The effectiveness of incentives to postpone retirement: evidence from Italy

This paper investigates whether financial incentives may be used as an effective device to induce workers to postpone retirement by evaluating the Italian so-called 'super-bonus' reform. The bonus consisted of economic incentives given for a limited period to private sector workers who had reached the requirements for seniority pension but who chose to postpone retirement. Using data from the Bank of Italy Survey on Household Income and Wealth, this paper assesses the effect of the bonus on the decision to postpone retirement, by comparing private and public workers before and after the reform. Results suggest a 30% reduction in seniority retirement probability, despite the fact that, when changes in social security wealth are taken into account, the bonus actually provided a negative incentive for most workers. Results also suggest that the effect of the reform was driven by low-income workers. Some evidence is presented showing that liquidity constraints and financial (il)literacy may help to interpret these results.