In Italy, poverty and disability are two strictly related issues. Households with disabled members continuously face a poverty risk. We simulate a simple Real Business Cycle model to investigate the macroeconomic effects of a permanent increase of civilian disability pensions. We stress the effectiveness of such a policy to stimulate private consumptions. The exercise is implemented via the reduction-both temporary and permanent-of public spending. Results show both the long- and short-run trade-off the policy maker has to deal with when the disability-poverty dualism becomes a relevant issue. In the long-run, a minimum increase of civilian disability pensions allows households with a disabled member to consume more and to exit from poverty condition. However, while temporary decline of public consumption entails a larger decrease of income inequality between the two groups of households, permanent reduction dampens the unavoidable recessionary effect. In the short-run, a temporary reduction of public spending causes an immediate surge of the consumption of households with a disabled member at a cost of a deep recession. By the opposite, a permanent public spending reduction softens the unavoidable output slump but private consumptions only gradually increase.

Can civilian disability pensions overcome the poverty issue? A DSGE analysis for Italian data

AGOVINO, MASSIMILIANO;FERRARA, MARIA
2016

Abstract

In Italy, poverty and disability are two strictly related issues. Households with disabled members continuously face a poverty risk. We simulate a simple Real Business Cycle model to investigate the macroeconomic effects of a permanent increase of civilian disability pensions. We stress the effectiveness of such a policy to stimulate private consumptions. The exercise is implemented via the reduction-both temporary and permanent-of public spending. Results show both the long- and short-run trade-off the policy maker has to deal with when the disability-poverty dualism becomes a relevant issue. In the long-run, a minimum increase of civilian disability pensions allows households with a disabled member to consume more and to exit from poverty condition. However, while temporary decline of public consumption entails a larger decrease of income inequality between the two groups of households, permanent reduction dampens the unavoidable recessionary effect. In the short-run, a temporary reduction of public spending causes an immediate surge of the consumption of households with a disabled member at a cost of a deep recession. By the opposite, a permanent public spending reduction softens the unavoidable output slump but private consumptions only gradually increase.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11367/50737
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact