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Centre for Employment Studies
RETIREMENT FROM THE LABOUR MARKET AND ITS SOCIAL IMPACT. EVIDENCE FROM ITALY USING DYNAMIC MICROSIMULATION. (download) Daniele Checchi * Abstract The “prospect of upward mobility” (POUM) hypothesis formalised by Benabou and Ok (2001a) finds explicit assumptions under which some individuals that are poorer than the average optimally chooses to oppose redistribution policies. The underlying intuition is that these individuals rationally expect to be richer than average in the future. This result holds provided the mobility process is concave in expectations, redistribution policies are expected to last for a sufficiently long period and individuals are not too risk averse. Alesina and La Ferrara (2002) provide evidence supportive of the POUM hypothesis, although field data are necessarily incomplete and impose the use of many proxies. This paper is aimed at testing the POUM hypothesis by means of a within subjects experiment where the concavity of the mobility process, the degree of social mobility, the knowledge of personal income and the degree of inequality are used as treatments. Other determinants of the demand for redistribution, such as risk aversion and inequality aversion are (partially) controlled for via either the experiment design or the information collected during the experiment. We find that the POUM hypothesis holds under alternative specifications, even when we control for individual fixed effects. *
University of Milan
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