nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒09‒13
four papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Fairness of Public Pensions and Old-Age Poverty By Friedrich Breyer; Stefan Hupfeld
  2. The ageing population and the associated challenges of the Slovenian pension system By Verbic, Miroslav
  3. Demographic Transitions: analyzing the effects of mortality on fertility By Luis Angeles
  4. Human Well-Being over the Life Cycle: Longitudinal Evidence from a 20-Year Panel By Bert G.M. Van Landeghem

  1. By: Friedrich Breyer; Stefan Hupfeld
    Abstract: In several OECD countries, public pay-as-you-go financed pension systems have undergone major reforms in which future retirement benefit promises have been scaled down. A consequence of these reforms is that especially in countries with a tight tax-benefit linkage, the retirement benefit claims of low-income workers might not even exceed the minimum income guarantee which the government provides the aged. Recently, some German politicians have criticized this likely development because it was unjust that persons who have paid contributions over a long working life end up with no higher benefits than people who have never worked or paid any contributions. However, the government defended the current retirement benefit formula with the argument that every Euro paid as contributions had exactly the same value in generating future retirement benefits. But this logic has been questioned recently, e.g. by Breyer and Hupfeld (2007), since the value of a contributed Euro depends on the life expectancy of the individual, which is positively correlated with annual income. In that earlier paper, we introduced the concept of "distributive neutrality", which takes income-group-specific differences in life expectancy into account. The present paper estimates the relationship between annual earnings and life expectancy of German retirees empirically and shows how the formula that links benefits to contributions would have to be modified to achieve distributive neutrality. We compare the new formula to the benefit formulas in other OECD countries and analyze a data set provided by the German Pension Insurance Office on a large cohort of pensioners to find out how the old-age poverty rate would be affected by the proposed change of the benefit formula. Finally, we discuss other possible effects of a change in the benefit formula, especially on the labour supply of different earnings groups.
    Keywords: Social security, life expectancy, poverty, redistribution
    JEL: H55 I38
    Date: 2008
  2. By: Verbic, Miroslav
    Abstract: The article presents an analysis of welfare effects in Slovenia, an analysis of supplementary pension insurance in Slovenia and an analysis of effects of the pension fund deficit on sustainability of Slovenian public finances. Stress was layed upon varying the parameters of the current Slovenian pension system and introducing mandatory supplementary pension insurance in Slovenia. It has been established that while young generations and new generations will lose from the pension reform, even complete implementation of the reform might not be sufficient to compensate unfavourable demographic developments. The volume of supplementary pension saving is insufficient at present in Slovenia to compensate the deterioration of rights from the first pension pillar. Not only is the participation in the (voluntary) second pillar insufficient, but especially the premia are too low. The level of expected deficit of the PAYG-financed state pension fund seems to be worrying, though higher activity level among the elderly would subsequently increase the volume of contributions to the first pension pillar, thus also reducing the state pension fund deficit.
    Keywords: general equilibrium models; PAYG; pension system; supplementary pension saving; sustainability of public finances; Slovenia; welfare analysis
    JEL: H55 C68 G23 J32 D91 D58
    Date: 2008–04
  3. By: Luis Angeles
    Abstract: The e¤ect of mortality reductions on fertility is one of the main mech- anisms stressed by the recent growth literature in order to explain demo- graphic transitions. We analyze the empirical relevance of this mechanism based on the experience of all countries since 1960. We distinguish be- tween the e¤ects on gross and net fertility, take into account the dynamic nature of the relationship and control for alternative explanatory factors and for endogeneity. Our results show that mortality plays a large role in fertility reductions, that the change in fertility behavior comes with a lag of about 10 years and that both net and gross fertility are a¤ected. We …nd comparatively little support for explanations of the demographic transition based on economic development or technological change.
    Keywords: mortality, fertility, demographic transitions, uni…ed growth models.
    Date: 2008–07
  4. By: Bert G.M. Van Landeghem
    Abstract: This paper uses longitudinal data from the German Socioeconomic Panel (GSOEP) to analyze the course of subjective well-being over the life cycle. The long time dimension offers an opportunity to disentangle ageing effects from fixed birth co- hort effects. The paper ¯finds that the U-shaped pattern of life satisfaction over age is less supported in a longitudinal analysis, and that the observed trajectory can vary across model specifications. Moreover, assets and material well-being seem to play an important role in determining the course of satisfaction over life time. The upsurge of happiness after mid-life seems to be more robust to model specifications, which might imply that the latter is inherent to mankind.
    Keywords: subjective well-being, life cycle happiness, ageing, birth cohorts, U-shape, German Socio-Economic Panel
    JEL: C23 I31 J10
    Date: 2008

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