nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒01‒05
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. What Determines the Demand for Occupational Pensions in Germany? By Kathrin Dummann
  2. Retirement in Australia: A Closer Look at the Financial Incentives By Diana Warren; Umut Oguzoglu
  3. Health, Economic Resources and the Work Decisions of Older Men By John Bound; Todd Stinebrickner; Timothy Waidmann
  4. Pensionsverpflichtungen: Ein unternehmerischer Risikofaktor? By Stefan Hubrich; Thusnelda Tivig; Hans-Dieter Stubben
  5. Net Worth and Housing Equity in Retirement By Todd Sinai; Nicholas S. Souleles
  6. The strategic bequest motive: evidence from SHARE By Viola Angelini
  7. A closer look at the relationship between life expectancy and economic growth By Raouf, BOUCEKKINE; Bity, DIENE; ThŽophile, AZOMAHOU
  8. "The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low" By R. Anton Braun; Daisuke Ikeda; Douglas H. Joines
  9. Aging and Death under a Dollar a Day By Abhijit V. Banerjee; Esther Duflo
  10. Birth-Cohort Projections of the Spanish Participation Rate By Pilar Cuadrado; Aitor Lacuesta; José María Martínez; Eduardo Pérez

  1. By: Kathrin Dummann
    Abstract: Demographic change causes an undersupply of financial old age benefits within the statutory pay-as-you-go pension system in Germany. Therefore, the provision of occupational as well as private pensions has to be enhanced. However, there seems to be an undersupply of occupational pension provision particularly in small and medium sized enterprises (SMEs). Using survey data of the German Socio-Economic Panel (GSOEP) and the German SAVE survey, the present paper studies econometrically the determinants of occupational pension provision in Germany. It shows that occupational pensions depend not only on supply-side factors such as firm size and industry, but also on demand-side factors such as individual socio-demographic attributes and people’s savings motives.
    Keywords: Occupational Pensions, Retirement Provision, Demographic Change, SMEs
    JEL: C25 G23 J14
    Date: 2007
  2. By: Diana Warren (Institute of Applied Economic and Social Research, The University of Melbourne); Umut Oguzoglu (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: In Australia, labour force participation among older people, particularly men over the age of 55, has been declining over the last 30 years. Previous research has found that in many OECD countries, the retirement income system actually provides incentives for older workers to retire early rather than remain in the work force. We use data from the first five waves of the Household, Income and Labour Dynamics in Australia (HILDA) survey to identify any financial incentives present in the Australian retirement income system. Following Gruber & Wise (2004), we model retirement behaviour where individuals retire in the period that the present value of their lifetime retirement income is maximised. We also utilise an option value model that considers the trade-off between utility drawn from leisure and utility drawn from labour income. Our findings suggest that for men the Australian retirement system provides incentives to retire early, while for women financial incentives are less significant, as the factors that influence women’s retirement behaviour are more commonly found to be family related, rather than financial incentives.
    Date: 2007–08
  3. By: John Bound; Todd Stinebrickner; Timothy Waidmann
    Abstract: In this paper, we specify a dynamic programming model that addresses the interplay among health, financial resources, and the labor market behavior of men in the later part of their working lives. Unlike previous work which has typically used self reported health of disability status as a proxy for health status, we model health as a latent variable, using self reported disability status as an indicator of this latent construct. Our model is explicitly designed to account for the possibility that the reporting of disability may be endogenous to the labor market behavior we are studying. The model is estimated using data from the Health and Retirement Study. We compare results based on our model to results based on models that treat health in the typical way, and find large differences in the estimated effect of health on behavior. While estimates based on our model suggest that health has a large impact on behavior, the estimates suggest a substantially smaller role for health than we find when using standard techniques. We use our model to simulate the impact on behavior of raising the normal retirement age, eliminating early retirement altogether and eliminating the Social Security Disability Insurance program.
    JEL: J14 J22 J26
    Date: 2007–11
  4. By: Stefan Hubrich (University of Rostock and Rostock Centre for the Study of Demographic Change, Germany); Thusnelda Tivig (University of Rostock and Rostock Centre for the Study of Demographic Change, Germany); Hans-Dieter Stubben (Bundes-Versorgungs-Werk GmbH, Hamburg)
    Abstract: Das Eingehen von Pensionsverpflichtungen ist für Unternehmen mit vielfältigen Risiken verbunden. In diesem Papier werden am Beispiel der Pensionszusage die Auswirkungen zweier Risikofaktoren auf die Pensionsrückstellungen von Unternehmen untersucht: Des vorzeitigen Rentenbezugs und des für die Steuerbilanzierung gesetzlich festgelegten Rechnungszinses gemäß § 6a EStG. Ausgangspunkt der Überlegungen bildet die Fragestellung, ob die gesetzlich zulässigen Pensionsrückstellungen auch den tatsächlichen Kostenaufwand aus Betriebsrenten abbilden. Dazu wird ein erstes Grundmodell zur Bestimmung von Pensionsrückstellungen entwickelt, auf dessen Basis für konkrete Annahmeszenarien Berechnungen durchgeführt werden. Es zeigt sich, dass ein vorzeitiger Rentenzugang mit 62 Jahren mit Einsparungen, ein Rentenzugang ab 65 Jahren hingegen mit Mehrkosten verbunden ist. Werden die Pensionsrückstellungen auf Basis der neuen Heubeck'schen Richttafeln 2005G(C) durchgeführt, so konnte eine angemessene Berücksichtigung demografischer Veränderungen festgestellt werden. Allerdings ist davon auszugehen, dass die gebildeten Pensionsrückstellungen unter Maßgabe des Rechnungszinses nach §6a EStG zu einer Unterbewertung des tatsächlichen Kostenaufwandes für Betriebsrenten von bis zu 30 Prozent führen. Vor dem Hintergrund dieser Ergebnisse werden schließlich alternative Möglichkeiten der Ausfinanzierung von Pensionszusagen beleuchtet. Pension accruals are linked to several risks for companies. In this paper we discuss two risk factors, taking pension promises as an example: Early retirement and the legal discount rate. As a starting point we ask whether statutory accruals correctly reflect the costs companies incur with pension promises. In a basic actuarial framework we first investigate the influence of the age of retirement on costs, taking into account that later retirement seems to go along with higher life expectancy. Then we investigate the cost effect of an actuarial discount rate that differs from the one stipulated by § 6a EStG. Our results show that early retirement (at age 62) leads to a cost reduction, whereas late retirement (at age 65and above) increases pension costs. If statutory accruals for pensions are calculated based on the new 2005 G Heubeck(c) tables, differential mortality seem quite well considered. Regarding differences in the discount rate, imposition of the statutory calculation rate according to § 6a EStG could imply an undervaluation of around 30 percent of real pension costs for companies. Given this result, we finally consider some alternative ways for companies to finance their pension promises.
    Keywords: Betriebliche Altersversorgung, Frühverrentung, Lebenserwartung, Pensionsrückstellung, Rechnungszins, Renteneintrittsalter, Rentenversicherung. occupational pension, early retirement, life expectancy, reserve for pensions, discount rate, age of retirement, pension insurance
    JEL: G18 G22 G23
    Date: 2007
  5. By: Todd Sinai; Nicholas S. Souleles
    Abstract: This paper documents the trends in the life-cycle profiles of net worth and housing equity between 1983 and 2004. The net worth of older households significantly increased during the housing boom of recent years. However, net worth grew by more than housing equity, in part because other assets also appreciated at the same time. Moreover, the younger elderly offset rising house prices by increasing their housing debt, and used some of the proceeds to invest in other assets. We also consider how much of their housing equity older households can actually tap, using reverse mortgages. This fraction is lower at younger ages, such that young retirees can consume less than half of their housing equity. These results imply that 'consumable' net worth is smaller than standard calculations of net worth.
    JEL: E21 G11 G21 J14 R21
    Date: 2007–12
  6. By: Viola Angelini (University of Padua)
    Abstract: This paper examines whether the empirical evidence supports the strategic bequest motive, as opposed to pure altruism, using SHARE data on ten European countries. The availability of internationally comparable data, as in SHARE, allows exploiting the cross-country variability in inheritance laws and cultural backgrounds to identify the operation of a strategic bequest motive determining the attention that adult children provide to their elderly parents.
    Keywords: intergenerational transfers, strategic bequest, inheritance laws, multiple imputation.
    JEL: D12 J14
    Date: 2007
  7. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Bity, DIENE; ThŽophile, AZOMAHOU
    Abstract: We first provide a nonparametric inference of the relationship between life expectancy and economic growth on an historical data for 18 countries over the period 1820-2005. The obtained shape shows up convexity for low enough values of life expectancy and concavity for large enough values. We then study this relationship on a benchmark model combining Òperpetual youthÓ and learning-by-investing. In such a benchmark, the generated relationship between life expectancy and economic growth is shown to be strictly increasing and concave. We finally examine a model departing from Òperpetual youthÓ by assuming age-dependent survival probabilities. We show that life-cycle behavior combined with age-dependent survival laws can reproduce our empirical finding.
    Keywords: Life expectancy, economic growth, perpetual youth, age-dependent mortality, nonparametric estimation
    JEL: O41 I20 J10
    Date: 2007–12–14
  8. By: R. Anton Braun (Faculty of Economics, University of Tokyo); Daisuke Ikeda (Northwestern University and Bank of Japan); Douglas H. Joines (Department of Finance and Business Economics, Marshall School of Business, University of Southern California)
    Abstract: During the 1990s, Japan began experiencing demographic changes that are larger and more rapid than in other OECD countries. These demographic changes will become even more pronounced in future years. We are interested in understanding the role of lower fertility rates and aging for the evolution of Japan's saving rate. We use a computable general equilibrium model to analyze the response of the national saving rate to changes in demographics and total factor productivity. In our model aging accounts for 2 to 3 percentage points of the 9 percent decline in the Japanese national saving rate between 1990 and 2000 and persistently depresses Japan's national saving rate in future years.
    Date: 2007–12
  9. By: Abhijit V. Banerjee; Esther Duflo
    Abstract: This paper uses household survey data form several developing countries to investigate whether the poor (defined as those living under $1 or $2 dollars a day at PPP) and the non poor have different mortality rates in old age. We construct a proxy measure of longevity, which is the probability that an adult's mother and father are alive. The non-poor's mothers are more likely to be alive than the poor's mothers. Using panel data set for Indonesia and Vietnam, we also find that older adults are significantly more likely to have died five years later if they are poor. The direction of causality is unclear: the poor may be poor because they are sick (and thus more likely to die), or they could die because they are poor.
    JEL: I12 I32 O12 O15
    Date: 2007–12
  10. By: Pilar Cuadrado (Banco de España); Aitor Lacuesta (Banco de España); José María Martínez (Banco de España); Eduardo Pérez (Banco de España)
    Abstract: This paper develops a projection of the Spanish aggregate participation rate between 2004 and 2020. We construct independent projections by nationality and gender using micro-data from the Labour Force Survey (1977-2004). When estimating the participation of individuals with Spanish citizenship we consider the impact of the NAIRU, changes attributed to the birth cohort and both the age and the educational attainment distributions. When estimating the participation rate of immigrants, we consider their age distribution as long as their recent changes in terms of the origin country composition. Moreover, for female immigrants we also consider their birth cohort. As a result, we find that changes in the participation rate of males and females due to belonging to different birth cohorts are vanishing over time. On the other hand, the change in the composition of immigrants appears to be a factor that could perpetuate over time a little bit longer. In aggregate terms, the educational upgrade of the population and the continuous increase in the participation of females compensate the aging of the population to keep the growth, although at a lower speed, of the participation rate within the whole considered period.
    Keywords: capital humano, inmigración, proyecciones demográficas, tasa de actividad
    JEL: J00
    Date: 2007–10

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