Essays on differentiated pension systems

This thesis is composed by three chapters in the form of self-contained works. The first work builds up a model to analyse the interaction between flexible contracts and pension systems in interconnected environment which allows obtaining heterogeneous labour careers featuring life cycle unemployment, flexible wage-tenure contracts. These are used as base to compare performances of two standard pension regimes, a Defined-Benefit (DB) and a Defined-Contribution (DC), in terms of financial sustainability and adequacy (income maintenance, inequality and poverty in old age). It results that a DC is more sustainable and adequate than a DB, despite the latter delivers higher pensions. Two standard variants of DC are also presented, in which the pension contribution rate is differentiated by worker’s age (DAC) and tenure of contract (DTC). These differentiated designs outperforms the standard DB and DC in all four dimensions. The last two chapters are empirical works which focus on the Italian population. They document a persistent and not decreasing heterogeneity in life expectancy across geography and education, respectively, and update the empirical evidence until recent years. Gender and age specificities are also considered. Unlike previous works, these two contributions use available data to cover also the last decade or so. The systematic dispersion of longevity, interacting with a public pension system, triggers an implicit tax/subsidy mechanism penalising/favoring tho who live less/more than commonly assumed by the pension formula through a homogeneous factor for residual life expectancy. These rates are estimated and a corrective policy based on gender-differentiated is proposed. Application of gender-specific values for life expectancy alleviates the intensity of the implicit transfer mechanism. Overall, these works call for a differentiated design of public pension regimes in the face of an increasing heterogeneity both before retirement, in terms of labour careers and, at retirement, in terms of residual life expectancy. Differentiation of contribution formula, by worker’s age or by tenure of the contract, and of pension formula, by worker’s gender, can be promising policies aimed at restoring the financial sustainability, adequacy, actuarial fairness and progressivity of public pension systems in an ageing heterogeneous society.