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on Economics of Ageing |
| By: | Baroni, Elisa (Institute for Futures Studies) |
| Abstract: | Traditionally, pension systems aim to fulfill a number of functions which include income security and consumption smoothing in old age, as well as income redistribution. The main rationale for pension reform lies in the interaction between current demographic trends (e.g. increasing old age dependency ratios) and the design of existing pension systems (particularly, the so called Pay-As-You-Go public systems). Under certain conditions, population aging can in fact undermine the ability of a pension system to fulfill those very aims for which it was created, putting pensioners at risks of higher poverty and inequality, besides creating large fiscal pressures on governments and threaten economic growth. <p> In the literature, we find two main approaches to this debate. On the one hand, economic theory helps us formalize the mechanisms through which aging affects a pension system, given its possible features (e.g. type of benefit offered, degree of actuarial fairness or type of financing); it also helps us quantify costs or returns associated to different pension designs and, consequently, to different pension reform options. On the other hand, the policy debate is centered on models of reform which take from concrete country experiences; overall, it focuses mostly on whether funding pensions (i.e. privatizing and individualizing retirement savings, away from Pay-As-You-Go systems) is the best option for reducing many of the negative economic impacts associated to population aging. <p> After having illustrated both sides of the debate – the theoretical and the empirical - our paper makes two main claims. Firstly, the debate should be re-framed away from whether funding is the best option for pension reform in the face of population aging, towards a redefinition of the problem which rather focus on the type of benefit offered, its coverage, its eligibility conditions and actuarial design (as this controls important behavioral and efficiency implications). Secondly, and relatedly, the final impact of a given pension system or reform on future economic variables (i.e. growth, poverty, inequality, financial sustainability) cannot be inferred only by using the tools of economic theory, or the lessons of policy experience. Rather, it requires the ability to quantify the net effects of several interacting explanatory levels, such as country-specific demographic, economic and institutional trends. To this end, we propose the adoption of micro simulation modeling as a well-suited methodology for shedding more light on this important policy debate. |
| Keywords: | pension systems; micro simulation modeling |
| JEL: | H50 H55 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2007_006&r=age |
| By: | Lindh, Thomas (Institute for Futures Studies); Lundberg, Urban (Institute for Futures Studies) |
| Abstract: | Ageing societies need to supply support to an ever growing segment of elderly dependent population without compromising the future sustainability for the currently young or unborn population. Current tendencies to focus on policy solutions like automatic stabilisers and norm based pre-commitment strategies with decisions delegated to experts carry a high risk of political breakdown when future populations re-evaluates this with new information. Using the Swedish pension reform as a concrete example we show how the futurity problem associated with the current non-existence of the future population makes the political process prone to avoid bringing issues with very long horizons into the public debate. Alternative demographic scenarios for Sweden are used to illustrate how even very small variations in the assumptions of demographic projections lead to radically different future population structures. Hence, the majority preferences in a distant future cannot be foreseen. Adding to this the complex interactions with a changing environment of technology and nature time-consistent decision making at the far future horizon must be virtually impossible. Thus the sustainability of long-term social security systems require constitutional balances that provide for orderly and continual adaptation rather than once-for-all fixes that are likely to be rejected by future electorates. |
| Keywords: | ageing; democracy; pensions |
| JEL: | J10 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2007_004&r=age |
| By: | Mehmet Serkan Tosun (University of Nevada, Reno); Claudia Williamson (Department of Economics, West Virginia University); Pavel Yakovlev (Department of Economics, West Virginia University) |
| Abstract: | Elderly have been increasingly targeted as a group to enhance economic development and the tax base in communities. A major factor in their rise in importance is the rapid increase in the number of retired elderly through aging of the U.S. population. While recent literature on elderly migration tends to focus on how elderly migration patterns are influenced by state fiscal variables, the reverse effect from elderly population on fiscal variables is very plausible as shown to be the case for estate, inheritance, and gift taxes by Conway and Rork (2006). In this paper, we reexamine the intergenerational conflict in education financing raised by Poterba (1997) using U.S. state and county level data that allows to analyze how preferences for education might vary across different elderly age groups, which has not been explored before. Moreover, this paper uses a variety of advanced econometric techniques to estimate the impact of elderly population and elderly migration on education spending. Our state and county regression results broadly support the presence of intergenerational conflict in education financing. We also find dramatic age heterogeneity in preferences for education spending among elderly migrants. |
| Keywords: | Population aging, elderly migration, education spending, intergenerational conflict |
| JEL: | H75 R23 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:unr:wpaper:07-003&r=age |
| By: | Dag Rønningen (Statistics Norway) |
| Abstract: | Recent decades have been characterized by rapid technological change. In the same period, early withdrawal from the labor market has increased markedly. One particular question concerns the effects of technological change and organizational change on the labor market participation of workers of different ages. The question posed in this paper is whether technological change and organizational change are biased against age, thereby causing a shift in demand from older to younger workers. We estimate the effects of organizational change and technological change on wage bill shares for five age groups. By using panel data, we control for unobserved firm fixed effects. The results indicate that organizational change raises the wage bill share for workers in their forties but lowers the share for workers in their fifties. The wage bill shares of the youngest and oldest workers are hardly affected by organizational change and technological change. Separate estimates for men and women yield qualitatively similar results. In regressions for different educational levels, wage bill shares are positively affected by organizational change for highly educated individuals in their thirties. Technological change increases the wage bill share of highly educated workers in their sixties. For workers with intermediate and lower levels of education, the results are similar to those obtained from the whole sample. |
| Keywords: | technological change; organizational change; age-biased labor demand |
| JEL: | J23 J31 O33 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:512&r=age |
| By: | Federico Biagi (Università di Padova); Danilo Cavapozzi (Università di Padova); Raffaele Miniaci (Università di Brescia) |
| Abstract: | In our work we study the role of Information and Communication Technology (ICT) skills and their utilization in the retirement decision. We provide empirical evidence based on Italian panel data in favour of the hypothesis that - ceteris paribus - better educated male employees with ICT know-how retire later. Such effect is stronger the longer the time horizon considered, and its magnitude is remarkably larger than the one observed in US and Germany in previous studies. We also document that ICT do not play a crucial role in the retirement decision of women. Our results are robust to the estimation strategy adopted. |
| Keywords: | retirement, skill-biased technological change |
| JEL: | J26 J24 J14 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0042&r=age |
| By: | Yu-Wei Hu; Colin Pugh; Fiona Stewart; Juan Yermo |
| Abstract: | Collective pension funds (CPFs) - occupational pension funds that cover the employees of more than one employer (enterprise) - have been operating in OECD countries for decades. Generally speaking, there are two models, i.e. closed pension funds, with membership restricted to a particular industry or group of industries, and open pension funds open to all types of company. The governance structure of such funds also operates in two ways – via an internal model (with trustees appointed by employers and employees) and external model (with professional, commercial trustees). In this report, we first describe and analyse how CPFs are operated in selected OECD countries and non-OECD economies. Then, we review occupational pensions (or Enterprise Annuities -EA- in Chinese terminology) in general and CPFs in particular. Given the problems holding back the development of EA plans among small and medium size enterprises (SMEs) in China, and bearing in mind both China‘s specific situations and international best practices, we propose a number of policy recommendations to promote the development of CPFs covering the SME sector. Our practical policy recommendations include 1) industry funds with more open membership; 2) establishment of new purpose-built industry funds; 3) establishment of new regional EA administration centres acting as independent pension councils (trustees) for open pension funds; 4) in parallel to these policy initiatives in China, commercial trustees should be encouraged to establish CPFs targeting the SME sector. <P>Fonds de pension collectifs : Observations internationales et conséquences pour la réforme des rentes d'entreprise en Chine <BR>Les fonds de pension collectifs (FPC) – fonds de pension professionnels qui couvrent des salariés relevant de plusieurs employeurs (entreprises) – existent dans les pays de l‘OCDE depuis plusieurs décennies. De manière générale, il existe deux modèles : des fonds de pension fermés auxquels seuls peuvent adhérer les travailleurs d‘une certaine industrie ou d‘un groupe d‘industries, et des fonds de pension ouverts auxquels peuvent adhérer les travailleurs de toutes entreprises. De même, il y a deux modèles de structure de gouvernance : un modèle interne (où les fiduciaires sont désignés par les employeurs et les travailleurs) et un modèle externe (où les fiduciaires sont des professionnels qui agissent à titre commercial). Dans ce rapport, nous commençons par décrire et analyser la façon dont les FPC sont gérés, dans certains pays de l‘OCDE et dans certaines économies extérieures à la zone de l‘OCDE. Puis nous examinons la question des pensions professionnelles (en Chine, on parle de rentes d‘entreprise), de façon générale, et des FPC en particulier. Étant donné les problèmes qui freinent le développement des systèmes de rentes d‘entreprise dans les petites et moyennes entreprises (PME) en Chine, et compte tenu, par ailleurs, des spécificités de la situation chinoise et des pratiques optimales définies au niveau international, nous formulons un certain nombre de recommandations pour promouvoir le développement des FPC dans le secteur des PME. Nos recommandations, concrètement, sont les suivantes: 1) ouvrir plus largement l‘adhésion aux fonds par industrie; 2) créer de nouveaux fonds par industrie spécialisés; 3) mettre en place de nouveaux centres régionaux de gestion des rentes d‘entreprise qui joueraient le rôle de conseils indépendants (fiduciaires) pour les fonds de pension ouverts; 4) parallèlement à ces initiatives d‘ordre public, en Chine, des fiduciaires agissant à titre commercial devraient être encouragées à créer des FPC ciblés sur le secteur des PME. |
| Keywords: | China, pension fund, fond de pension, Small and Medium-sized Enterprises |
| JEL: | G23 P52 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaab:9-en&r=age |