Life expectancy heterogeneity and pension fairness: An Italian north-south divide

Abstract

This work documents a persistent life expectancy heterogeneity by gender and geography in Italy during the period 1995–2019. Based on deviations of life expectancy at age 65, it quantifies the implicit tax/subsidy mechanism triggered when pensions annuities are computed by adopting the same value of longevity for the whole population. The intensity of this transfer mechanism is then measured and projected over the decade 2020–2030. Results show that females are subsidized while males are taxed by around 10%. Differences by geography persist along the Italian territory. Since 1995 the macroarea of Mezzogiorno has been taxed by 2%, Center and North-West macroareas are being subsidized by around 1%, whereas North-East by 2%. The intensity of the mechanism, despite decreases over time, is higher among females since the year 2000. From a geographical perspective, the macroarea of Mezzogiorno shows the lowest intensity, but also the lowest reduction as compared to other macroareas. Projections indicate that the North-South divide in this implicit transfer mechanism will persist over the next decade.