nep-age New Economics Papers
on Economics of Ageing
Issue of 2008‒12‒01
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Retirement patterns during the Swedish pension reform By Glans, Erik
  2. The effect of changes in the replacement rate on partial retirement in Sweden By Glans, Erik
  3. Pension Reforms and Women Retirement Plans By Boeri, Tito; Brugiavini, Agar
  4. Australia's Retirement Income System:Historical Development and Effects of Recent Reforms By Diana Warren
  5. Population Aging and Economic Growth in Asia By David E. Bloom; David Canning; Jocelyn Finlay
  6. Parental Marital Disruption, Family Type, and Transfers to Disabled Elderly Parents By Pezzin, Liliana E.; Pollak, Robert; Steinberg Schone, Barbara
  7. Demographic Change, Institutional Settings, and Labor Supply By David E. Bloom; David Canning; Günther Fink; Jocelyn E. Finlay
  8. Social Security incentives, exit from the workforce and entry of the young young By Michele Boldrin; Pilar García Gómez; Sergi Jiménez Martín
  9. Growth and the Ageing Joneses By Fisher, Walter H.; Heijdra, Ben J.
  10. Layoff Tax and the Employment of the Elderly By Mario Schnalzenberger; Rudolf Winter-Ebmer
  11. Do Government Benefits for High Income Retirees Encourage Saving? By Siminski, Peter
  12. Union Membership and Age: The inverted U-shape hypothesis under test By Claus Schnabel and Joachim Wagner
  13. Height, Health and Cognitive Function at Older Ages By Anne Case; Christina Paxson

  1. By: Glans, Erik (Department of Economics)
    Abstract: The Swedish pension reform of 1999-2003 provides an opportunity to study whether and how important economic incentives are for the timing of retirement. The new pension system provides a much closer link between contributions and benefits than the former system. I study whether the reform has led to delayed retirement by examining the retirement patterns of elderly Swedish workers that were differentially affected by the reform. I use duration analysis with annual data from the LINDA database. Discrete time proportional hazard models are estimated. The results show a remarkable decline in the retirement hazard among latter born cohorts, who were more affected by the reform. This implies that retirement is delayed. Most of the decline occurs among public sector employees.
    Keywords: Retirement; Labour supply; Pension Reform
    JEL: H55 J26
    Date: 2008–11–18
  2. By: Glans, Erik (Department of Economics)
    Abstract: Knowledge about how elderly workers react to changes in pension benefits is important in guiding the design of social security systems. This paper contributes to this knowledge by examining the effect of changed replacement rates on part-time retirement behaviour in Sweden. During the 1980s, older workers had the option of partial retirement with an income replacement of 65 percent. The replacement rate was lowered to 50 percent in 1981 and subsequently increased back to 65 percent in 1987. Estimates using a linear probability model with register data from the LINDA database suggest that fewer men and women chose part-time retirement after the reduction in benefit levels in 1981. There was an approximate 4 percentage point drop in the partial retirement propensity among eligible 60-year old men, and a 5.7 percent drop among women. This corresponds to proportional reductions in the retirement propensity by about 29 and 36 percent respectively. The probability of part-time retirement increased among men by about 3.5 percentage points once benefit levels were increased again, whereas the partial retirement probability of women remained largely unchanged.
    Keywords: Retirement; Labour supply; Pensions
    JEL: H55 J26
    Date: 2008–11–18
  3. By: Boeri, Tito (Bocconi University); Brugiavini, Agar (Università Ca’ Foscari di Venezia)
    Abstract: We analyse the effects of pension reforms on the planned retirement age of women by exploiting within country variation in pension wealth across cohorts of workers in Italy after the Amato and Dini reforms of the early 1990s, which introduced a "Notionally Defined Contribution" (NDC) method for calculating pension benefits. The effect of the change in the pension regime on retirement decisions is affected by the presence of gaps in careers of women. Binding constraints related to eligibility to pensions indeed reduce the responsiveness of women to changes in pension rules. This explains why, contrary to a priori expectations, men are often found to be more reactive than women to changes in pension rules.
    Keywords: pensions, social security wealth and accrual, gaps in careers
    JEL: J14 J16 J26
    Date: 2008–11
  4. By: Diana Warren (Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Over the past decade, changes to Australia’s retirement income policy have been announced in almost every Federal Budget, with no signs yet that reform is coming to an end. Indeed, the Simpler Super reforms announced in the 2006 Federal Budget have been described as the largest overhaul of Australia’s superannuation system since the introduction of compulsory superannuation. This paper describes the current retirement system in Australia and provides a summary of the historical development of the Australian retirement system, with special emphasis placed on the recent reform initiatives designed to increase labour force participation of mature age Australians, provide higher levels of savings for retirement, and reduce reliance on the Age Pension as the main source of retirement income. The final section of the paper contains a review of the existing research addressing the issue of whether recent changes to retirement income policy will in fact have their intended effects. At this point it is still unclear whether these reforms will increase mature age labour force participation or reduce reliance on the Age Pension. Indeed, some have argued that these policy changes create perverse incentives, and will encourage early retiremen.
    Date: 2008–11
  5. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Jocelyn Finlay (Harvard School of Public Health)
    Abstract: The decline in the total fertility rate between 1960 and 2005, coupled with an increase in life expectancy and the dynamic evolution of past variation in birth and death rates, is producing a significant shift in age structure in Asia. The age distribution has shifted from one with a high youth-age population share to one with a high old-age population share. We illustrate the role of these separate forces in shaping the age distribution. We also argue that the economic consequences of population aging depend on behavioral responses to the shift in age structure: the female labor force participation response to the decline in fertility, child quality/quantity trade-off in the face of the fertility decline, savings adjustments to an increase in life expectancy, and social security distortions insofar as the pace of life expectancy improvements is faster than the pace of policy adjustments. We estimate the association between old- and youth-age population shares and economic growth. The results suggest that population aging may not significantly impede economic performance in Asia in the long run.
    Keywords: Global health, fertility, Asia, labor, Aging.
    Date: 2008–11
  6. By: Pezzin, Liliana E. (Medical College of Wisconsin); Pollak, Robert (Washington University, St. Louis); Steinberg Schone, Barbara (Georgetown University)
    Abstract: This paper examines the family variables that affect intergenerational living arrangements and adult children's time and cash transfers to their unpartnered disabled elderly parents. The family variables we examine include parental marital status, parental marital history, whether the index child is a step child or a biological child of the parent, and whether the index child's siblings are step children or biological children of the parent. Using data from the Health and Retirement Studies - Asset and Health Dynamics Among the Oldest Old (HRS-AHEAD) surveys, we estimate the joint probabilities that an adult child provides time and/or cash transfers to a parent and analyze a five-level categorical variable capturing parent–child living arrangements. Parameter estimates suggest significant detrimental effects of parental divorce and step relationship on time transfers and on the probability of coresidence with the index child. The composition of the index child's sibling network also affects transfers and living arrangement choices of adult children. Our findings suggest that demographic changes are weakening the traditional role of the family as a support network. Because more recent cohorts of elderly persons have experienced substantially higher rates of divorce, remarriage, and step parenthood than the cohort considered in this study, our findings raise concerns about the future availability of family care.
    Keywords: aging, intergenerational transfers, long-term care, family
    JEL: I10 J14
    Date: 2008–11
  7. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Günther Fink (Harvard School of Public Health); Jocelyn E. Finlay (Harvard School of Public Health)
    Abstract: This paper analyzes cross-country panel data to examine the effect of key institutional features of social security systems on male labor supply. Our findings indicate that the labor supply of older males covaries negatively with replacement rates and system coverage, with the replacement rate effects being stronger for pay-as-you-go systems than for fully funded systems. The results also reveal a surprisingly small and often negative response of the labor supply of older males to improvements in life expectancy.
    Keywords: Global health, labor, Aging, Economics, Demography.
    Date: 2008–11
  8. By: Michele Boldrin; Pilar García Gómez; Sergi Jiménez Martín
    Abstract: In this paper we analyze the relationship between the employment of the young, exit of older people and retirement incentives using data from both the Spanish labor force survey and the Muestra Contínua de Vidas Laborales. Against a priori expectations, we do find some (weak) evidence of positive (negative) relationship between the employment (unemployment) of young and the labor force participation of the older population. However, we are unable to find a clear relationship between the employment of the young and the incentives to retirement created by the Spanish pension system. We believe this is so because retirement incentives have changed very little during the last two decades.
    Date: 2008–11
  9. By: Fisher, Walter H. (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Heijdra, Ben J. (Department of Economics, University of Groningen, Groningen, The Netherlands, and Institute for Advanced Studies, Netspar, CESifo)
    Abstract: We incorporate Keeping-up-with-the-Joneses (KUJ) preferences into the Blanchard-Yaari (BY) framework and develop, using an AK technology, a model of balanced growth. In this context we investigate status preference, demographic, and pension policy shocks. We find that a higher degree of KUJ lowers economic growth, while, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper we extend the model by incorporating a Pay-as-you-go (PAYG) pension system with a statutory retirement date. This introduces a life-cycle in human wealth earnings and implies that the growth rate is higher under PAYG. We also consider the implications of an increase in the retirement date under both defined benefit and defined contribution schemes.
    Keywords: Relative consumption, OLG, Endogenous growth, Pension reform
    JEL: D91 E21 H55
    Date: 2008–11
  10. By: Mario Schnalzenberger; Rudolf Winter-Ebmer
    Abstract: In 1996 Austria introduced a tax for the layoff of older workers, which was tightened in 2000. The regulation requires employers to pay a tax of up to 170 percent of the gross monthly income when they give notice to employees aged 50 or more. We use data from Austrian social security records to investigate if such layoff taxes lead to less firing of older workers. We compare a control group of workers aged nearly 50 with the treatment group above 50. We apply a difference-in-difference approach to analyze the difference in the displacement probability of all prime aged workers. Results show substantial reductions in layoff behavior for workers aged 50 and above after the tightening of the tax.
    Keywords: Layoff tax, labor demand, employment, elderly workers
    JEL: J14 J45 J63
    Date: 2008–11
  11. By: Siminski, Peter (University of Wollongong)
    Abstract: The Australian Commonwealth government provides a set of benefits to high income older people, which are intended to promote saving for retirement. It has not been established whether this unusual policy is effective. Using illustrative models, it is shown that these benefits may induce some people to save and work more, but they may have the opposite effect on other, more affluent, people. It is unclear which effect dominates. These benefits are likely to have increased Commonwealth government expenditure on affluent older people, accompanied by a reduction in state government expenditure on people with slightly lower incomes.
    Keywords: retirement, saving, incentives, Australia
    JEL: D91 H31
    Date: 2008
  12. By: Claus Schnabel and Joachim Wagner (Institute of Economics, University of Lüneburg)
    Abstract: In this note we cast some doubt on the claim put forward by David Blanchflower (2007) that the probability of being unionized follows an inverted U-shaped pattern in age with a maximum in the mid- to late 40s. By using a special test for an inverted Ushaped pattern that has not been applied to the age-membership nexus before, and by constructing exact confidence intervals for the maximum value, we demonstrate that at least for West Germany Blanchflower’s hypothesis does not hold. Our findings suggest that more definitive evidence is needed before the existence of international unionization-age patterns can be taken for granted.
    Keywords: unionization, age, inverted U-shape, Germany
    JEL: J51
    Date: 2008–11
  13. By: Anne Case (Princeton University); Christina Paxson (Princeton University)
    Abstract: Research across a number of disciplines has highlighted the role of early life health and circumstance in determining health and economic outcomes at older ages. Nutrition in utero and in infancy may set the stage for the chronic disease burden that an individual will face in middle age (David J. Barker, 1998; Barker et al. 1989; Johann Eriksson et al. 2001). Childhood health may also have significant effects on economic outcomes in adulthood. Collectively, a set of childhood health measures can account for a large fraction of the explained variance in employment and social status observed among a British cohort followed from birth into adulthood (Anne Case, Angela Fertig and Christina Paxson 2005).
    Date: 2008–01

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