Social Security and Households' Saving

Abstract
This paper provides new evidence on the substitutability between private and pension wealth by exploiting the Italian pension reform of 1992. We use a difference-in-difference estimator that exploits the differential effects of the reform on individuals belonging to several year-of-birth cohorts and different occupational groups. We find convincing evidence that saving rates increase as a result of a reduction in pension wealth. By allowing for the possibility that substitutability changes with age, we find that substitutability is particularly high (and precisely estimated) for workers between 35 and 45.

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