nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒09‒19
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Towards an actuarially fair pension system in Norway By Ugo Colombino; Erik Hernæs; Marilena Locatelli; Steinar Strøm
  2. How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness By Annamaria Lusardi; Olivia S. Mitchell
  3. Le vieillissement de la population carcérale sous responsabilité fédérale au Canada: Vers de «pénitenciers-hospices» ? By Anne-Laure Tesseron
  4. The long-run impacts of adult deaths on older household members in Tanzania By Adhvaryu, Achyuta R.; Beegle, Kathleen
  5. Optimal savings and heallth spending over the life cycle By Tamara Fioroni
  6. La «migration de remplacement» au Québec: à quel point peut-on compter sur l’immigration pour contrer les problèmes démographiques appréhendés? By Guillaume Marois
  7. Decreasing Fertility, Economic Growth and the Intergenerational Wage Gap By Klaus Prettner; Alexia Prskawetz
  8. Asymptotic age structures and intergenerational trade By Grégory Ponthière
  9. PAYG Pensions and Human Capital Accumulation: Some Unpleasant Arithmetic By Giam Pietro Cipriani; Miltiadis Makris

  1. By: Ugo Colombino; Erik Hernæs; Marilena Locatelli; Steinar Strøm
    Abstract: In order to estimate labour supply responses among older people we have employed a very simple model of retirement decisions that can be estimated on a single cross-section sample, and still be given a structural interpretation in terms of inter-temporal decisions. The model is estimated on Norwegian register data from 1996, which covers all Norwegians aged 55-68 in 1996. The empirical model is employed to assess the impact on retirement of moving the Norwegian pension system towards actuarial fairness. Future annual pension benefits are increased if retirement is postponed say, for one year. In one of the simulations future annual benefits are increased by NOK 8,000 (as of April 2009 1 Euro~ NOK 8.7), which is around 5 per cent of the average pension benefit in 1996 and corresponds approximately to the adjustment in the new pension system which comes into effect 1. January 2011. The number of men and women choosing retirement is reduced by around 5 per cent, given that there is no consumption smoothing. When perfect consumption smoothing is assumed the reduction is much larger; 18 per cent in the case of men and 14 per cent in the case of women. These reductions are really sizeable and indicate that pension reforms, combined with removing constraints in the credit market, may be of great importance in giving the individuals incentive to prolong their working life.
    Keywords: Retirement, inter-temporal interpretation, estimates and policy simulations, Norway
    JEL: D10 H55 J26
    Date: 2009–04
  2. By: Annamaria Lusardi; Olivia S. Mitchell
    Abstract: This paper reports on several self-assessed and objective measures of financial literacy newly added to the American Life Panel (ALP), and it links these performance measures to efforts consumers make to plan for retirement. We evaluate the causal relationship between financial literacy and retirement planning by exploiting information about respondents’ financial knowledge acquired in school - before entering the labor market and certainly before starting to plan for retirement. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready.
    JEL: D91
    Date: 2009–09
  3. By: Anne-Laure Tesseron
    Abstract: The ageing of the prison population under federal responsibility is a more and more obvious phenomenon in Canadian penitentiaries, as is the increase in the number of prisoners of 50 years and over. The stakes connected with these two phenomena are many and constitute major challenges for the correctional authorities in providing health services, in finding the necessary material and financial resources, and in reorganizing the penitentiaries. This report has as its objective, on one hand to analyze the process of ageing of the prison population and, on the other, to forecast the number of prisoners of 50 years and over. This will allow us to answer our main research question: are we moving towards "penitentiary-homes"? The data were supplied by the Correctional Service of Canada for 2001-2002 to 2006- 2007 and result from a vast data base which is constantly enriched: The Criminal Justice Information Library. From these data, several indicators were calculated. The mean and median ages of various classes of prisoners allowed us to estimate the prison ageing while the rates of flow in and out of the system make possible projections of the prison population. We found an increase of the mean and median ages of the prisoners condemned to long sentences, combined with a slight increase in the age of admittance. However both age and age at the time of admission were relatively stable for those with short sentences. These observations confirm what had been observed in the literature: the ageing of the prison population can be explained largely by the existing penal system and the increasing severity of legislated penalties. In a second step, the projections of population highlighted a net increase of the number of prisoners of 50 years and over from 2007 till 2017 if current practices persist. So, penitentiaries have to face not only an ageing of their population but also an increase in the number of older prisoners. These two phenomena will change inexorably the organization of the federal establishments even if older prisoners remain a minority. The correctional authorities will have to adjust to this new prison reality.
    Keywords: Prison population, prison ageing, old prisoners, projections, Canada
    JEL: J11
    Date: 2009–08
  4. By: Adhvaryu, Achyuta R.; Beegle, Kathleen
    Abstract: HIV/AIDS is drastically changing the demographic landscape in high-prevalence countries in Africa. The prime-age adult population bears the majority of the mortality burden. These “missing” prime-age adults have implications for the socioeconomic well-being of surviving family members. This study uses a 13-year panel from Tanzania to examine the impacts of prime-age mortality on the time use and health outcomes of older adults, with a focus on long-run impacts and gender dimensions. Prime-age deaths are weakly associated with increases in working hours of older women when the deceased adult was co-resident in the household. The association is strongest when the deceased adult was living with the elderly individual at the time of death and for deaths in the distant past, suggesting that shorter-run studies may not capture the full extent of the consequences of adult mortality for survivors. Holding more assets seems to buffer older adults from having to work more after these shocks. Most health indicators are not worse for older adults when a prime-age household member died, although more distant adult deaths are associated with an increased probability of acute illness for the surviving elderly. For deaths of children who were not residing with their parents at baseline, the findings show no impact on hours worked or health outcomes.
    Keywords: Population Policies,Health Monitoring&Evaluation,Gender and Health,Demographics,Gender and Social Development
    Date: 2009–09–01
  5. By: Tamara Fioroni
    Abstract: This paper investigates the relationship between saving and health spending in a two-period overlapping generations economy. Individuals work in the first period of life and live in retirement in old age. Health spending is an activity that increases the quality of life and longevity. Empirical evidence shows that both health spending and saving behave as luxury goods but their behavior differs markedly according to the level of per capita GDP. The share of saving on GDP has a concave shape with respect to per capita GDP, whereas the share of health spending on GDP increases more than proportionally with respect to per capita GDP. Their ratio is nonlinear with respect to income, i.e. first increasing and then decreasing. This ratio, in the proposed model, is equal to the ratio between the elasticity of the utility function with respect to saving and the elasticity of the utility function with respect to health.
    Keywords: Intertemporal Choice, Health Spending, Adult Mortality, Saving
    JEL: D91 I12 E21
    Date: 2009–02
  6. By: Guillaume Marois
    Abstract: Quebec, as most Western societies, is facing the ageing of its population, producing many economic, political and social impacts. One solution often considered is to rely on immigration to reduce, delay or even counter certain consequences. For this purpose, replacement migration is sometimes seen as a solution: it aims to establish the number of immigrants needed to reach specific demographic targets, which are, in this study, to prevent total population decline, to prevent working-age population decline and to prevent the percentage of those 65 years and over from exceeding 25% of the total population. The results show that it could be possible for Quebec to prevent the decline of its population if fertility does not decrease further and if immigration is well managed; that is replacement migration would not be excessively high. However, raising the immigration level too quickly could impede reaching this objective. The decline of the population aged between 20 and 64 years is inevitable: whatever the level of fertility, even if migration were much higher for the next two decades than has been planned for Quebec. Finally, immigration has no significant impact on the age structure of a population: it is quite unrealistic to expect this component to prevent the percentage of those 65 years and over in the total population from exceeding 25%. The only way to reach this objective is a rapid increase of fertility to the replacement level. This means that immigration can in no way prevent the ageing of the population or have a significant impact on the process.
    Keywords: Replacement migration, Quebec, immigration, demography, population, ageing, workforce, fertility, projections
    JEL: J11
    Date: 2009–08
  7. By: Klaus Prettner; Alexia Prskawetz
    Abstract: Persistent low fertility rates lead to lower population growth rates and eventually also to decreasing population sizes in most industrialized countries. There are fears that this demographic development is associated with declines in per capita GDP and possibly also increasing inequality of the wage distribution. We investigate whether this is true in the context of neoclassical growth models, augmented with endogenous fertility decisions and endogenous educational decisions. Furthermore we allow for imperfect substitutability across workers of different age in the production process and learning by doing effects as well as human capital depreciation. In particular, we assess the intergenerational wage redistribution effects which follow after a demographic change to persistent low fertility rates.
    Keywords: Population decline, economic growth, intergenerational wage gap.
    Date: 2009–08
  8. By: Grégory Ponthière
    Abstract: While demographers Lotka (1939) and Lopez (1961) proposed conditions on (exogenous) fertility and mortality laws under which populations with distinct initial age structures exhibit the same asymptotic age structure, this paper re-examines the issues of age structure stabilization and convergence, by considering a population whose fertility and mortality are endogenously determined in the economy. For that purpose, we develop a three-period OLG model where human capital accumulation and intergenerational trade affect fertility and longevity. It is shown that the age structure must converge asymptotically towards a stable structure, whose form depends on the structural parameters of the economy. Moreover, populations with distinct initial age structures will end up with the same long-run age structure when fertility and mortality laws are converging, which requires converging terms of trade between coexisting generations in the different populations under study.
    Date: 2009
  9. By: Giam Pietro Cipriani; Miltiadis Makris
    Abstract: A large literature has studied the effects of PAYG systems on fertility, human capital and growth. We argue that the social security system may also interact with longevity when the latter is endogenously determined. We show that in such an environment, in a dynamically efficient economy PAYG pensions must be sufficiently low in order to ensure positive economic growth. Moreover, a transition to a funded social security system will promote growth, and can thereby take place by fully compensating the losers.
    Keywords: Pensions, Human Capital, Growth, Endogenous Longevity
    JEL: H55 J10 O10
    Date: 2009–07

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