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on Economics of Ageing |
| By: | Stephan Kühntopf (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) |
| Abstract: | The public pension system in Germany allows early retirement albeit at the cost of pension deductions. Deductions are calculated under the assumption that life expectancy is indepen-dent of the age of retirement and apply equally for men and women. The "fair" amount of deductions is currently debated, the general feeling being that they are too low. In this paper we show that remaining lifetime and thus the perpetuity period vary with the age of retirement. In a survival analysis using micro data from the German Pension Insurance, we find that remaining life expectancy of men at age 65 receiving old-age pensions with age 60 to 66 is up to 1.9 years higher if retirement occurred later. For women, instead, life expec-tancy is almost independent of retirement age. Extending the analysis to invalidity pensioners (they receive pensions before the age of 60), we find that men and women reaching the age of 65 have a more than 3 years lower remaining life expectancy than old-age pensioners on average. Many other variables, like residence (West and East Germany), lifetime wage in-come and number of children are considered, too. In a simple model we finally calculate and compare actuarial deductions under the alternative assumptions of constant and age-of-retirement dependent life expectancy. The main conclusion is that deductions currently in law are too high for very early retirees (below age 63) and too low for all others. |
| Keywords: | Life expectancy, retirement age, early retirement, pension deductions |
| JEL: | H55 J14 J26 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:85&r=age |
| By: | John Bound (University of Michigan); Todd Stinebrickner (University of Western Ontario); Timothy Waidmann (The Urban Institute) |
| 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 or 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. |
| Keywords: | retirement behavior; disability insurance; social security; dynamic programming, latent Variable models |
| JEL: | C15 C61 H55 J14 J26 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:epuwoc:20076&r=age |
| By: | Julie Zissimopoulos (RAND); Nicole Maestas (RAND); Lynn Karoly (RAND) |
| Abstract: | In this paper, we examine how public and private pension and health insurance systems affect the retirement transitions. In many countries, public and private pension eligibility, as well as access to health insurance varies between self-employed and wage and salary workers, and these differences are likely to cause differential retirement patterns both within and across countries. We use the variation in these institutional features within and across the United States and England to analyze retirement patterns. Based on longitudinal data from the Health and Retirement Study (HRS) in the United States and the English Longitudinal Survey of Ageing (ELSA) we find that the higher labor force exit rate of wage and salary workers compared to self-employed workers is due to defined benefit pension incentives created by the public and private pension systems. Higher rates of labor force exit at ages 55 and older in England compared to the United States are due in part to the availability of publicly provided health insurance. |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp155&r=age |
| By: | David Wildasin (Martin School of Public Policy and Administration and Department of Economics, University of Kentucky) |
| Abstract: | The rich countries of the world, especially those of Western Europe, are aging rapidly due to fertility rates far below the replacement rate, while experiencing substantial immigration from elsewhere in Europe, North Africa, and the third world generally. For the foreseeable future, West European countries will confront a policy tradeoff between population aging and (im)migration. The literature shows that both skilled and unskilled workers affect the highly redistributive fiscal systems of the advanced economies, the first as net contributors, the second as net beneficiaries. Age-imbalanced population structures in rich countries and global competition for labor create incentives to limit the extent of redistribution in rich countries. |
| Keywords: | Aging, Public Pensions, Migration, Fiscal Adjustment |
| JEL: | H0 F2 J61 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ifr:wpaper:2008-02&r=age |
| By: | Nicole Maestas (RAND); Xiaoyan Li (RAND) |
| Abstract: | We introduce the process of psychological burnout and recovery as an explanation for the phenomenon known as unretirement. We illustrate theoretically how predictable time variation in burnout could generate retirement and subsequent re-entry in a standard retirement model. We apply this model to the longitudinal Health and Retirement Study, presenting a novel measure of burnout, the Burnout EX3 Index. The index is correlated with different types of work stressors, and its time profile discriminates among different types of retirees. For example, prior to retirement, burnout rises steeply for future unretirees then falls rapidly after retirement; whereas burnout among future partial retirees is low and changes little over time. Using a series of econometric models derived from our theoretical model, we show that as burnout rises, retirement becomes more probable, and as burnout recedes following retirement, re-entry becomes more probable. While access to public and private pension benefits increases the likelihood of retirement for all retirees, pension accruals are least important for those who will later unretire, suggesting that unretirees are more willing to trade future gains in pension wealth for leisure than other retirees. Indeed, for this group, the effect of burnout dominates that of the net return to work. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp166&r=age |
| By: | John Laitner (University of Michigan); Dan Silverman (University of Michigan) |
| Abstract: | After dropping for a century, the average retirement age for U.S. males seems to have leveled off in recent decades. An important question is whether as future improvements in technology cause wages to rise, desired retirement ages will resume their downward trend, or not. This paper attempts to use HRS panel data to test how relatively high (or low) earnings affect male retirement ages. Our goal is to use cross-sectional earning differences to help anticipate likely time-series developments in coming decades. Our preliminary regression results show that higher earnings do lead to somewhat earlier retirement. Unless additional analysis changes the parameter estimates, the implication is that the downward trend in male retirement ages will ultimately return. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp165&r=age |
| By: | Eric French (Federal Reserve Bank of Chicago); John Bailey Jones (SUNY-Albany) |
| Abstract: | This paper provides an empirical analysis of the effect of employer-provided health insurance and Medicare in determining retirement behavior. Using data from the Health and Retirement Study, we estimate the first dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that uncertainty and saving are both important. We find that workers value health insurance well in excess of its actuarial cost, and that access to health insurance has a significant effect on retirement behavior, which is consistent with the empirical evidence. As a result, shifting the Medicare eligibility age to 67 would cause a significant retirement delay--as large as the delay from shifting the Social Security normal retirement age from 65 to 67. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp170&r=age |
| By: | Martin Farnham (University of Victoria); Purvi Sevak (Hunter College) |
| Abstract: | We use data from the Health and Retirement Study (HRS) and the Office of Housing Enterprise Oversight to measure the effect of changes in housing wealth on retirement timing. Using cross-MSA variation in house-price movements to identify wealth effects on retirement timing, we find evidence that such wealth effects are present. According to some specifications the rate of transition into retirement increases in the presence of positive housing wealth shocks. In addition, we use data on expected age of retirement to measure the impact of housing wealth shocks on expectations about retirement timing. Using renters as a control for heterogeneity in local amenities and using individual fixed effects to control for unobserved individual heterogeneity, we find that a 10% increase in housing wealth is associated with a reduction in expected retirement age of between 3.5 and 5 months. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp172&r=age |
| By: | Purvi Sevak (Hunter College); Lucie Schmidt (Williams College) |
| Abstract: | Existing literature suggests that immigrants receive lower wages than U.S.-born workers with similar characteristics. This could imply that immigrant households would enter retirement at a significant financial disadvantage. In this paper, we examine the retirement resources available to immigrant families by examining Social Security benefits, pension coverage, and private wealth accumulation. Our results suggest that although immigrant families may be financially better-off in the U.S. than in their native countries, they do enter retirement at a significant financial disadvantage relative to native born households with similar characteristics. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp169&r=age |
| By: | John Bound (University of Michigan); Timothy Waidmann (The Urban Institute) |
| Abstract: | We estimate the magnitude of any direct effect of retirement on health. Since retirement is endogenous to heath, it is not possible to estimate this effect by comparing the health of individuals before and after they retire. As an alternative we use institutional features of the pension system in the United Kingdom that are exogenous to the individual to isolate exogenous variation in retirement behavior. Data used will include both vital statistics and survey data that include both "objective" physical measurements and respondent self-reports. We find no evidence of negative health effects of retirement and some evidence that there may be a positive effect, at least for men. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp168&r=age |