nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒05‒23
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Saving for retirement and retirement investment choices By Monica Paiella; Andrea Tiseno
  2. Older or Wealthier? : The Impact of Age Adjustments on the Wealth Inequality Ranking of Countries By Ingvild Almas; Magne Mogstady
  3. Population Aging, Elderly Migration and Education Spending: Intergenerational Conflict Revisited By Tosun, Mehmet S.; Williamson, Claudia R.; Yakovlev, Pavel
  4. Macroeconomic Implications of Demography for the Environment: A Life-Cycle Perspective By Xavier Pautrel
  5. Managing Prolonged Low Fertility: The Case of Singapore By Mukul. G Asher
  6. Does Job Loss Cause Ill Health? By Salm, Martin
  7. Happiness and age cycles – return to start… By Fischer, Justina AV
  8. Global Aging and Fiscal Policy with International Labor Mobility: A Political Economy Perspective By Tosun, Mehmet S.
  9. Means-Tested Income Support, Portfolio Choice and Decumulation in Retirement By Susan Thorp; Hardy Hulley; Rebecca McKibbin; Andreas Pedersen
  10. Life Expectancy and Economic Growth: The Role of the Demographic Transition By Cervellati, Matteo; Sunde, Uwe
  11. Ageing and Mobility in Germany : Are Women Taking the Fast Lane? By Dominika Kalinowska; Uwe Kunert
  12. Managers, Coordination, and the Firm Age-Wage Relationship By Peter Thompson
  13. Well-being over the Life Span : Evidence from British and German Longitudinal Data By Christoph Wunder; Andrea Wiencierz; Johannes Schwarze; Helmut Küchenhoff; Sara Kleyer; Philipp Bleninger

  1. By: Monica Paiella; Andrea Tiseno (-; -)
    Abstract: In this paper we focus on the recent restructuring of the Italian pension system and in particular on the reforms concerning the tax-favored retirement saving accounts. These reforms issued in the early and mid- 1990s reduced the riskiness of private retirement saving plans and their overall cost. We find that private pension saving incentives had little if any effect on household savings. Further, those workers who have experienced the most severe public pension cut are not significantly more likely to contribute to a private retirement plan, ceteris paribus. We find, however, that the pension fund legislation had a strong effect on the allocation of savings and triggered substantial substitution of non-tax-favored nonretirement wealth for tax-favored pension funds.
    Keywords: household savings, pension funds, social security reforms, difference-in-difference estimation
    JEL: H31 D14 D12
    Date: 2009–05–19
  2. By: Ingvild Almas; Magne Mogstady
    Abstract: Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross-section data, we may confuse older with wealthier. We propose a new method to adjust for age effects in cross-sections, which eliminates transitory wealth inequality due to age, yet preserves inequality arising from other factors. This new method is superior to existing methods, like the much used Paglin-Gini, which is shown to have several problems. A new cross-country comparable database reveals that the choice of method is empirically important: Existing methods yield erroneous wealth inequality rankings of countries.
    Keywords: Wealth inequality, Life cycle, Age adjustments, Gini coefficient
    JEL: D31 D63 D91 E21
    Date: 2009
  3. By: Tosun, Mehmet S. (University of Nevada, Reno); Williamson, Claudia R. (Appalachian State University); Yakovlev, Pavel (Duquesne University)
    Abstract: Elderly have been increasingly targeted as a group to enhance economic development and the tax base in communities. While recent literature on elderly migration tends to focus on how elderly migration patterns are influenced by state fiscal variables, the reverse effect from elderly population on fiscal variables is very plausible. This paper reexamines the intergenerational conflict in education financing using U.S. state and county level data. We analyze how preferences for education spending might vary across different elderly age groups, an analysis that has not been explored before. We estimate the impact of elderly population and elderly migration rates on education spending using panel data and spatial econometric techniques. Our results broadly support the presence of intergenerational conflict and age heterogeneity in preferences for education spending among elderly migrants.
    Keywords: population aging, elderly migration, education spending, intergenerational conflict
    JEL: H75 R23
    Date: 2009–05
  4. By: Xavier Pautrel (Nantes Atlantique Université)
    Abstract: This article studies how demography affects the outcome of the environmental policy in a macro-economic perspective, incorporating age-earning profiles in an OLG model à la Blanchard (1985) to capture the age structure effect of the demographic shocks. It first demonstrates, conversely to previous works of the related literature that a decrease in the birth rate may lower the steady-state per capita stock of physical capital even if the aggregate labor supply is exogenous. It also demonstrates that the ageing of population influences the macro-economic impact of the environmental policy according to the cause of the ageing and the life-cycle earnings assumption. Thus, with decreasing age-earning profiles, a lower birth rate reduces the detrimental impact of the environmental policy on the steady-state per capita stock of physical capital for low values of this birth rate, while a reduction of the mortality rate reinforces the negative outcome of the environmental policy. When earnings profiles are independent of age, ageing always strengthens the negative impact of the environmental policy.
    Keywords: Demography, Environment
    JEL: Q56
    Date: 2009–01
  5. By: Mukul. G Asher
    Abstract: This paper analyzes Singapore’s multi-pronged approach to managing prolonged low fertility which has led to population aging, labor force shortages, increasing elderly dependency ratios, and feminization of the elderly population. This approach has emphasized high growth, and has given priority to becoming an attractive business location over providing adequate and equitable retirement and health financing; and has pursued policies designed to generate high levels of net immigration. The chosen policy priorities have created a dilemma centering on ensuring Singapore’s business competitiveness on the one hand, and meeting its residents’ needs and expectations on the other. In spite of many measures to boost fertility levels (official Total Fertility Rate was 1.29 in 2007, a rate at which population is reduced by 50% in 45 years), as well as high net immigration, population aging is expected to accelerate after 2010. This, along with high income inequalities (Gini coefficient was 0.52 in 2005), will make continuation of current policy priorities even more challenging for the policymakers. While future policy developments are difficult to predict, greater political contestability is likely to hasten the path toward policy priorities which give greater weight to the needs and expectations of the current Singapore residents, even if that leads to lower (but more sustainable and socially cohesive) growth.[ADBI WP NO 114]
    Keywords: population explosion; unmanageable; Total Fertility Rate; Gini Coefficient; demographic trends; high life expectancy; childbearing; age-structural composition; feminization; Population Pyramids; labor force; financial adequacy; demographic transition; Fiscal Management; Net Immigration; Children Development Cosavings (Baby Bonus) Scheme; Financing Retirement; Health Care; Central Provident Fund; social risk pooling elements; Medisave Account; Housing and Development Board
    Date: 2009
  6. By: Salm, Martin (Tilburg University)
    Abstract: This study estimates the effect of job loss on health for near elderly employees based on longitudinal data from the Health and Retirement Study. Previous studies find a strong negative correlation between unemployment and health. To control for possible reverse causality, this study focuses on people who were laid off for an exogenous reason – the closure of their previous employers' business. I find that the unemployed are in worse health than employees, and that health reasons are a common cause of job termination. In contrast, I find no causal effect of exogenous job loss on various measures of physical and mental health. This suggests that the inferior health of the unemployed compared to the employed could be explained by reverse causality.
    Keywords: job displacement, health, unemployment
    JEL: I12 J63
    Date: 2009–04
  7. By: Fischer, Justina AV
    Abstract: Previous happiness research has explicitly assumed that subjective well-being is U-shaped in age. This paper sheds new light on this issue testing several functional forms. Using micro data from the World Values Survey on 44’000 persons in 30 economically well-developed OECD countries with long life expectancies, we reveal that age follows a hyperbolic form. We find that life satisfaction reaches another local maximum around the age of 83, with a level identical to that of a 26-years old. This hyperbolic well-being-age relation is robust to the inclusion of cohort effects. We corroborate the functional form using a sample of non-OECD countries.
    Keywords: Subjective Well-Being; cohorts; happiness; aging; life-course; OECD; WVS; cross-national; life satisfaction
    JEL: C51 J14 I31
    Date: 2009–02–15
  8. By: Tosun, Mehmet S. (University of Nevada, Reno)
    Abstract: This paper uses an overlapping generations model with international labor mobility and a politically responsive fiscal policy to examine aging in developed and developing regions. Migrant workers change the political structure composed of young and elderly voters in both labor-receiving and labor-sending countries. Numerical simulations show that the developed region benefits more from international labor mobility through the contribution of migrant workers as laborers, savers, and voters. The developing region experiences significant growth in all specifications but benefit more under international capital mobility. Restricting political participation of migrant workers in the developed region produces inferior growth results.
    Keywords: population aging, overlapping generations, endogenous fiscal policy, international labor mobility, international capital mobility
    JEL: E62 F21 F22 F43 H30 J10
    Date: 2009–05
  9. By: Susan Thorp (School of Finance and Economics, University of Technology, Sydney); Hardy Hulley (School of Finance and Economics, University of Technology, Sydney); Rebecca McKibbin; Andreas Pedersen
    Abstract: We investigate the impact of means tested public income transfers on post-retirement decumulation and portfolio choice using theoretical simulations and panel data on Australian Age Pensioners. Means tested public pension payments in Australia have broad coverage and give insight into the incentive responsiveness of well-off, as well as poorer households. Via numerical solutions to a discrete time, finite horizon dynamic programming problem, we simulate the optimal consumption and portfolio allocation strategies for a retired household subject to assets and income tests. Relative to benchmark, means tested households should optimally decumulate faster early in retirement, and choose more risky portfolios. Panel data tests on inferred wealth for pensioner households show evidence of more rapid spending early in retirement. However they also show that better-off households continue to accumulate, even when facing a steeper implicit tax rate on wealth than applies to poorer households. Wealthier households also hold riskier portfolios. Results from tests for Lorenz dominance of the panel wealth distribution show no decrease in wealth inequality over the five years of the study.
    Keywords: retirement wealth; life-cycle saving; public pension; portfolio choice
    JEL: D91 E21 G11
    Date: 2009–04–01
  10. By: Cervellati, Matteo (University of Bologna); Sunde, Uwe (University of St. Gallen)
    Abstract: In this paper we investigate the causal effect of life expectancy on economic growth by explicitly accounting for the role of the demographic transition. In addition to focusing on issues of empirical identification, this paper emphasizes the role of the econometric specification. We present a simple theory of the economic and demographic transition where individuals' education and fertility decisions depend on their life expectancy. The theory predicts that before the demographic transition improvements in life expectancy primarily increase population. Improvements in life expectancy do, however, reduce population growth and foster human capital accumulation after the onset of the demographic transition. This implies that the effect of life expectancy on population, human capital and income per capita is not the same before and after the demographic transition. Moreover, a sufficiently high life expectancy is ultimately the trigger of the transition to sustained income growth. We provide evidence supporting these predictions using data on exogenous mortality reductions in the context of the epidemiological revolution.
    Keywords: life expectancy, demographic transition, epidemiological revolution, heterogeneous treatment effects
    JEL: E10 J10 J13 N30 O10 O40
    Date: 2009–05
  11. By: Dominika Kalinowska; Uwe Kunert
    Abstract: Results from travel demand research in many countries show that – on average – women are less mobile and have different mobility patterns than men. Recent longitudinal studies of gender specific travel demand reveal converging mobility of males and females. Moreover, in some countries results show convergence between cohort and gender specific travel demand: women and men display more and more similar travel behaviour while older individuals today have higher mobility demands than ever before. Do these developments hold also for Germany? Based on socio-economic and demographic analysis of gender specific travel behaviour using the German mobility survey data from 2002, we ask what individual travel patterns can be expected for the future in the year 2025. We place emphasis on the importance of educational attainment and labour force participation for the assessment of future personal mobility.
    Keywords: travel demand, cohort effects, gender, households, ageing population
    JEL: R41 J11 J14 J16
    Date: 2009
  12. By: Peter Thompson (Department of Economics, Florida International University)
    Abstract: This paper describes a version of Lucas’ span of control model, in which managers of younger and smaller firms are less able than managers of older firms to provide precise instructions to employees. Employees differ in their propensity to follow instructions, and those least likely to follow instructions are said to be high-a types. In equilibrium, younger [older] firms employ high-a [low-a] types, and wages exhibit a U-shaped relationship in which the lowest wages are paid by firms of intermediate age. A natural extension of the model, in which employee ability also varies, is developed to examine the effect of employer age and size on entry into self-employment.
    Keywords: Management, firm age and wages, self-employment
    JEL: J24 J31 L26
    Date: 2009–03
  13. By: Christoph Wunder; Andrea Wiencierz; Johannes Schwarze; Helmut Küchenhoff; Sara Kleyer; Philipp Bleninger
    Abstract: This paper applies semiparametric regression models using penalized splines to investigate the profile of well-being over the life span. Splines have the advantage that they do not require a priori assumptions about the form of the curve. Using data from the British Household Panel Survey (BHPS) and the German Socio-Economic Panel Study (SOEP), the analysis shows a common, quite similar, age-specific pattern of life satisfaction for both Britain and Germany that can be characterized by three age stages. In the first stage, life satisfaction declines until approximately the fifth life decade. In the second age stage, well-being clearly increases and has a second turning point (maximum) after which well-being decreases in the third age stage. Several reasons for the three-phase pattern are discussed. We point to the fact that neither polynomial functions of the third nor the fourth degree describe the relationship adequately: polynomials locate the minimum and the maximum imprecisely. In addition, our analysis discusses the indistinguishability of age, period, and cohort effects: we propose estimating age-period models that control for cohort effects including substantive variables, such as the life expectancy of the birth cohort, and further observed socioeconomic characteristics in the regression.
    Keywords: Subjective well-being, life satisfaction, semiparametric regression, penalized splines, age-period model, age-cohort model
    JEL: C14 C23 D10 I31
    Date: 2009

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