nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒04‒15
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Population Aging and Economic Growth By David E. Bloom; David Canning; Günther Fink
  2. The Retirement Consumption Puzzle: Actual Spending Change in Panel Data By Michael D. Hurd; Susann Rohwedder
  3. Modelling the Economic Effects of Population Ageing By James Giesecke; G.A. Meagher
  4. What is Retirement? A Review and Assessment of Alternative Concepts and Measures By Frank T. Denton; Byron G. Spencer
  5. Health and Labor Supply Dynamics of Older Married Workers By Danilo Cavapozzi
  6. Health effects on labour market exits and entries By García-Gómeza, P; Jones, A.M; Rice, N

  1. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Günther Fink (Harvard School of Public Health)
    Abstract: Between 2000 and 2050, the share of the population aged 60 and over is projected to increase in every country in the world; the same is true for the 80+ population in all but one country (Mali). Worldwide, the largest absolute increases are yet to come. Although labor force participation rates are projected to decline from 2000 to 2040 in most countries, due mainly to changes in their age distributions, labor-force-to-population ratios will actually increase in most countries. This is because low fertility will cause lower youth dependency that is more than enough to offset the skewing of adults toward the older ages at which labor force participation is lower. The increase in labor-force-to-population ratios will be further magnified by increases in age-specific rates of female labor force participation associated with fertility declines. These factors suggest that economic growth will continue apace, notwithstanding the phenomenon of population aging. For the OECD countries, the declines projected to occur in both labor force participation and labor-force-to-population ratios suggest modest declines in the pace of economic growth. But even these effects can be mitigated by behavioral responses to population aging – in the form of higher savings for retirement, greater labor force participation, and increased immigration from labor-surplus to labor-deficit countries. Countries that can facilitate such changes may be able to limit the adverse consequences of population aging. When seen through the lens of several mitigating considerations, there is reason to think that population aging in developed countries may have less effect than some have predicted. In addition, policy responses related to retirement incentives, pension funding methods, investments in health care of the elderly, and immigration can further ameliorate the effect of population aging on economic growth.
    Keywords: demography, growth, aging, population, economy.
    Date: 2008–04
  2. By: Michael D. Hurd; Susann Rohwedder
    Abstract: The simple one-good model of life-cycle consumption requires that consumption be continuous over retirement; yet prior research based on partial measures of consumption or on synthetic panels indicates that spending drops at retirement, a result that has been called the retirement-consumption puzzle. Using panel data on total spending, nondurable spending and food spending, we find that spending declines at small rates over retirement, at rates that could be explained by mechanisms such as the cessation of work-related expenses, unexpected retirement due to a health shock or by the substitution of time for spending. In the low-wealth population where spending did decline at higher rates, the main explanation for the decline appears to be a high rate of early retirement due to poor health. We conclude that at the population level there is no retirement consumption puzzle in our data, and that in subpopulations where there were substantial declines, conventional economic theory can provide the main explanation.
    JEL: D91 J26
    Date: 2008–04
  3. By: James Giesecke; G.A. Meagher
    Abstract: In March 2005, the Productivity Commission released a report on the Economic Implications of an Ageing Australia. The report describes projections for a number of economic variables including population, labour force participation rates, labour supply, employment and hours worked per week. The present paper describes a number of simulations with the MONASH model designed to extend the range of the Commission's earlier analysis. The first is a base case forecast for the Australian economy for the twenty-year period 2004-05 to 2024-25. As far as possible, it is specified so as to maintain consistency with the Commission's projections. The others are alternative forecasts for the same period in which various effects of population ageing have been removed. The alternative forecasts separately identify: (a) a taste effect due to the removal of age-related shifts in the commodity composition of household consumption; (b) a public effect due to the removal of age-related shifts in public consumption; (c) a skill effect due to the removal of age-related shifts in hours of employment distinguished by skill (with total hours of employment unchanged); (d) a scale effect due to the removal of age-related shifts in total hours of employment (with the skill composition of employment unchanged); and (e) a total effect due to the simultaneous removal of all the above age-related shifts. To accommodate the simulations, the MONASH model itself is reconfigured such that labour by qualification group can be converted into labour by occupation according to Constant Elasticity Transformation (CET) functions. Labour by occupation in its turn can be converted into effective units of industry-specific labour according to Constant Elasticity Substitution (CES) functions. Labour of a partcular skill is then distributed between occupations and industries according to relative wage rates. The scheme incorporates 67 qualification groups, 81 occupations (the ASCO minor groups) and 107 industries (the input-output classification).
    Keywords: computable general equilibrium modelling, population ageing, labour market forecasting
    JEL: C53 C68 J11
    Date: 2008–02
  4. By: Frank T. Denton; Byron G. Spencer
    Abstract: Since the concept of retirement is prominent in both popular thinking and academic studies it would be helpful if the notion were analytically sound, could be measured with precision, and would make possible comparisons of patterns of retirement over time and among different populations. This paper reviews and assesses the many concepts and measures that have been proposed, summarizing them in groupings that reflect non-participation or reduced participation in the labour force, receipt of pension income, end-of-career employment, selfassessed retirement, or combinations of those characteristics. It concludes that there is no agreed measure and that no one measure dominates. Instead, new measures continue to be proposed to take account of additional refinements as new data sets become available, thereby further restricting possible comparisons. The confusing array of definitions reflects the practical problem that underlies the concept of retirement: it is an essentially negative notion, a notion of what people are not doing – namely, that they are not working. A more positive approach would be to focus instead on what people are doing, including especially their involvement in non-market activities that are socially productive, even if those activities do not contribute to national income as conventionally measured.
    Keywords: concepts of retirement, measures of retirement
    JEL: J26
    Date: 2008–03
  5. By: Danilo Cavapozzi (University of Padova)
    Abstract: This empirical analysis investigates how the labor supply dynamics of married workers aged 46-65 is influenced by their own health conditions and by those of their cohabiting partners. Exploiting the information conveyed by the European Community Household Panel (1995-2001), our econometric specifications focus on the transition towards not employment within the next year and use alternative health indicators to describe the overall physical and mental conditions of couple members. We also control for partners labor supply because of its close relationship with their own health and the well-documented coordination with the labor market position of the other couple member. Our results show that while healthier individuals present higher chances of remaining at work in the future, living with healthier spouses affects positively the likelihood of ceasing from work. Finally, when the spouse is employed, the probability of keeping on working is estimated to rise. This last result upholds the hypothesis, suggested by the literature, that couple members prefer to spend their time in the same employment status.
    Keywords: Labor supply, health, married workers
    JEL: J26 J14
    Date: 2008–03
  6. By: García-Gómeza, P; Jones, A.M; Rice, N
    Abstract: This paper analyses the role of health on exits out of and entries into employment using data from the first twelve waves of the British Household Panel Survey (1991-2002). We use discretetime duration models to estimate the effect of health on the hazard of becoming non-employed and on the hazard of becoming employed. The results show that general health, measured by a variable that captures health limitations and by a constructed latent health index, affects entries into and exits out of employment; the effects being higher for men than for women. Moreover, results suggest that changes in mental health status influences only the hazard of nonemployment for the stock sample of workers. The results are robust to different definitions of employment, and to the exclusion of older workers from the analysis.
    Keywords: health, health shocks, discrete-time hazard models, employment, BHPS
    JEL: I1 C41 J60
    Date: 2008–03

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