nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒11‒04
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Premise to the Rostock debate on demographic change "Should governments in Europe push much more aggressively for gender equality to raise fertility?" By Laura Bernardi; Pascal Hetze
  2. CAPP_DYN: A Dynamic Microsimulation Model for the Italian Social Security System By Carlo Mazzaferro; Marcello Morciano
  3. Regularities and deviations in mortality trends of the developed world By Elisabetta Barbi
  4. Economic Well-being and Poverty among the Elderly: an Analysis Based on a Collective Consumption Model By Laurens Cherchye; Bram De Rock; Frederic Vermeulen
  5. Who Really Benefits from Pension Systems? By Christophe Hachon
  6. Sharing Demographic Risk – Who is Afraid of the Baby Bust? By Alexander Ludwig; Michael Reiter
  7. Exogenous determinants of early-life conditions, and mortality later in life By Gerard J. van den Berg; Gabriele Doblhammer-Reiter; Kaare Christensen
  8. Beyond the Kannisto-Thatcher Database on Old Age Mortality: an assessment of data quality at advanced ages By Dmitri A. Jdanov; Domantas Jasilionis; Eugeny Soroko; Roland Rau; James W. Vaupel
  9. Voluntary Private Health Care Insurance Among the Over Fifties in Europe: A Comparative Analysis of SHARE Data By Omar Paccagnella; Vincenzo Rebba; Guglielmo Weber
  10. The Sustainability of European Health Care Systems: Beyond Income and Ageing By Fabio Pammolli; Massimo Riccaboni; Laura Magazzini
  11. Inequality and Social Security Reforms By Jean-Olivier Hairault; François Langot
  12. Do Redistributive Pension Systems Increase Inequalities and Welfare? By Christophe Hachon
  13. Do Red Herrings Swim in Circles? – Controlling for the Endogeneity of Time to Death By Stefan Felder; Andreas Werblow; Peter Zweifel

  1. By: Laura Bernardi (Max Planck Institute for Demographic Research, Rostock, Germany); Pascal Hetze
    Abstract: -
    JEL: J1 Z0
    Date: 2008–01
  2. By: Carlo Mazzaferro; Marcello Morciano
    Abstract: We present the technical structure of CAPP_DYN, a population based dynamic microsimulation model for the analysis of long term redistributive effects of social policies, developed at CAPP (Centro di Analisi delle Politiche Pubbliche) to study the intergenerational and the intragenerational redistributive effects of reforms in the social security system. The model simulates probabilistically the socio-demographic and economic evolution of a representative sample of the Italian population for the period 2005-2050. After a short review of the existing similar models for the Italian economy, a rather detailed analysis and discussion of the functioning of the model as well as a description of estimation procedures employed in each single module of the models is offered.
    Keywords: Dynamic microsimulation; lifetime and intragenerational redistribution; social security systems
    JEL: C51 C52 H55
    Date: 2008–09
  3. By: Elisabetta Barbi (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: By the second half of the 20th century, mortality patterns in industrialized countries showed a continuous tendency of reduction at all ages, even at the oldest ones. However, the pace of mortality decline considerably varies depending on the country. Furthermore, in a few cases, stagnation and even an unexpected reversed pattern have been observed in more recent years. In this paper a comparative analysis of mortality trends in several developed countries is performed. The aim of the paper is to locate deviations from expected mortality patterns, and to understand the reasons for these deviations. As a first step of the analysis, a new two-dimensional relational model is applied to mortality surfaces of the selected developed countries, between 1960 and 1999, for the age range 50-99. In the second step, mortality by cause of the countries with particular structural features is analyzed through the surfaces of leading causes of death.
    Keywords: mortality trends
    JEL: J1 Z0
    Date: 2008–03
  4. By: Laurens Cherchye; Bram De Rock; Frederic Vermeulen
    Abstract: We apply the collective consumption model of Browning, Chiappori and Lewbel (2006) to analyse economic well-being and poverty among the elderly. The model focuses on individual preferences, a consumption technology that captures the economies of scale of living in a couple, and a sharing rule that governs the intra-household allocation of resources. The model is applied to a time series of Dutch consumption expenditure surveys. Our empirical results indicate substantial economies of scale and a wife's share that is increasing in total expenditures. We further calculated poverty rates by means of the collective consumption model. Collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale. Poverty among women (men) in elderly couples, however, seems to be heavily underestimated (overestimated) by the traditional approach. Finally, we analysed the impact of becoming a widow(er). Based on cross-sectional evidence, we find that the drop (increase) in material well-being following the husband's death is substantial for women in high (low) expenditure couples. For men, the picture is reversed.
    Keywords: collective model, intra-household allocation, indi¤erence scales, economies of scale, poverty
    JEL: D11 D12 D13 D63 I31
    Date: 2008
  5. By: Christophe Hachon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: A growing empirical literature shows that life expectancy depends on the wage level. Using an overlapping generations model with a small open economy, we explain why this result can change theredistributive properties of unfunded pension systems. We use the concept of "net contribution" to measure this redistributivity of pension systems. We show that Beveridgian pension systems remainprogressive. However, the poorest do not necessarily benefit the most from pension systems. For Bismarkian pension systems, net contributions are regressive. It means that poor agents pay morefor the pension system than they receive from it. Conversely, rich agents receive more from the pension system than they pay for it. For mixed pension systems, it is possible that collected resources are redistributed in favour of the ends of the distribution of wages.
    Keywords: Pension system; inequality; length of life; netcontribution
    Date: 2008–05–14
  6. By: Alexander Ludwig; Michael Reiter (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: We model the optimal reaction of a public PAYG pension system to demographic shocks. We compare the ex-ante first best and second best solution of a Ramsey planner with full commitment to the outcome under simple third best rules that mimic the pension systems observed in the real world. The model, in particular the pension system, is calibrated to the German economy. The objective of the social planner is calibrated such that the size of the German pension system was optimal under the economic and demographic conditions of the 1960s. We find that the German system comes relatively close to the second-best solution, especially when labor market distortions are correctly modelled. Furthermore, the German system and a constant contribution rate lead to a lower variability of lifetime utility than does the second best policy. The recent baby-boom/baby-bust cycle leads to welfare losses of about 5% of lifetime consumption for some cohorts. We argue that it is crucial for these results to model correctly the labor market distortions arising from the pension system.
    JEL: E62 H3 H55
    Date: 2008–10–30
  7. By: Gerard J. van den Berg; Gabriele Doblhammer-Reiter (Max Planck Institute for Demographic Research, Rostock, Germany); Kaare Christensen
    Abstract: We analyze causal effects of conditions early in life on the individual mortality rate later in life. Conditions early in life are captured by transitory features of the macro environment around birth, notably the state of the business cycle around birth, but also food price deviations, weather indicators, and demographic indicators. We argue that these features can only affect high-age mortality by way of the individual early-life conditions. Moreover, they are exogenous from the individual point of view, which is a methodological advantage compared to the use of unique characteristics of the newborn individual or his family or household as early-life indicators. We collected national annual time-series data on the above-mentioned indicators, and we combine these to the individual data records from the Danish Twin Registry covering births in 1873-1906. The empirical analyses (mostly based on the estimation of duration models) indicate a significant negative causal effect of economic conditions early in life on individual mortality rates at higher ages. If the national economic performance in the year of birth exceeds its trend value (i.e., if the business cycle is favorable) then the mortality rate later in life is lower. The implied effect on the median lifetime of those who survive until age 35 is about 10 months. A systematic empirical exploration of all macro indicators reveals that economic conditions in the first years after birth also affect mortality rates later in life.
    JEL: J1 Z0
    Date: 2008–04
  8. By: Dmitri A. Jdanov (Max Planck Institute for Demographic Research, Rostock, Germany); Domantas Jasilionis (Max Planck Institute for Demographic Research, Rostock, Germany); Eugeny Soroko (Max Planck Institute for Demographic Research, Rostock, Germany); Roland Rau (Max Planck Institute for Demographic Research, Rostock, Germany); James W. Vaupel (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: The old age population in developed countries has been increasing remarkably, yet internationally comparable high quality data on oldest-old mortality remain relatively scarce. The Kannisto-Thatcher Old Age Mortality Database (KTD) is a unique source providing uniformly recalculated old-age mortality data for 35 countries. Our study addresses a number of data quality issues relevant to population and death statistics at the most advanced ages. Following previous studies by Väinö Kannisto, we apply the same set of measures. This allows us to identify dubious or irregular mortality patterns. Deviations such as this often suggest that the data quality has serious problems. We update previously published findings by extending the analyses made so far to thirty five countries and by adding data on longer historical periods. In addition, we propose a systematic classification of country- and period-specific data, thus simultaneously accounting for each indicator of data quality. We apply conventional procedures of hierarchical cluster analysis to distinguish four data quality clusters (best data quality, acceptable data quality, conditionally acceptable quality, and weak quality). We show that the reliability of old-age mortality estimates has been improving in time. However, the mortality indicators for the most advanced ages of a number of countries, such as Chile, Canada, and the USA should be treated with caution even for the most recent decade. Canada, Ireland, Finland, Lithuania, New Zealand (Non-Maori), Norway, Portugal, Spain, and the USA have particular problems in their historical data series. After having compared the KTD with official data, we conclude that the methods used for extinct and almost extinct generations produce more accurate population estimates than those published by national statistical offices. The most reliable official data come from the countries with fully functioning population registers.
    Keywords: World, data evaluation, mortality, old age
    JEL: J1 Z0
    Date: 2008–03
  9. By: Omar Paccagnella (University of Padua); Vincenzo Rebba (University of Padua); Guglielmo Weber (University of Padua)
    Abstract: Using data from SHARE (Survey of Health, Ageing and Retirement in Europe), we analyze the effect of having a voluntary health insurance policy (VPHI) on out-of-pocket (OOP) health spending for individuals aged 50 or more in a host of European countries. We control for self selection into VPHI policy holding, and find that VPHI policy holders do not have lower OOP's than the rest of the population. In Southern European countries and Austria they even spend more. We also find that the main determinants of VPHI are different in each country and this reflects the differences in the underlying health care systems.
    Date: 2008–10
  10. By: Fabio Pammolli (Corresponding author, IMT Lucca Institute for Advanced Studies, Lucca, Italy, and Fondazione CERM, Roma, Italy); Massimo Riccaboni; Laura Magazzini
    Abstract: During the last thirty years health care expenditure (HCE) has been growing much more rapidly than GDP in all OECD countries posing increasing concern on the long-term sustainability of current trends. Against this background, we look at the determinants of HCE in European countries, explicitly taking into account the role of income, the effect of ageing population, life habits, technological progress, as well as institutional and budgetary variables. Our results show that the current trend of increasing HCE is rooted in a set of highly differentiated factors. Ageing population is usually regarded as a key driver of HCE in Europe. However, increased life expectancy and decreased fertility rate only tells part of the story. Increased income levels also lead to higher HCE, and the magnitude of the estimated elasticity poses serious concerns about sustainability of current trends. Besides, our results show the deep influence of technological uptake and diffusion, as well as the institutional framework and budget constraints as important factors in explaining HCE growth dynamics. We further control for health habits of the population by looking at the consumption of sugar and of fruits and vegetables. Our results reinforce the need for a political debate at the European level aimed at assuring long-term sustainability and prosperity. The key challenge for Governments is to design pluralistic systems of health care delivery and financing, where a well-balanced mix of public and private financing would put at work market forces to promote investment and innovation, without imposing unsustainable burdens on public budgets or denying care to the disadvantaged population.
    Keywords: health care expenditure, sustainability, ageing population, income elasticity, welfare
    JEL: H51
    Date: 2008–10
  11. By: Jean-Olivier Hairault (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); François Langot (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris)
    Abstract: This paper develops a quantitative Markovian overlapping generations model with altruistic individuals and incomplete financial markets in order to analyze the long-run distributional implications of two hypothetical public social security policy changes, made in response to impending future demographic shifts. The two policy changes considered are first, raising the tax rate while keeping the replacement rate constant and second, keeping the tax rate constant while lowering the replacement rate. Whereas this latter policy is detrimental to the relative situation of the retirees, the huge financial heterogeneity in the first scenario explains why the increase in the proportional labor tax is relatively badly absorbed by low-productivity workers, leading to an increase in welfare inequality. We show that the very popular idea that a more funded system would ineluctably lead to more inequalities in well-being can be justified only by focusing on the inequality of positions in case of general equilibrium.
    Keywords: Inequality, social security reform, idiosyncratic uncer-tainty, incomplete markets, altruism
    Date: 2008
  12. By: Christophe Hachon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Using a capital-skill complementarity technology, we analytically show that an increase in the direct redistributivity of Pay-As-You-Go (PAYG) pension systems has a positive impact on wages and on wage inequalities. We also show that life expectancyinequalities play an important role in the achievement of these results. Then, we calibrate our model and we and that, if life expectancy inequalities are suffciently high, a more redistributive pension system increases the wealth and the welfare of every agent of the economy. Moreover, such a policy decreases the tax rate of the pension system.
    Keywords: Inequality, Pension System, Redistribution, Capital-Skill Complementarity
    Date: 2008–06–04
  13. By: Stefan Felder; Andreas Werblow; Peter Zweifel
    Abstract: Studies on the effect of ageing on health care expenditures (HCE) have revealed the importance of controlling for time-to-death (TTD). These studies, however, are subject to possible endogeneity if HCE influences remaining life expectancy.This paper introduces a ten year observational period on monthly HCE, socioeconomic characteristics, and survivor status to first predict TTD and then uses predicted values of TTD as an instrument in the regression for HCE.While exogeneity of TTD has to be rejected, core results concerning the role of TTD rather than age as a determinant of HCE (the “red herring” hypothesis) are confirmed.
    Keywords: Health care expenditure, proximity to death, ageing, “red herring” hypothesis
    JEL: I10 D12
    Date: 2008–10

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