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on Economics of Ageing |
| By: | Owen O'Donnell; Federica Teppa; Eddy van Doorslaer |
| Abstract: | Theory predicts a number of mechanisms through which survival expectations influence retirement decisions: a wealth effect of a longer lifespan; an uncertainty effect through the return on savings; a longevity risk effect; and, an adverse selection effect from pooling within pensions. We use data from the first three waves of the English Longitudinal Study of Ageing to test whether the timing of retirement is responsive to subjective survival expectations. Measurement error in reported survival chances is allowed for by instrumenting using parental longevity and smoking behaviour. We find a significant concave relationship between the propensity to retire and survival expectations. Men who are extremely pessimistic about their survival chances are least likely to retire, but after initially rising steeply the propensity to retire falls as survival expectations improve over most of their range. This is consistent with some of the theory. For women, the results are more sensitive to allowing for endogeneity. Surprisingly, the retirement behaviour of the less educated is more sensitive to survival expectations. |
| Keywords: | Longevity; Retirement; Pensions; Expectations; Subjective Survival Probability. |
| JEL: | D84 D91 H55 J26 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:188&r=age |
| By: | Coe, Norma B. (Tilburg University); Lindeboom, Maarten (Free University of Amsterdam) |
| Abstract: | The magnitude of the effect that health has on the retirement decision has long been studied. We examine the reverse relationship, whether or not retirement has a direct impact on later-life health. In order to identify the causal relationship, we use unexpected early retirement window offers to instrument for retirement behavior. They are legally required to be unrelated to the baseline health of the individual, and are significant predictors of retirement. We find that there is no negative effect of early retirement on men's health, and if anything, a temporary increase in self-reported health and improvements in health of highly educated workers. While this is consistent with previous literature using Social Security ages as instruments, we also find some evidence that anticipation of retirement might also be important, and might bias the previous estimates towards zero. |
| Keywords: | health, retirement, instrument, causal effect |
| JEL: | I12 J08 J14 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3817&r=age |
| By: | Kathrin Dummann (University of Rostock) |
| Abstract: | People often disregard the need for individual savings for old-age although a decreasing rate of birth and an increasing life expectancy make it necessary to save additional money for retirement by using private or occupational pensions. Due to a lack of financial literacy and a variety of products it is important that people consult financial intermediaries like banks and insurance companies which support their savings plans. We apply the behavioral life-cycle hypothesis to explain whether people of different socioeconomic attributes contact diverse financial intermediaries and which motives promote this consultancy. To answer those and other questions on differences in consulting behavior of financial intermediaries Probit regressions are used. We find that income, low risk aversion and the presence of banks in the local surrounding have a large impact on oldage savings behavior. Our results differ across intermediary groups. They have important policy implications as better financial literacy and enhanced consulting activities may cause less old-age poverty and more trust in the financial system. |
| Keywords: | life-cycle hypothesis, pension savings, financial intermediaries, financial literacy |
| JEL: | D14 D82 G10 G21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:99&r=age |
| By: | Mélika Ben Salem; Antoine Bozio; Didier Blanchet; Muriel Roger |
| Abstract: | One of the justifications provided for early retirement policies in developed countries is the idea that such policies can facilitate access to the labor market for younger people and help lower global unemployment. But many questions remain on the true effect on young workers of these policies. The objective of the present paper is to study the long term relationship between labor force participation of the old and unemployment of the young in France since the beginning of the 1970s. Establishing causal relationship of the reduction of labor force participation of the old on employment prospect of the young is a challenging work. Evidence of the correlation between youth labor market outcomes and older worker's labor force participation plead more in favor of a positive association between younger and older workers' employment. An increase in the older workers' participation is indeed correlated with an increase in the employment rate of young workers and a decrease in their unemployment rate. Even controlling for the economic cycle, this positive association remains - albeit less robustly. These correlations, based on times series, are not however evidence of causal relationship between younger and older workers' employment. We then use an index summarizing the intensity of policies aiming at removing older workers from the labor market, based on Social Security wealth. The effect of the wealth index on youth labor market outcomes is always significant, whatever the set of the control variables we use and with a similar size and the same sign. The coefficient is negative for both the unemployment and employment of youth, with or without controlling for school attendance. In France policies aiming at removing older workers from the labor market have been prompted by increase in unemployment. Granger causality tests between youth unemployment and the Wealth index show therefore a significant link in both directions, whereas nothing is significant between youth employment and the Wealth index. Hence if we do not find evidence that reducing labor force participation of the old provide jobs for the young, we cannot exclude altogether that some general and unaccounted cause is hiding its true impact. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-57&r=age |