nep-age New Economics Papers
on Economics of Ageing
Issue of 2007‒08‒27
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Explaining the Health Gap Between Canadian- and Foreign-Born Older Adults: Findings from the 2000/2001 Canadian Community Health Survey By Karen M. Kobayashi; Steven Prus
  2. Demographic Change and Policy Responses: Implications for the Global Economy By Rod Tyers; Qun Shi
  3. Income, Aging, Health and Wellbeing Around the World: Evidence from the Gallup World Poll By Angus Deaton
  4. Aging, Gender and Neighbourhood Determinants of Distance Traveled: A Multilevel Analysis in the Hamilton CMA By Ruben Mercado; Antonio Páez
  5. Why do firms offer risky defined benefit pension plans? By David A. Love; Paul A. Smith; David Wilcox
  6. Private Intergenerational Transfers and Their Ability to Alleviate the Fiscal Burden of Ageing By Hayat Khan

  1. By: Karen M. Kobayashi; Steven Prus
    Abstract: Previous research (Gee, Kobayashi, Prus, 2004) indicates that foreign- born older adults (65 years and older) have poorer health than their Canadian-born counterparts. Using data from the 2000/2001 Canadian Community Health Survey, the current study tests two hypotheses to explain the health gap between these two groups. Findings indicate support for the differential vulnerability hypothesis but not for the differential exposure hypothesis in explaining the health gap between Canadian- and foreign-born older adults. What this suggests is that differences in health status between these two groups, rather than being the result of different social locations and/or lifestyle behaviours, can instead be attributed to the different “reactions” of Canadian- and foreign- born older adults to various social and lifestyle determinants of health.
    Keywords: health, immigrants, aging
    JEL: I18 I19
    Date: 2007–06
  2. By: Rod Tyers; Qun Shi
    Abstract: The fertility declines associated with the final phase of the global demographic transition have led to slower population growth and accelerated ageing in developed countries and in several advanced developing countries. A global demographic and economic is used to assess the implications of these changes for population sizes, age-gender distributions, labour force growth and their implications for economic performance. A base line projection that incorporates declining fertility is compared with a hypothetical constant population growth scenario. The results show that slower population growth and ageing reduces average saving rates in industrial regions, yet global investment demand is also slowed and saving rates rise in developing regions, so there is no net tightening of financial markets. Increased aged labour force participation, considered one solution to the resulting rise in aged dependency in advanced regions, is found to redistribute investment in favour of the industrialised regions and hence to accelerate their per capita income growth, while conferring on the other regions compensatory terms of trade improvements. The alternative of replacement migration is found to require inconceivably large population movements. It also impairs real per capita growth in destination regions but by least in Western Europe, where the terms of trade is improved by the immigration.
    Date: 2006–08
  3. By: Angus Deaton
    Abstract: During 2006, the Gallup Organization conducted a World Poll that used an identical questionnaire for national samples of adults from 132 countries. I analyze the data on life satisfaction (happiness) and on health satisfaction and look at their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and with their health than are younger people. HIV prevalence in Africa has little effect on Africans' life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans. The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, as do the low levels of life and health satisfaction in Eastern Europe and the countries of the former Soviet Union, the lack of correlations between life and health satisfaction and health measures shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.
    JEL: I1 I31 O1 O15 O57
    Date: 2007–08
  4. By: Ruben Mercado; Antonio Páez
    Abstract: The objective of this study is to investigate the determinants of mean trip distance traveled by different mode types. The study uses data from the Hamilton CMA in Canada, and multilevel models to investigate demographic aging factors, gender differentials, and neighbourhood attributes on distance traveled. The results of the study validate previous findings regarding the decline in distance traveled as age advances. In addition, it is found that: 1) While this effect of age is present for all modes analyzed (car-driving, car-passenger, and bus) it is considerably more marked for car-driving; 2) There are significant gender effects compounded by the interrelated factors of employment constraints, household dynamics, and greater reliance on travel modes other than car driving; and 3) Neighbourhoods with high commercial and residential mix showed a negative relation with distance traveled only in the case of car-driver.
    Keywords: distance traveled, aging, elderly, gender, neighbourhood influence, multilevel analysis
    JEL: R22 R23 R41 R52 R58
    Date: 2007–06
  5. By: David A. Love; Paul A. Smith; David Wilcox
    Abstract: Even risky pension sponsors could offer essentially riskless pension promises by contributing a sufficient level of resources to their pension trust funds and by investing those resources in fixed-income securities designed to deliver their payoffs just as pension obligations are coming due. However, almost no firm has chosen to fund its plan in this manner. We study the optimal funding choice for plan sponsors by developing a simple model of pension financing in which the total compensation offered to workers must clear the labor market. We find that if workers understand the implications of pension risk, they will demand greater compensation for riskier pension promises than for safer ones, all else equal. Indeed, in our model, pension sponsors maximize their value by making their pension promises free of risk. We close by positing some explanations for why no real-world firm follows the prescription of our model.
    Date: 2007
  6. By: Hayat Khan
    Abstract: The ratio of retirees to workers in developed countries is expected to increase sharply in the next few decades. In the presence of unfunded income support policies, this increase in old age dependency is expected to increase the future fiscal burden which is seen as a threat to living standards. This paper quantifies the ability of private intergenerational transfers to alleviate the future fiscal burden of ageing. This is done through developing an extended dynamic overlapping generations simulation model with realistic demographics. Calculation based on steady state simulations suggests that a bequest to GDP ratio of 1% offsets about 33.3 % of the fiscal burden over the lifecycle when measured as a % of simple labour income and 8.9% of the fiscal burden when measured as % of the full income. The model is calibrated for Australia under small open economy assumption such that the optimal solution mimic important cross sectional and time series fundamentals of the Australian Economy. Intergenerational accounting suggests that the empirically plausible intergenerational transfers are strong enough to offset most of the tax burden (81 to 91%) when measured as % of simple labour income and up to 1/4 of the burden when fiscal burden is measured as % of full income. In the endogenous labour supply case, 81 to 91 percent of the fiscal burden of ageing will be alleviated by inheritances in the base case. Due to the calibration strategy adopted, the paper analytically demonstrates that results of the simulations are robust to the introduction of lifetime uncertainty in the model where people discount the future by a rate of time preference and by a survival probability irrespective of whether there are perfect annuity markets or no annuity markets at all.
    Keywords: Ageing, Overlapping Generations (OLG) model, bequests, fiscal
    Date: 2007–06

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