nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒11‒18
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Economic and Demographic Transition, Mortality, and Comparative Development By Matteo Cervellati; Uwe Sunde
  2. The Housing Crash and the Retirement Prospects of Late Baby Boomers By Dean Baker; David Rosnick
  3. Early retirement and inequality in Britain and Germany: How important is health? By Roberts, J; Rice, N; Jones, A.M
  4. Can Adult Education Delay Retirement from the Labour Market? By de Luna, Xavier; Stenberg, Anders; Westerlund, Olle
  5. Changes in Consumption at Retirement By Emma Aguila; Orazio P. Attanasio; Costas Meghir
  6. SHARE Ireland: First Results By Liam Delaney; Colm Harmon; Cecily Kelleher; Jean Kennedy

  1. By: Matteo Cervellati; Uwe Sunde
    Abstract: We present a theory of the economic and demographic transition where adult longevity, child mortality, fertility and the education composition of the population are jointly determined. The model allows for an investigation of the determinants of underdevelopment traps as well as of the mechanism that leads to an endogenous exit out of the trap. We also study the different roles of exogenous reductions in mortality and of permanent differences in extrinsic mortality for comparative development. The theory delivers a series of novel predictions which are illustrated with a simple dynamic simulation of the model. These predictions are shown to be consistent with evidence using both time series data and crosscountry panel data.
    Keywords: Economic and Demographic Transition, Adult Longevity, Child Mortality, Heterogeneous Human Capital, Comparative Development, Development Traps, Kernel Distributions
    JEL: E10 J10 J13 N30 O10 O40
    Date: 2008–11
  2. By: Dean Baker; David Rosnick
    Abstract: This paper extrapolates from data from the 2004 Survey of Consumer Finance to project household wealth, by wealth quintile, for the cohort that will be between the ages of 45-54 in 2009 under three alternative scenarios. The first scenario assumes that real house prices fall no further than their level as of March 2008. The second scenario assumes that real house prices fall an additional 10 percent as a 2009 average. The third scenario assumes that real house prices fall an additional 20 percent for a 2009 average. The projections show that the vast majority of families in these age cohorts will have little or no wealth by 2009 in any of these scenarios and that the cohorts just approaching retirement will have very little to support themselves in retirement other than their Social Security. The projections also show that a large number of families in these age cohorts will have little or no equity in their homes in 2009. Finally, the projections show that the renters within the same wealth quintiles in 2004 will have more wealth in 2009 than homeowners in all three scenarios.
    Keywords: housing bubble, retirement, home equity, household wealth
    JEL: R21 L85 O51 E E21
    Date: 2008–06
  3. By: Roberts, J; Rice, N; Jones, A.M
    Abstract: Both health and income inequalities have been shown to be much greater in Britain than in Germany. One of the main reasons seems to be the difference in the relative position of the retired, who, in Britain, are much more concentrated in the lower income groups. Inequality analysis reveals that while the distribution of health shocks is more concentrated among those on low incomes in Britain, early retirement is more concentrated among those on high incomes. In contrast, in Germany, both health shocks and early retirement are more concentrated among those with low incomes. We use comparable longitudinal data sets from Britain and Germany to estimate hazard models of the effect of health on early retirement. The hazard models show that health is a key determinant of the retirement hazard for both men and women in Britain and Germany. The size of the health effect appears large compared to the other variables. Designing financial incentives to encourage people to work for longer may not be sufficient as a policy tool if people are leaving the labour market involuntarily due to health problems.
    Keywords: health, early retirement, hazard models.
    JEL: J26 I10 C23 C41
    Date: 2008–11
  4. By: de Luna, Xavier (Department of Statistics, Umeå University); Stenberg, Anders (SOFI, Stockholm University); Westerlund, Olle (Department of Economics, Umeå University)
    Abstract: Several studies have suggested that education is associated with later retirement from the labour market. In this paper, we examine whether adult education, involving enrolees aged 42 or above, delays retirement to potentially increase labour force participation among the elderly. With Swedish register data of transcripts from adult education and an-nual earnings, which encompasses 1979-2004 and 1982-2004 respectively, we exploit the fact that adult education is a large-scale phenomenon in Sweden and construct a measure of the timing of the transition from being self-supported by productive work to being supported by pension transfers. We match samples of treated and controls on the propen-sity score and use non-parametric estimation of survival rates. The results indicate that adult education has no effect on the timing of the retirement from the labour force. This can be contrasted with the fact that adult education is one of the cornerstones of the OECD strategy for “active ageing” and the European Union’s “Lisbon strategy” for growth and jobs.
    Keywords: Human capital; Pensions; Elderly; Adult schooling
    JEL: H52 H55 H75 I28 J14 J26
    Date: 2008–11–11
  5. By: Emma Aguila; Orazio P. Attanasio; Costas Meghir
    Abstract: Previous empirical literature has found a sharp decline in consumption during the first years of retirement implying that individuals do not save enough for their retirement. This phenomenon has been called the retirement consumption puzzle. In contrast to some of the previous studies, the authors find no evidence of the retirement consumption puzzle during the first years of retirement. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many previous studies. Food expenditure at retirement decreases. The latter could be explained by a reallocation of the budget shares after retirement to adjust to a new stage in the life cycle. These results suggest that food expenditure is not an accurate measure to test the Life Cycle Model.
    Keywords: retirement, consumption
    JEL: D91 J26
    Date: 2008–10
  6. By: Liam Delaney (School of Economics & Geary Institute, University College Dublin); Colm Harmon (UCD Geary Institute, University College Dublin); Cecily Kelleher (School of Population and Health, University College Dublin); Jean Kennedy (UCD Geary Institute, University College Dublin)
    Abstract: The study team gratefully acknowledges funding support from the Irish Research Council for Humanities and Social Sciences under the Thematic Research Programmes initiative. Mark McGovern from UCD and Dr. Berengere Davin from NUIG provided substantial and excellent assistance in the drafting of this document. Christianne Hellmanzik, Lorna Sweeney and Fearghal O.hAodha also provided excellent research assistance at various stages of this project. We would like to thank Dr. Dorothy Watson of the ESRI who co-ordinated the field-work and her team of interviewers. Dr. Marcel Das of CenTERdata in Tilburg University and Simon Holroyd of NATCEN provided substantial technical assistance. This study would not have been possible in Ireland without the support of Professor Axel Boersch-Supan of the Mannheim Institute of Aging (MEA) who leads the European SHARE study. We would also like to sincerely thank the many participants who gave their time for this important study.
    Keywords: share, ireland, results
    Date: 2008–11–10

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