nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒05‒16
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Spanish Pension System: Population Aging and Immigration Policy By Javier Vázquez Grenno
  2. Mandatory Retirement Rules and the Retirement Decisions of University Professors in Canada By Casey Warman; Christopher Worswick
  3. Analyzing labour supply of elderly people By Paul de Hek; Frank van Erp
  4. The Age-Productivity Gradient: Evidence from a Sample of F1 Drivers By Fabrizio Castellucci; Mario Padula; Giovanni Pica
  5. Welfare Spending and Mortality Rates for the Elderly Before the Social Security Era By Adrian Stoian; Price V. Fishback
  6. Retirement Choices: New Evidence for Italy By Michele Belloni; Rob Alessie
  7. Part-time work and Health among Older Workers in Ireland and Britain By Brenda Gannon; Jennifer Roberts
  8. Rethinking Retirement By Rob Euwals; Ruud de Mooij; Daniel van Vuuren
  9. Early retirement and inequality in Britain and Germany: How important is health? By Jennifer Roberts; Nigel Rice; Andrew M. Jones
  10. The Demographics of Expropriation Risk By Philipp Harms; Philipp an de Meulen

  1. By: Javier Vázquez Grenno (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: There is a widespread consensus in the literature that, as consequence of the demographic transition, the current Spanish pension system will become unsustainable in the next decades. In this article we evaluate the sustainability of the contributory pensions' sub-system, taking into account the demographic projections by the Spanish Statistical Oce (INE). A baseline scenario is projected as well as several reforms are simulated, focusing on: (i) selective immigration policy, (ii) changes in the way of tting the pensions and (iii) increase of the legal age of retirement up to 68. The main results are the following. The current system would not incur decits until 2018, from then decits will begin to be accumulated. The expenditure in pensions practically would double (from 8.3 % in 2005 to 17.2 % in 2050). A selective immigration policy -towards foreign young people- would help, but does not solve the long-term sustainability of the current system. A policy that combines a pensions' growth at a pace lower than productivity growth and extends the legal age of retirement up to 68 would give solvency to the system beyond 2029.
    Keywords: Immigration policy, public pensions, sustainability.
    JEL: E62 F22 H55 J61
    Date: 2009–04
  2. By: Casey Warman (Queen's University); Christopher Worswick (Carleton University)
    Abstract: We examine the impact of mandatory retirement on the retirement decisions of professors in Canada using administrative data. We find that the age distributions of professors at universities without mandatory retirement and those at universities with mandatory retirement at age 65 have diverged over time with a higher fraction of professors over the age of 65 being at universities without mandatory retirement. Estimation of a discrete time hazard model indicates that faculty members at universities with mandatory retirement at age 65 have exit rates at age 65 that are around 30 to 36 percentage points higher than those of their counterparts at universities without mandatory retirement. Similar results are found for both men and women; however, the magnitude of this effect is somewhat smaller for women.
    Keywords: Retirement, Faculty, University
    JEL: J26 J14 J45 J18 J21 I23
    Date: 2009–04
  3. By: Paul de Hek; Frank van Erp
    Abstract: In light of the ageing of the Dutch society, policy measures aim at increasing the participation rate of elderly workers, particularly in the age-group between 55 and 64. This paper develops a stylized numerical simulation model describing consumption, savings and labour supply behaviour over the life cycle to analyze the labour-market implications of such proposals. For example, we simulate a shift in the (normal) retirement age from 65 to 67, the elimination of the Social Security premium exemption after age 65, and a premium on first-tier pension benefits if the commencement date of these benefits is postponed. Each of these reforms affect the economic outcomes via wealth effects, income effects and inter- and intratemporal substitution effects. The stylized model offers a profound theoretical underpinning which helps us to understand these policy effects over the entire life cycle of individuals. However, the numerical outcomes should be taken with some caution as the model ignores insights of behavioural economics (such as ‘framing effects’).
    Keywords: Life-cycle policies; Lifetime labour supply; Retirement
    JEL: J26 H55 E21 D31 J14 J32
    Date: 2009–02
  4. By: Fabrizio Castellucci (INSEAD); Mario Padula (University Ca’ Foscari of Venice and CSEF); Giovanni Pica (Università di Salerno and CSEF)
    Abstract: Aging is a global phenomenon. If older individuals are less productive, an aging working population can lower aggregate productivity, economic growth and fiscal sustainability. Therefore, understanding the age-productivity gradient is key in a aging society. However, estimating the effect of aging on productivity is a daunting task. First, it requires clean measures of productivity. Wages are not such measures to the extent that they reward other workers attributes than their productivity. Second, unobserved heterogeneity at workers, firms and workers/firms level challenges the identification of the age-productivity gradient in cross-sectional data. Longitudinal data attenuate some identification issues, but give rise to the problem of partialling out the effect of aging from the pure effect of time. Third, the study of the age-productivity link requires investigating the role of experience and of seniority. We tackle these issues by focussing on a sample of Gran Prix Formula One drivers and show that the age-productivity link has an inverted U-shape profile, with a peak at around the age of 30-32.
    Keywords: Aging, individual effects, firm effects, match effects, Formula One
    JEL: J24 C23 L83
    Date: 2009–05–01
  5. By: Adrian Stoian; Price V. Fishback
    Abstract: We analyze the impact of the original means-tested Old Age Assistance (OAA) programs on the health of the elderly prior to the first Social Security pension payments. Before 1935 a number of states had enacted their own OAA laws. After 1935 the federal government began offering matching grants and thus stimulated the adoption of OAA programs by the states. A new panel data set of 75 cities for each year between 1929 and 1938 combines mortality rates for older age groups with three measures of the OAA programs, spending on non-age-specific relief and a rich set of correlates. The data are analyzed using difference-in-difference-in-difference and instrumental variables methods. Our results suggest that Old Age Assistance in the 1930s had little impact on the death rate of the elderly. Our sense is that the OAA programs in the 1930s transferred the elderly from general relief programs without necessarily increasing the resources available to them.
    JEL: H51 H75 I1 N32
    Date: 2009–05
  6. By: Michele Belloni (CeRP-Collegio Carlo Alberto, Turin); Rob Alessie (University of Groningen)
    Abstract: This study exploits a new dataset in order to quantify the effect of financial incentives on retirement choices. This dataset contains - for the first time in Italy - information on seniority. In accordance with the general finding in Gruber and Wise (2004), we find that financial incentives have an effect on retirement. The effect goes in the expected direction; when employees become eligible for pension benefits the change in financial incentives they experience is so high that their retirement probability increases in a sizable way. We also find that the procedure to impute seniority used in previous studies leads to a sizable measurement error. Due to this measurement error, the key parameters of the model are inconsistently estimated. Our sensitivity analysis suggests that the lack of appropriate information on seniority is an important reason for the unclear evidence so far obtained in retirement studies for Italy.
    Keywords: retirement, social security wealth, seniority, unobserved heterogeneity.
    JEL: J2
    Date: 2008–05
  7. By: Brenda Gannon; Jennifer Roberts (Department of Economics, The University of Sheffield)
    Abstract: Part-time work is viewed as a viable option for people who wish to have a gradual transition to retirement. From a policy viewpoint, this may help to alleviate some labour supply shortages, especially in the context of the aging population. Factors such as health or pension provision may influence a person´s decision to work part-time. This paper considers the impact of health on the work decision for people aged 50 and over in the UK and Ireland. Methodological issues are discussed and the impact of unobserved individual effects is estimated using the Mundlak estimator applied to the multinomial probit model. The impact of health on part-time work is negative in Ireland, but we find no significant effect in the UK. The paper discusses potential reasons for these impacts and current policies on part-time work..
    Keywords: health, retirement, panel data
    JEL: J26 I10 C23
    Date: 2008–12
  8. By: Rob Euwals; Ruud de Mooij; Daniel van Vuuren
    Abstract: This study argues that Dutch policy regarding the labour market for elderly is at a crossroads. Previous reforms in the Netherlands have encouraged labour supply and are expected to boost labour-market participation of individuals aged 55 to 64 to 60% in 2020. Further stimulus of supply is debatable due to perverse distributive implications. The increase in participation reveals inefficiencies in the demand side of the market. Indeed, the Dutch labour market for elderly is characterised by long unemployment duration, long job tenures, low mobility and little investment in human capital. The inefficiencies were previously hidden by massive early retirement, but will become more pressing as the workforce ages and participation rates increase. This imposes a new challenge for Dutch policy, a challenge that has become more urgent due to the current financial crisis that is expected to cause a substantial rise in unemployment. The study offers up-to-date insight in the consequences of policy reforms for the labour market.
    Keywords: Participation; Welfare-state institutions; Retirement; Wage-productivity gap; Flexibility; Allocation
    JEL: D6 H2 H5 J14 J26 J3 J6
    Date: 2009–04
  9. By: Jennifer Roberts (Department of Economics, The University of Sheffield); Nigel Rice; Andrew M. Jones
    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
  10. By: Philipp Harms (RWTH Aachen University, Study Center Gerzensee); Philipp an de Meulen (RWTH Aachen University)
    Abstract: It is often argued that capital should flow from aging industrialized economies to countries with fast-growing populations. However, institutional failures and the risk of expropriation substantially reduce developing economies’ attractiveness for foreign investors. We analyze the influence of a country’s demographic structure on international investment, using a political-economy model in which population growth potentially affects the risk of expropriation. We first explore how redistributive expropriation affects the welfare of different age groups and derive the government’s incentive to expropriate. We then analyze how the relative size of different generations influences the feasible volume of foreign investment
    Date: 2009–05

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