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on Economics of Ageing |
| By: | Marjan, MAES (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) |
| Abstract: | Early retirement is often explained as resulting from a voluntary labour supply choice of a utility maximizing individual. nonetheless, a lof of individuals perceive retirement as a forced instead as a voluntary decision. This paper tries to accomodate voluntary and unvoluntary labour supply decisions within one model. On the basis of a large administrative dataset merged with Census data, we estimate a discrete-time competing risk model of transitions from Belgian private-sector employees into unemployment, early and old-age retirement while accounting for forward-looking retirement incentives. The estimated coefficients are used to simulate a cut in early retirement benefits. Although this could enhance the financial sustainability of the social security system for elderly, one might expect that this may ofrce people to retire involuntarily through elderly unemployment where they end up with a lower living standard or even in poverty. Alternatively, it could stimulate employees to work longer until they qualify for old-age pension benefits. The model predicts a strong increase of the exit rates towards unemployment between age 52 and 57 while exit towards the old-age pension system marginally increases until age 63. In particular, blue-collars with physically demanding jobs in traditional industries have a higher risk to become unemployed while white-collar workers, members of voluntary saving plans or occupational pension schemes and highly educated workers are predicted to move in the old-age pension system. |
| Keywords: | competing-risk model; early retirement; retirement pathways; involuntary retirement |
| JEL: | J26 C25 H55 |
| Date: | 2008–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:208041&r=age |
| By: | Marjan, MAES (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) |
| Abstract: | The effects of three reforms of the Belgian old-age pension system were examined on retirement behaviour, government budget and income distribution of the old-age retired. On the basis of a large administrative micro-dataset used to estimate and simulate a discrete-time hazard model we found that reforms of the old-age pension system that penalize early retirement, and in particularly penalize early retirement of the rich more than the poor, are not only the ones that enhance the financial sustainability of the system at most but at the same time lead to the strongest decrease of income ineduality and relative poverty among the old-age retired. On the contrary, reforms that compensate retirement beyond the age of eligibility like the Òpension bonusÓ recently implemented in Belgium lead to budget deficits and at the same time to a higher income ineduality among the old-age retired. Finally, it was shown that the impact of reforming the old-age pension system may be limited by individuals that have the prospect of receiving occupational pension benefits, among others because in Belgium these are subject to an extremely generous fiscal treatment |
| Keywords: | early retirement; retirement incentives; pension reforms; hazard model; micro-simulation |
| JEL: | J26 C35 H23 |
| Date: | 2008–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2008040&r=age |
| By: | Marjan, MAES |
| Abstract: | On the basis of a longitudinal administrative dataset (1991-2002) merged with the Census of 2001 and the National Register, the majority of the poor elderly in Belgium appear to be persistently poor. The question arises why this might be so. To the extent that individual characteristics such as low abilities persist over time, they may also be the reason that individuals persist in poverty over time. In that case, one expects that once individual characteristics are controlled for, duration dependence in poverty becomes spurious. The alternative possibility is that poverty experience has a causal impact on future poverty. This may be because of a poverty trap : people may be given an incentive not to work while at the same time they slip into poverty. Or this may be due to depreciation of human capital or loss of motivation. The reasons for dependence would suggest to focus on stigma and adverse work incentives while spurious dependence would suggest to change individualÕs characteristics. The simultaneous estimation of a multiple-spell discrete-time hazard model of transitions in and out of poverty, that allows for unobserved effects and a significant initial condition problem, lends strong empirical support for true duration dependence in poverty. This suggestion sounds reasonable since in Belgium elderly unemployed are exempted from the search for a job and thus easily exposed to depreciation of human capital and employers are reluctant to invest in the human capital of older workers. In addition in Belgium both employers and the government design retirement pathways that give elderly strong incentives to leave the labour market as soon as possible. |
| Keywords: | poverty dynamics; poverty persistence; early retirement; work disincentives; multiple spell discrete-time hazard model |
| JEL: | J14 J26 C41 I32 |
| Date: | 2008–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2008042&r=age |
| By: | Juan A. Rojas (Banco de España) |
| Abstract: | In this paper we study the quantitative properties of a policy reform aimed at funding the pension system in the standard model economy with perfect substitution across workers with different experience levels and a model economy where this substitutability is imperfect. With compulsory retirement, the welfare gains for young cohorts are underestimated in the standard model economy with perfect substitution as compared to the imperfect substitution case. However these additional welfare gains displayed in the imperfect substitution case come at the cost of higher welfare losses for the generations living at the time of the policy reform, due to the fall in the experience premium that follows after the elimination of social security. When the policy reform consists of the elimination of both social security and compulsory retirement, we find that in the standard model the status quo problem disappears. However, such policy change is not able to solve the status quo problem when less and more experienced workers are imperfect substitutes because the fall in the experience premium is more pronounced, providing a rationale for the lack of political support in favour of pension reform in the Spanish economy. |
| Keywords: | Social Security, overlapping generations |
| JEL: | E62 H55 J11 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0832&r=age |
| By: | Pfeifer, Christian |
| Abstract: | Human capital and deferred compensation might explain why firms employ but do not hire older workers. Adjustments of wage-tenure profiles for older new entrants are explored in the context of deferred compensation. From an equity theory perspective, such adjustments might lead to adverse incentive effects so that firms prefer to hire rather homogenous workers in terms of entry age. A personnel data set is analyzed which reveals that at least for white-collar workers entry age has a positive effect on entry wages and wage-tenure profiles are adjusted according to entry age. |
| Keywords: | deferred compensation, human capital, internal labor markets, older workers, wages |
| JEL: | J14 J24 J31 J33 M51 M52 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-413&r=age |
| By: | Farvaque, Etienne; Héricourt, Jérôme; Lagadec, Gaël |
| Abstract: | We contrast the influence of demography and central bank independence on inflation. The recent demographic trends in developed countries are shown to weight more on inflation than central bank independence, while the contrary stands for the period from 1960 to 1979. |
| Keywords: | Demography ; Central Bank Independence ; Inflation |
| JEL: | E58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13076&r=age |