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on Economics of Ageing |
| By: | John B. Shoven |
| Abstract: | The current practice of measuring age as years-since-birth, both in common practice and in the law, rather than alternative measures reflecting a person's stage in the lifecycle distorts important behavior such as retirement, saving, and the discussion of dependency ratios. Two alternative measures of age are explored: mortality risk and remaining life expectancy. With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn't look like a huge wave at all. By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent. However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent. Needless to say, the aging of the society is a lot less dramatic with the alternative mortality-based age measures. In a separate application of age measurement, I examine the consequences of stabilizing labor force participation by age with alternative age definitions. If labor force participation were to remain as it is today with respect to remaining life expectancy (i.e. if the length of retirement stayed where it is today) rather than labor force participation remaining fixed by conventionally-defined age, then there would be 9.6 percent more total labor supply by 2050 in the U.S. This additional labor supply could help finance entitlement programs amongst other things. GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize. Several policies are examined that would encourage longer work careers. |
| JEL: | J10 J11 J14 J26 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13476&r=age |
| By: | David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Michael Moore (Queen's University, Belfast) |
| Abstract: | We construct a model in which retirement occurs at the end of life as a result of declining health. We show that improvements in life expectancy, coupled with a delay in the onset of disability, create a wealth effect that increases both the optimal consumption level and the proportion of life spent in leisure. For social security systems whose goal is to mimic optimal behavior, the appropriate response to longer, healthier lives is to reduce contribution rates and increase benefit rates, funded by an increase in the retirement age that is less than proportional to the increase in life expectancy. |
| Keywords: | aging, health, retirement, savings |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:2607&r=age |
| By: | Ichino, Andrea; Schwerdt, Guido; Winter-Ebmer, Rudolf; Zweimüller, Josef |
| Abstract: | We use firm closure data from social security records for Austria 1978-1998 to investigate the effect of age on employment prospects. We rely on exact matching to compare workers displaced due to firm closure with similar non-displaced workers. We then use a difference-in-difference strategy to analyze employment and earnings of older relative to prime-age workers in the displacement and non-displacement groups. Results suggest that immediately after plant closure the old have lower re-employment probabilities as compared to prime-age workers but later they catch up. While among the young the employment prospects of the displaced remain persistently different from those of the non-displaced, among the old the effect of displacement fades away, and actually disappears even immediately after plant closure when the effect of tenure based severance payment is controlled for. Our evidence suggests that increasing the retirement age does not necessarily produce individuals who are “too old to work but too young to retire”. |
| Keywords: | Aging; Employability; Matching; Plant Closures |
| JEL: | J14 J65 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6510&r=age |
| By: | Dhaval Dave; Henry Saffer |
| Abstract: | This study has two primary goals. These are the examination of the effect of risk tolerance on individuals' demand for alcohol and second, the examination of the demand for alcohol by older adults over the age of 55. The data sets employed are multiple waves from the Panel Study of Income Dynamics (PSID) and the Health and Retirement Study (HRS). While risk tolerance can impact the level of alcohol consumption, it may also affect the sensitivity of demand to prices. There are parallels between the economist's and the psychologist's concept of risk tolerance. Research on attitudes towards risk by psychologists is part of a larger theoretical and empirical literature on personality traits. Psychologists have found risk tolerance to be an important determinant of alcohol consumption. The empirical results indicate that risk aversion has a significant negative effect on alcohol consumption, with the prevalence and consumption among risk-tolerant individuals being six to eight percent higher. Furthermore, the tax elasticity is similar across both risk-averse and risk-tolerant individuals. This suggests that tax policies may be effective in deterring alcohol consumption even among those who have a higher propensity for alcohol use. The significance of research on alcohol demand by individuals ages 55 and older is highlighted by the increased potential for alcohol-related adverse consequences among this demographic group. Comparing younger adults (ages 21-54) with older adults, responses to taxes and prices are higher among the older sub-population. The tax elasticity is estimated at -0.05 for younger adults, compared to -0.20 for older adults. |
| JEL: | I1 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13482&r=age |
| By: | Calvo, Esteban; Williamson, John B. |
| Abstract: | While numerous Western countries first experienced cultural rationalization, next economic modernization, and then faced the challenges of population aging and pension policy reform, both Latin America and China, in contrast, are dealing with these challenges in the context of much less developed economies and stronger traditional cultures. In this article we analyze old-age pension reform efforts in eight Latin American countries that have introduced funded defined contribution schemes with individual accounts. We are searching for insights about the potential success of similar reforms being implemented in China. All of these societies are organized primarily around the principles of family, reciprocity, loyalty and poverty. Our analysis suggests that these distinctive characteristics have important implications for the likely success of the reforms currently being implemented in China, particularly in four interrelated areas: coverage, compliance, transparency, and fiscal stability. |
| Keywords: | Pension reform; China; Latin America; Social Security; Culture |
| JEL: | H55 J32 G23 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4872&r=age |