nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒06‒27
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Transfers and Labor Market Behavior of the Elderly in Developing Countries: Theory and Evidence from Vietnam By Chung Tran
  2. How Changes in Social Security Affect Recent Retirement Trends By Alan L. Gustman; Thomas Steinmeier
  3. The Impact of Income on the Weight of Elderly Americans By John Cawley; John R. Moran; Kosali I. Simon
  4. Life-cycle Investing and Leverage: Buying Stock on Margin Can Reduce Retirement Risk By Ian Ayres; Barry J. Nalebuff
  5. Aging, transitional dynamics, and gains from trade By Takumi Naito; Laixun Zhao
  6. Projecting Pension Expenditures in Spain: On Uncertainty, Communication and Transparency By Rafael Domenech; Ángel Melguizo
  7. Trade-off between formal and informal care in Spain By Sergi Jiménez-Martín; Cristina Vilaplana Prieto

  1. By: Chung Tran (Indiana University Bloomington)
    Abstract: In this paper, I analyze the crowding-out effects of public transfers on labor supply of the elderly in the context of developing countries. I argue that the interactions between private transfers received and labor supplied by the elderly affect the opportunity cost of retirement and, therefore, magnify the crowding-out effects of public transfers on the labor supply of the elderly. Using household survey data from Vietnam, I find the evidence supporting this hypothesis. That is, the crowding-out effect is about two times larger when accounting for the endogeneity of private transfers, which is caused by the interactions of private transfers and the labor supply.
    Keywords: Altruism, Crowding-out, Social Security, Retirement, Transfers
    JEL: H31 H55 I38 J14 J22 J28
    Date: 2008–06
  2. By: Alan L. Gustman; Thomas Steinmeier
    Abstract: According to CPS data, men 65 to 69 were about six percentage points less likely to be retired in 2004 than in 1992. CPS and Health and Retirement Study (HRS) data indicate a corresponding difference of 3 percentage points between 1998 and 2004. Simulations with a structural retirement model suggest changes in Social Security rules between 1992 and 2004 increased full time work of 65 to 67 year old married men by a little under 2 percentage points, about a 9 percent increase, and increased their labor force participation by between 1.4 and 2.2 percentage points, or 2 to 4 percent, depending on age. Social Security changes account for about one sixth of the increase in labor force participation between 1998 and 2004, for married men ages 65 to 67. These rule changes encourage deferring retirement from long term jobs, returning to full time work after retiring, and increasing partial retirement. Although married men in their fifties decrease their participation in the labor force over this period, this is not due to changes in Social Security, but may reflect other factors, including changes in disability.
    JEL: D31 D91 E21 H55 I3 J08 J14 J26 J32 J38
    Date: 2008–06
  3. By: John Cawley; John R. Moran; Kosali I. Simon
    Abstract: This paper tests whether income affects the body weight and clinical weight classification of elderly Americans using a natural experiment that led otherwise identical retirees to receive significantly different Social Security payments based on their year of birth. We exploit this natural experiment by estimating models of instrumental variables using data from the National Health Interview Surveys. The model estimates rule out even moderate effects of income on weight and on the probability of being underweight or obese, especially for men.
    JEL: H55 I1 I12 I38 J14 J26
    Date: 2008–06
  4. By: Ian Ayres; Barry J. Nalebuff
    Abstract: By employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time. Using stock data going back to 1871, we show that buying stock on margin when young combined with more conservative investments when older stochastically dominates standard investment strategies?both traditional life-cycle investments and 100%-stock investments. The expected retirement wealth is 90% higher compared to life-cycle funds and 19% higher compared to 100% stock investments. The expected gain would allow workers to retire almost six years earlier or extend their standard of living during retirement by 27 years.
    JEL: D33 G1 G11 G18 H55
    Date: 2008–06
  5. By: Takumi Naito (Tokyo Institute of Technology); Laixun Zhao (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: We formulate a two-country, two-good, two-factor, two-period-lived overlapping generations model to examine how population aging determines the pattern of and gains from trade. We obtain two main results. First, the aging country endogenously becomes a small country exporting the capital-intensive good, whereas the younger country endogenously dominates the world economy determining the world prices, in the free trade steady state. Second, although uncompensated free trade cannot be Pareto superior to autarky, there exists a compensation scheme applied within each country such that free trade is Pareto superior to autarky.
    Keywords: Aging and trade, Gains from trade, Overlapping generations model, Transitional dynamics, Compensation scheme
    JEL: F43 J11 O41
    Date: 2008–01
  6. By: Rafael Domenech (University of Valencia); Ángel Melguizo (BBVA Research Department)
    Abstract: In this paper we suggest a set of indicators about the future performance of the Spanish public pension system and a suitable method of representing their uncertainty, in order to improve the communication to the public opinion about its main future challenges. Spain seems a particularly interesting case in Europe to illustrate our proposals, since the social security system has been in surplus for nine consecutive years, in sharp contrast to the projections made just a decade ago, but, at the same time, most projections foresee for Spain one of the highest increases in public expenditure among EU countries due to ageing. We argue that simple, transparent, credible, public and periodic indicators, which take explicitly into account the uncertainty about future demographic, economic and institutional developments, may contribute to improve the debate on the policies needed to strengthen the pension system.
    Keywords: pensions, projections, communication, uncertainty
    JEL: E17 H55
    Date: 2008–06
  7. By: Sergi Jiménez-Martín; Cristina Vilaplana Prieto
    Abstract: The remarkable growth of older population has moved long term care to the front ranks of the social policy agenda. Understanding the factors that determine the type and amount of formal care is important for predicting use in the future and developing long-term policy. In this context we jointly analyze the choice of care (formal, informal, both together or none) as well as the number of hours of care received. Given that the number of hours of care is not independent of the type of care received, we estimate, for the first time in this area of research, a sample selection model with the particularity that the first step is a multinomial logit model. With regard to the debate about complementarity or substitutability between formal and informal care, our results indicate that formal care acts as a reinforcement of the family care in certain cases: for very old care receivers, in those cases in which the individual has multiple disabilities, when many care hours are provided, and in case of mental illness and/or dementia. There exist substantial differences in long term care addressed to younger and older dependent people and dependent women are in risk of becoming more vulnerable to the shortage of informal caregivers in the future. Finally, we have documented that there are great disparities in the availability of public social care across regions.
    Keywords: Formal care, informal care, caregiver, dependent
    JEL: I1 J14
    Date: 2008–06

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