nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒10‒10
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement By Courtney Coile; Phillip B. Levine
  2. Does the Welfare State Make Older Workers Unemployable? By Saint-Paul, Gilles
  3. Meet the Parents? The Causal Effect of Family Size on the Geographic Distance between Adult Children and Older Parents By Holmlund, Helena; Rainer, Helmut; Siedler, Thomas
  4. The Role of Demographics in Precipitating Crises in Financial Institutions By Macunovich, Diane
  5. Ageing and Export Dependency By Vistesen, Claus
  6. Examining the Role of Demographic Change in the Decline in Male Employment in Australia: A Propensity Score Re-weighting Decomposition Approach By David Black; Yi-Ping Tseng; Roger Wilkins

  1. By: Courtney Coile; Phillip B. Levine
    Abstract: Recent dramatic declines in U.S. stock and housing markets have led to widespread speculation that shrinking retirement accounts and falling home equity will lead workers to delay retirement. Yet the weakness in the labor market and its impact on retirement is often overlooked. If older job seekers have difficulty finding work, they may retire earlier than expected. The net effect of the current economic crisis on retirement is thus far from clear. In this paper, we use 30 years of data from the March Current Population Survey to estimate models relating retirement decisions to fluctuations in equity, housing, and labor markets. We find that workers age 62 to 69 are responsive to the unemployment rate and to long-run fluctuations in stock market returns. Less-educated workers are more sensitive to labor market conditions and more-educated workers are more sensitive to stock market conditions. We find no evidence that workers age 55 to 61 respond to these fluctuations or that workers at any age respond to fluctuating housing markets. On net, we predict that the increase in retirement attributable to the rising unemployment rate will be almost 50 percent larger than the decrease in retirement brought about by the stock market crash.
    JEL: J26 J64 R23
    Date: 2009–10
  2. By: Saint-Paul, Gilles (University of Toulouse I)
    Abstract: This paper discusses the specificities of the labor market for older workers. It discusses the implications of those specificities for the effect of labor market institutions on the employability of those workers. It shows that while unemployment benefits indexed backwards and hiring costs are likely to harm these workers more than the average worker, the converse is true for employment protection, provided it is uniform across workers and not specifically higher for older workers. It provides some evidence on the impact of labor market institutions on older workers by comparing their outcome in the United States and France. It discusses how the welfare state can be reformed in order to improve outcomes for older workers.
    Keywords: older workers, labor market institutions, employment, employment protection, welfare state, pensions, retirement
    JEL: J23 J24 J26 J31
    Date: 2009–09
  3. By: Holmlund, Helena (CEP, London School of Economics); Rainer, Helmut (University of St. Andrews); Siedler, Thomas (DIW Berlin)
    Abstract: An emerging question in demographic economics is whether there is a link between family size and the geographic distance between adult children and elderly parents. Given current population trends, understanding how different configurations of family size and sibship influence patterns of child-parent proximity is vitally important, as it impacts on issues such as intergenerational care and everyday mobility. It may be the case, for example, that larger families enable the responsibility of care for older parents to be shared among more siblings, possibly decreasing individual involvement and relaxing constraints on geographic mobility. However, there is no causal evidence to date on this issue. This study is the first attempt to estimate the causal effect of sibship size on the geographic distance between older parents and adult children by using a large administrative data set from Sweden. We find a positive association between sibship size and child-parent geographic distance. However, when we use multiple births and sibship sex composition as instruments for family size, we do not find any evidence that the observed positive relationship represents a causal effect. Given that family sizes are continuing to fall in many developed countries, our findings suggest that the trend towards smaller families will not necessarily result in adult children being more constrained in terms of their geographic location decisions, at least in countries with extensive state-provision of elderly care.
    Keywords: child-parent geographic proximity, family size
    JEL: J10 C10
    Date: 2009–09
  4. By: Macunovich, Diane (University of Redlands)
    Abstract: There are significant effects of changing demographics on economic indicators: growth in GDP especially, but also the current account balance and gross capital formation. The 15-24 age group appears to be one of the key age groups in these effects, with increases in that age group exerting strong positive effects on GDP growth, and negative effects on the CAB and GCF. There have been major shifts in the share of the population aged 15-24 during the past half century or more, many of which correspond closely to periods of institutional turmoil. The hypothesis presented in this paper is that increases in the share of the 15-24 age group lead producers to ratchet up their production expectations and take out loans to expand production capacity; but then reductions in that share – or even declining rates of increase – confound these expectations and precipitate a downward spiral of missed loan payments and even defaults and bankruptcies, putting pressure on central banks and causing foreign investors to withdraw funds and speculators to unload the local currency. This appears to have been the pattern not only during the 1996-98 crisis with the Asian Tigers, but also during the "Tequila" crisis of the early 1990s, the crises that occurred in the early 1980s among developed as well as developing nations, and the economic problems Japan has experienced since about 1990. The effect appears to be even more pronounced for the current 2008-2009 period.
    Keywords: age structure, currency crisis, demographic change, financial crisis
    JEL: J1 E3 F3 F4
    Date: 2009–09
  5. By: Vistesen, Claus
    Abstract: The primary manifestation of the demographic transition in a modern economic context is through ageing and the primary transmission from ageing to the macro economy is through its effect on saving and investment behavior. These two effects taken together suggest a strong impact from the continuing process of ageing on international capital flows and global macroeconomic imbalances. This paper explores the potential relationship between ageing on a macroeconomic level and the reliance, or outright dependency, on exports and foreign asset income to achieve economic growth. The paper’s argument is both theoretical and empirical. Using a standard overlapping generation framework (OLG) in an open economy context this paper discusses whether the proposed relationship between a transition into old age and dissaving is feasible and desirable (or even optimal?). Finally, an empirical analysis is presented on Germany and Japan to show how these two economies, as the oldest in the world, may exactly be in a state of export dependency.
    Keywords: demographics; international capital flows; open economy macroeconomics; ageing; intertemporal choice;
    JEL: D91 F41 J11
    Date: 2009–10–01
  6. By: David Black (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Brotherhood of St Laurence); Yi-Ping Tseng (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Brotherhood of St Laurence); Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Using Australian data spanning the period 1981 to 2001, we apply a propensity score reweighting decomposition approach to investigate the extent to which the large decline in the male employment-population rate over this period can be attributed to changes in sociodemographic characteristics. We find that changes in observed characteristics account for little of the aggregate decline. However, changes in characteristics are found to be important for population sub-groups. In particular, changes in partner status and partner employment status have acted to decrease employment rates of younger males, but increase employment rates of older males. A further finding is that, holding observed characteristics constant, there has been a very large decline in the employment rate of 55-64 year olds with bachelor degree qualifications. In the course of applying the decomposition method, we illustrate that validity of inferences depends on ‘appropriate’ specification of the re-weighting function.
    Date: 2009–09

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