nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒08‒22
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Monetizing Housing Equity to Generate Retirement Incomes By Ngee-Choon Chia; Albert K C Tsui
  2. Cognition and Economic Outcomes in the Health and Retirement Survey By John J. McArdle; James P. Smith; Robert Willis
  3. International Differences in Longevity and Health and Their Economic Consequences By Michaud, Pierre-Carl; Goldman, Dana P.; Lakdawalla, Darius N.; Zheng, Yuhui; Gailey, Adam H.
  4. Should Pension Systems Recognise "Hazardous and Arduous Work"? By Asghar Zaidi; Edward R. Whitehouse
  5. Improving the Functioning of the Slovenian Labour Market By Isabell Koske
  6. Understanding the Economic Consequences of Shifting Trends in Population Health By Michaud, Pierre-Carl; Goldman, Dana P.; Lakdawalla, Darius N.; Zheng, Yuhui; Gailey, Adam H.
  7. Aging, religion, and health By Angus S. Deaton
  8. Population and Health Policies By Schultz, T. Paul
  9. Variance in Death and Its Implications for Modeling and Forecasting Mortality By Shripad Tuljapurkar; Ryan D. Edwards

  1. By: Ngee-Choon Chia (Department of Economics, National University of Singapore); Albert K C Tsui (Department of Economics, National University of Singapore)
    Abstract: The public housing program and the unique way of financing housing through the mandatory savings system in Singapore have created a class of homeowners. This paper compares the instruments available to different flat owners to monetize their assets, including the Lease Buyback Scheme (LBS), subletting, downsizing and reverse mortgage. We estimate the present value of retirement incomes derived from these options by incorporating the survival probability which is forecasted using the Lee-Carter demographic model. We compare the monthly payouts that can be unlocked and discuss the tradeoffs of adequate retirement with the elderly preference for leaving a bequest and ageing in place. Our results show that LBS is the most attractive option. It allows the elderly to age-inplace while generating a steady stream of monthly drawdown and possibility of leaving a bequest. Subletting releases housing equity while retaining the asset. This helps the elderly to fulfill their bequest motive. Reverse mortgage is the least attractive option, yielding the lowest retirement income due to high loading factors.
    Date: 2009–07
  2. By: John J. McArdle; James P. Smith; Robert Willis
    Abstract: Dimensions of cognitive skills are potentially important but often neglected determinants of the central economic outcomes that shape overall well-being over the life course. There exists enormous variation among households in their rates of wealth accumulation, their holdings of financial assets, and the relative risk in their chosen asset portfolios that have proven difficult to explain by conventional demographic factors, the amount of bequests they receive or anticipating giving, and the level of economic resources of the household. These may be cognitively demanding decisions at any age but especially so at older ages. This research examines the association of cognitive skills with wealth, wealth growth, and wealth composition for people in their pre and post-retirement years.
    JEL: J0
    Date: 2009–08
  3. By: Michaud, Pierre-Carl (RAND); Goldman, Dana P. (RAND); Lakdawalla, Darius N. (RAND); Zheng, Yuhui (RAND); Gailey, Adam H. (RAND)
    Abstract: In 1975, 50 year-old Americans could expect to live slightly longer than their European counterparts. By 2005, American life expectancy at that age has diverged substantially compared to Europe. We find that this growing longevity gap is primarily the symptom of real declines in the health of near-elderly Americans, relative to their European peers. In particular, we use a microsimulation approach to project what US longevity would look like, if US health trends approximated those in Europe. We find that differences in health can explain most of the growing gap in remaining life expectancy. In addition, we quantify the public finance consequences of this deterioration in health. The model predicts that gradually moving American cohorts to the health status enjoyed by Europeans could save up to $1.1 trillion in discounted total health expenditures from 2004 to 2050.
    Keywords: disability, mortality, international comparisons, microsimulation
    JEL: I10 I38 J26
    Date: 2009–08
  4. By: Asghar Zaidi; Edward R. Whitehouse
    Abstract: Special pensions for workers in hazardous or arduous jobs have long been a feature of the pension landscape and, recently, they are the subject of a great deal of debate in the pension arenas of many OECD countries. Such pensions are historically rooted in the idea that people who work in hazardous or arduous jobs – say, underground mining – merit special treatment. The rationale for this scheme is that hazardous or arduous work increases mortality and reduces life expectancy, thus reducing the time during which retirement benefits can be enjoyed. This results in such workers being made eligible for earlier access to pension benefits than otherwise available in that country’s general pension scheme...<BR>Les régimes de retraite spéciaux pour les professions dangereuses ou pénibles existent de longue date. Depuis quelques temps, ils suscitent de multiples débats dans de nombreux pays de l’OCDE. Ces régimes ont pour origine l’idée selon laquelle les personnes qui exercent un métier dangereux ou pénible, l’exploitation minière souterraine par exemple, méritent un traitement particulier. Cette idée se justifie par le fait que ces métiers augmentent la mortalité et diminuent l’espérance de vie, réduisant ainsi la période pendant laquelle les personnes qui les exercent peuvent profiter de leurs prestations de retraite. C’est pourquoi elles ont le droit de partir à la retraite avant l’échéance fixée par le régime de retraite général national...
    Keywords: pensions, retraites, working conditions, conditions de travail, hazardous job, emploi à risque, arduous job, pénébilité du travail
    JEL: H55 J81
    Date: 2009–08–10
  5. By: Isabell Koske
    Abstract: Labour market outcomes have improved markedly in the past years as the beneficial effects of the economic upswing were reinforced by important structural reforms.With the economy on the verge of a severe economic downturn, it is important to avoid alleviating measures that adversely affect the functioning of the labour market in the long run. Moreover, several structural challenges remain which require further reform efforts. Firstly, to raise labour force participation of the elderly the pension system needs to be reformed by removing incentives for early retirement and facilitating gradual exits from the labour force. Secondly, to increase employment rates of younger age cohorts, the length of tertiary studies needs to be reduced by strengthening incentives for rapid graduation. Moreover, potential negative employment effects associated with the relatively high minimum wage compared to the average wage should be avoided. Thirdly, to combat increasing labour market dualism, employment protection legislation on regular work contracts needs to be eased once the current economic crisis subsides and the preferential treatment of student work should be phased out. This Working Paper relates to the 2009 OECD Economic Survey of the Slovenia.<P>Améliorer le fonctionnement du marché de travail de la Slovénie<BR>La situation du marché du travail s’est nettement améliorée ces dernières années, sous l’effet cumulé du redressement économique et d’importantes réformes structurelles. Face à la menace imminente d’un ralentissement économique grave, il est essentiel d’éviter toute mesure de soutien qui pourrait nuire au bon fonctionnement du marché du travail à terme. Des efforts restent en outre à fournir en matière de réformes pour remédier à certaines difficultés structurelles. Tout d’abord, le régime de retraite doit être remanié afin d’améliorer le taux d’activité des travailleurs âgés, en éliminant les incitations à la retraite anticipée et en facilitant la sortie progressive de la population active. Ensuite, pour stimuler l’emploi des jeunes, il faut réduire la durée des études supérieures, en renforçant les mesures d’incitation à l’obtention rapide des diplômes, et éviter par ailleurs les effets potentiellement négatifs sur l’emploi du niveau relativement élevé du salaire minimum. Enfin, pour lutter contre le dualisme croissant du marché du travail, on devra assouplir la législation sur la protection de l’emploi pour les contrats de travail réguliers une fois la crise économique dissipée, et il convient aussi de supprimer progressivement le traitement préférentiel appliqué à l’emploi des étudiants. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Slovénie 2009.
    Keywords: taux d'activité, Slovenia, Slovénie, labour force participation, labour market dualism, dualisme du marché du travail
    JEL: J21 J22 J26 J32
    Date: 2009–08–03
  6. By: Michaud, Pierre-Carl (RAND); Goldman, Dana P. (RAND); Lakdawalla, Darius N. (RAND); Zheng, Yuhui (RAND); Gailey, Adam H. (RAND)
    Abstract: The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy − with a concomitant decrease in the public-sector's annuity burden − but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.
    Keywords: disability, health care costs, social security, microsimulation
    JEL: I10 I38 J26
    Date: 2009–08
  7. By: Angus S. Deaton
    Abstract: Durkheim’s famous study of suicide is a precursor of a large contemporary literature that investigates the links between religion and health. The topic is particularly germane for the health of women and of the elderly, who are much more likely to be religious. In this paper, I use data from the Gallup World Poll to study the within and between country relationships between religiosity, age, and gender, as well as the effects of religiosity on a range of health measures and health-related behaviors. The main contribution of the current study comes from the coverage and richness of the data, which allow me to use nationally representative samples to study the correlates of religion within and between more than 140 countries using more than 300,000 observations. It is almost universally true that the elderly and women are more religious, and I find evidence in favor of a genuine aging effect, not simply a cohort effect associated with secularization. As in previous studies, it is not clear why women are so much more religious than men. In most countries, religious people report better health; they say they have more energy, that their health is better, and that they experience less pain. Their social lives and personal behaviors are also healthier; they are more likely to be married, to have supportive friends, they are more likely to report being treated with respect, they have greater confidence in the healthcare and medical system and they are less likely to smoke. But these effects do not all hold in all countries, and they tend to be stronger for men than for women.
    JEL: I10 Z12
    Date: 2009–08
  8. By: Schultz, T. Paul (Yale University)
    Abstract: The program evaluation literature for population and health policies is in flux, with many disciplines documenting biological and behavioral linkages from fetal development to late life mortality, chronic disease, and disability, though their implications for policy remain uncertain. Both macro- and microeconomics seek to understand and incorporate connections between economic development and the demographic transition. The focus here is on research methods, findings, and questions that economists can clarify regarding the causal relationships between economic development, health outcomes, and reproductive behavior, which operate in many directions, posing problems for identifying causal pathways. The connection between conditions under which people live and their expected life span and health status refers to "health production functions." The relationships between an individual's stock of health and productivity, well-being, and duration of life encompasses the "returns to health human capital." The control of reproduction improves directly the well-being of women, and the economic opportunities of her offspring. The choice of population policies may be country specific and conditional on institutional setting, even though many advances in biomedical and public health knowledge, including modern methods of birth control, are now widely available. Evaluation of a policy intervention in terms of cost effectiveness is typically more than a question of technological efficiency, but also the motivation for adoption, and the behavioral responsiveness to the intervention of individuals, families, networks, and communities. Well-specified research strategies are required to address (1) the economic production of health capacities from conception to old age; (2) the wage returns to increasing health status attributable to policy interventions; (3) the conditions affecting fertility, family time allocation, and human capital investments; and (4) the consequences for women and their families of policies which change the timing as well as number of births.
    Keywords: fertility and family planning, biology of health human capital, economic development, health
    JEL: D13 I18 J13 O12
    Date: 2009–08
  9. By: Shripad Tuljapurkar; Ryan D. Edwards
    Abstract: Entropy, or the gradual decline through age in the survivorship function, reflects the considerable amount of variance in length of life found in any human population. Part is due to the well-known variation in life expectancy between groups: large differences according to race, sex, socioeconomic status, or other covariates. But within-group variance is very large even in narrowly defined groups, and it varies strongly and inversely with the group average length of life. We show that variance in length of life is inversely related to the Gompertz slope of log mortality through age, and we reveal its relationship to variance in a multiplicative frailty index. Our findings bear a variety of implications for modeling and forecasting mortality. In particular, we examine how the assumption of proportional hazards fails to account adequately for differences in subgroup variance, and we discuss how several common forecasting models treat the variance along the temporal dimension.
    JEL: I1 J11 N3
    Date: 2009–08

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