation and Spend-down in the Italian Microsimulation Model CAPP_DYN: A Life-Cycle Approach

In microsimulation literature a limited number of models are provided with a module aimed at analyzing and projecting the evolution of private wealth over time. However, this issue appears crucial in order to get a comprehensive evaluation of the likely distributional effects of institutional reforms adopted to cope with population ageing. In this work we describe the implementation in the Italian dynamic micro simulation model CAPP_DYN of a new module in which household’s savings and asset allocation are modelled. In particular, our efforts are addressed at accounting for some possible behavioural responses to pension reforms in household savings. To this end, we rely on an approximate life cycle structural framework for estimating saving behaviour, while adopting the traditional stochastic micro simulation approach for assets allocation. In line with Ando and Nicoletti Altimari (2004), we emphasize the role of lifetime economic resources in households’ consumption decisions, yet we further account for internal habit formation and subjective expectations on pension outcomes in the econometric stage. In addition, we model intergenerational transfers of private wealth in a probabilistic fashion. Despite possible saving responses to pension reforms, simulated results for the period 2008-2050 suggest a rising dispersion in saving propensity and intergenerational transfers received are largely responsible for the predicted increase in disposable income inequality in the next decades which, differently from the recent past, will also affect the group of elderly.household consumption, habit formation, pension expectations, social security, intergenerational transfers, income and wealth distribution, microsimulation

MultiNERD: A Multilingual, Multi-Genre and Fine-Grained Dataset for Named Entity Recognition (and Disambiguation)

Named Entity Recognition (NER) is the task of identifying named entities in texts and classifying them through specific semantic categories, a process which is crucial for a wide range of NLP applications. Current datasets for NER focus mainly on coarse-grained entity types, tend to consider a single textual genre and to cover a narrow set of languages, thus limiting the general applicability of NER systems.In this work, we design a new methodology for automatically producing NER annotations, and address the aforementioned limitations by introducing a novel dataset that covers 10 languages, 15 NER categories and 2 textual genres.We also introduce a manually-annotated test set, and extensively evaluate the quality of our novel dataset on both this new test set and standard benchmarks for NER.In addition, in our dataset, we include: i) disambiguation information to enable the development of multilingual entity linking systems, and ii) image URLs to encourage the creation of multimodal systems. We release our dataset at https://github.com/Babelscape/multinerd

Household risk-sharing channels

This paper aims to fill the gaps in the analysis of risk-sharing channels at the microlevel, both within and across households. Using data from the Bank of Italy's Survey on Household Income and Wealth covering the financial crisis, we are able to quantify in a unified and consistent framework several risk-sharing mechanisms that so far have been documented separately. We find that Italian households were able to smooth on average about 85% of shocks to household head's earnings in both 2008–2010 and 2010–2012 spells. The most important smoothing mechanisms turn out to be self-insurance through savings/dissavings (40% and 47% in 2008–2010 and 2010–2012, respectively), and within-household risk-sharing (16% and 14%). Interestingly, risk-sharing through portfolio diversification and private transfers is rather limited, but the overall percentage of shock absorption occurring through private risk-sharing channels hovers around four-fifths, as opposed to around one-fifth of a shock cushioned by taxes and public transfers, excluding pensions. In addition, by exploiting subjective expectations on the following year's household income, we find significant evidence of a lower degree of smoothing of persistent shocks

Bank's strategies during the financial crisis

In this paper we introduce a calibration procedure suitable for the validation of agent based models. Starting from the well-known financial model of Brock and Hommes 1998, we show how an appro- priate calibration technique makes the model able to describe price time series.The calibration results show that the simplest version of the Brock and Hommes model, with two trader types, fundamentalists and trend-followers, well replicates the price series of four sub-sectoral banking indexes, representing different geographical areas. Moreover, we show how the parameter values of the calibrated model are important to analyse the trader behavior on the different investigated markets

Alternative approaches for the reformulation of economics

In the last decades most of advanced and developing economies have undertaken adeep structural transformation. This profound structural change, caused by the tran-sition from a manufacturing economy to a service-based one, is among the causes ofthe current crisis (see Delli Gatti et al.2012). The dereculation of the banking sys-tem with the consequent redirection of banking activity from the credit sector to thefinancial one,1and the liberalization of financial markets, the globalization and thedelocalisation of production with the resulting labor market flexibility are just some ofthe many transformations affecting the socio-economic system in the recent decades

Regressivity reducing VAT reforms

A concern about a more extensive use of the Value Added Tax (VAT) in national tax systems often arises both from its impact on aggregate consumption and its alleged regressivity over income. Yet, the empirical evidence on this latter issue is still narrow mainly due to the lack of joint data on income and expenditures with enough detail to account for commodity-specific tax rates. After discussing relevant problems in the measurement of VAT incidence over current income – which are likely to cause severe upward bias in the estimated regressivity – the paper aixsms at analysing the distributional implications of different VAT structures. In a framework of marginal tax reforms, relying on the concept of Gini elasticity (Yitzhaki, 1983), a general methodology is proposed to analyse and improve the distributional profile of VAT over income. Using a static microsimulation model (EGaLiTe), the methodology is applied on a comprehensive dataset of expenditures and incomes obtained by a statistical matching of two different sources representative of the Italian population. It is shown that an alternative allocation of goods among existing rates could mitigate the regressive profile of the tax over income, and that a properly designed two-rate setting could even improve the distributional outcome compared with the current setting. Finally, behavioural responses to tax-driven price changes are also simulated in order to assess the potential impact of the proposed reforms on aggregate expenditures