nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒04‒25
eight papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. SOEP as a Source for Research on Ageing : Issues, Measures and Possibilities for Improvement By Laura Romeu Gordo; Andreas Motel-Klingebiel; Susanne Wurm
  2. Early Retirement and Employment of the Young By Adrian Kalwij; Arie Kapteyn; Klaas de Vos
  3. Can age discrimination be justified with a lower productivity of older workers? By Barthel, Jens
  4. Why Does the Utilization of Pharmaceuticals Vary So Much Across Europe? Evidence from Micro Data on Older Europeans By Lambrelli, D; O’Donnell, O
  5. Public pension and household saving: Evidence from China By Feng, Jin; He, Lixin; Sato, Hiroshi
  6. Pension Freezes and Household Saving Over the Life Cycle By David Love; Paul A. Smith
  7. Pension and Child Care Policies with Endogenous Fertility By Masaya Yasuoka; Naohisa Goto
  8. Effects of informal eldercare on female labor supply in different European welfare states By Kotsadam, Andreas

  1. By: Laura Romeu Gordo; Andreas Motel-Klingebiel; Susanne Wurm
    Abstract: Demographic change is a key consequence of the development of modern societies. The prolongation of life expectancy, shifts of mortality into later life and long-term low fertility rates cause essential changes in population structures – with an increase in the number and proportion of older people as a key feature. The changes in mortality patterns can be seen as a success of modern society. But demographic shifts imply new risks and challenges as well as opportunities for modern societies, as they affect individual life courses as well as societies as a whole. The present low birth rates also predict low birth numbers in the future, since the number of potential mothers decreases. At the same time, life expectancies are not expected to decrease. As a consequence, the relation between old and young people will change in Germany in the next decades. In 2050, just about half of the population will be of working age and more than 30 percent will be 65 years old or older. The number of the 20 to under 65-years-olds will decrease from 50 million to a figure between 35 and 39 million in the next 40 years (Federal Statistical Office, 2006). Furthermore, the working age population will undergo an ageing process, implying that in 2050, nearly 40 percent of the working-age population will be between 50 and 64 years old (Federal Statistical Office, 2006). In order to understand the labour market and the fiscal implications of these population trends, it is very illustrative to analyse the proportion of older individuals in relation to the working population, the so-called old-age dependency ratio. According to the Federal Statistical Office (2006) the old-age dependency ratio will grow from 32 percent in 2005 to 60 or 64 percent by 2050. This projection indicates that in 40 years, for every three persons of working-age in Germany there will be two persons receiving a pension. If we consider the age cut at 67, the results are not much more optimistic, indicating that increasing the legal retirement age alone is not a solution for the sustainability of the public pension systems and for the decrease in the labour force. The proportion of people of very old age is also growing. While the 80+ population was nearly 4 million in 2005, it will grow to 10 million by 2050 (Federal Statistical Office, 2006). This trend has inter alia, important consequences for health care provision. In this demographic context, interdisciplinary research of ageing and later life gains in relevance. Thus, research on ageing becomes an increasingly crucial task for major surveys like the German Socio-Economic Panel (SOEP). As part of the “research infrastructure” they are called upon to invest in its potentials and attractiveness for research on ageing and later life.
    JEL: J14
    Date: 2009
  2. By: Adrian Kalwij; Arie Kapteyn; Klaas de Vos
    Abstract: Policy makers have often argued that an additional benefit of facilitating early retirement is that it creates employment for the young. This may happen if older and younger workers are substitutes. Nowadays policy makers' goals are to discourage early retirement to counter the economic consequences of an aging population and, interestingly, the consequences for youth employment appear to play no role in this. This paper studies the nexus between employment of older and younger workers in more depth, if only to put any concerns for adverse effects of later retirement to rest. To empirically investigate this issue the authors estimate a dynamic model of employment of the young, prime age and old people using panel data of 22 OECD countries over the time period 1960-2004. Their empirical analysis does not support the hypothesis that employment of the young and old are substitutes and finds some minor complementarities. This suggests that discouraging early retirement will have no adverse effect on youth employment.
    Date: 2009–03
  3. By: Barthel, Jens
    Abstract: The connection between age and productivity is a widely discussed topic in the empirical literature. The present paper's aim is to contribute to the explanation of an apparant lower productivity of older individuals. If we introduce uncertainty about the future working conditions depending on present success, a decrease of productivity over the working life can be observed despite a constant a priori productivity.
    Keywords: age discrimination; productivity
    JEL: J14 J71
    Date: 2008–12–12
  4. By: Lambrelli, D; O’Donnell, O
    Abstract: We analyze the relative importance of population versus institutional factors in explaining cross-country variation in the utilization of pharmaceuticals among older Europeans. Use of medication is examined among all individuals aged 50+ in eleven European countries and, to better control for need, among those diagnosed with medical conditions for which there exist effective drug therapies. Organizational factors include the density of pharmacies and of physicians, retail prices, reimbursement rates, restrictions on retailing of pharmaceuticals and incentives designed to influence prescribing behaviour. Differences in population health and demographics account for almost 75% of the cross-country variation in the propensity to use pharmaceuticals among all older Europeans but this fraction falls to only 12% among those with a diagnosed condition, while, for this group, differences in the organization of the pharmaceutical and health sectors explain 32-54% of the cross-European variation in utilization of medicines. Organizational differences are more important in explaining variation in receipt of medication for serious conditions, such as asthma, arthritis, diabetes, heart attack and stroke, for which 60-80% of the crosscountry variation can be explained by population and organizational factors, and less important for asymptomatic conditions, such as high cholesterol and hypertension, for which less than 35% of the variation is explained.
    Keywords: Pharmaceuticals, heath care, elderly, Europe
    JEL: I11 I18
    Date: 2009–04
  5. By: Feng, Jin (BOFIT); He, Lixin (BOFIT); Sato, Hiroshi (BOFIT)
    Abstract: We relate household saving to pension reform, to explain the high household saving rates in urban China from a new perspective. We use the exogenous – policy induced - variation in pension wealth to explicitly estimate the impact of pension wealth on household saving, and obtain a significant offset effect of pension wealth on household saving. Our estima-tions show that pension reform boosted the household saving rate in 1999 by about 6 per-centage points for cohort aged 25-29 and by about 3 percentage points for cohort aged 50-59. Our results also indicate that declining pension wealth reduces expenditure on educa-tion and health more than on other consumption items.
    Keywords: pensions; pension reform; household savings rate; China
    JEL: H31 H55 P35
    Date: 2009–04–20
  6. By: David Love (Williams College); Paul A. Smith (Federal Reserve Board)
    Abstract: Defined benefit (DB) pension freezes in large healthy firms such as Verizon and IBM, as well as terminations of plans in the struggling steel and airline industries, highlight the fact that these traditional pensions cannot be viewed as risk-free promises from the employee’s perspective. Indeed, the current turmoil in financial markets and difficult economic outlook for many firms suggest that many more pension plans could be frozen soon. In this preliminary paper we develop an empirical dynamic programming framework to investigate household saving decisions in a model economy with freezeprone DB pensions. The model incorporates important sources of uncertainty facing households, including asset returns, employment, income, and mortality, as well as pension freezes. Applying a compensating variation measure of welfare, we find that pension freezes reduce welfare by a maximum of about $6,000 for individuals with a high school degree and about $2,000 for individuals with a college degree. We close by highlighting a few important issues that are missing from our preliminary analysis, including a labor supply decision and the effects of market-clearing conditions in the labor market. We hope to address these issues in future work.
    Date: 2008–10
  7. By: Masaya Yasuoka; Naohisa Goto
    Abstract: This paper describes how a child allowance policy and income transfer to older people policy alter fertility and economic growth under a pay-as-you-go pension system. Moreover, this paper presents ways to finance such policies: one for income taxation and the other for consumption tax. The results presented in this paper are as follows. First, the relation between fertility and economic growth depends on fertility. This relation is positive if fertility is at a certain level. However, if fertility is low or high, this relation is negative. Second, a child allowance does not always raise the fertility rate. On the other hand, income transfer to older people raises the fertility rate. This result underscores that it is important to consider policies for older people when considering how to raise the fertility rate. Income transfer to older people financed by consumption taxation can achieve two goals: increasing fertility in a society with fewer children, and providing income security for older people.
    Keywords: Child allowance, Endogenous fertility, Pay-as-you-go pension system, Taxation
    JEL: D10 H55 J13 J14 J18 J26
    Date: 2009–03
  8. By: Kotsadam, Andreas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Using advanced panel data methods on ECHP (European Community Household Panel) data, female labor force participation at both the intensive and extensive margin is found to be negatively associated with informal caregiving to elderly. The effects of informal caregiving seem to be more negative in the Southern European countries, less negative in the Nordic countries, and in between these extremes in the Central European countries included in the study. That is, not only do women in some countries provide more care, the care they provide also has a stronger negative correlation with the probability of being employed and the number of hours worked. It is argued in this paper that a candidate explanation for the phenomenon of lower marginal effects in countries with more formal care and less pronounced gendered care norms has to do with the degree of coercion in the caring decision.<p>
    Keywords: Informal care; Female labor supply; European welfare states
    JEL: I11 I12 J22
    Date: 2009–04–06

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