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on Economics of Ageing |
| By: | Susann Rohwedder |
| Abstract: | Some studies suggest that people can maintain their cognitive abilities through "mental exercise." This has not been unequivocally proven. Retirement is associated with a large change in a person's daily routine and environment. In this paper, the authors propose two mechanisms how retirement may lead to cognitive decline. For many people retirement leads to a less stimulating daily environment. In addition, the prospect of retirement reduces the incentive to engage in mentally stimulating activities on the job. They investigate the effect of retirement on cognition empirically using cross-nationally comparable surveys of older persons in the United States, England, and 11 European countries in 2004. They find that early retirement has a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. Identification is achieved using national pension policies as instruments for endogenous retirement. |
| Keywords: | cognition, retirement, human capital, international comparison, HRS, SHARE, ELSA |
| JEL: | I12 J24 J26 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ran:wpaper:711&r=age |
| By: | Alonso Ortiz, Jorge |
| Abstract: | There are large differences in the employment to population ratio relative to the US across OECD countries, and these differences are even larger for the old age (55-69 years). There are also large differences in various features of social security, such as the replacement rate, the entitlement age or whether it is allowed to collect social security and working. These observations suggest that they might be an important factor. I assess quantitatively this hypothesis using a life cycle general equilibrium model of retirement. I find that the differences in social security can indeed account for the differences in employment to population ratio at old age in the OECD. I also evaluate which features of social security are most important in this context and find that generosity and whether it allows collecting social security while working are the most important contributors. |
| Keywords: | Social security; retirement; idiosyncratic labor income risk |
| JEL: | J14 E24 H53 J26 |
| Date: | 2009–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18563&r=age |
| By: | Grip Andries de; Lindeboom Maarten; Montizaan Raymond (METEOR) |
| Abstract: | This paper assesses the impact of a dramatic reform of the Dutch pension system on mental health, savings behavior and retirement expectations of workers nearing retirement age. The reform means that public sector workers born on January 1, 1950 or later face a substantial reduction in their pension rights while workers born before this threshold date may still retire under the old, more generous rules. We employ a unique matched survey and administrative data set comprising male public sector workers born in 1949 and 1950 and find strong ex ante effects on mental health for workers who are affected by the reform. This effect increases as birth dates approach the threshold date. Furthermore, the effects differ in accordance with worker characteristics. Finally, we find that the response of those affected by the reform is to work longer and to save more. |
| Keywords: | labour economics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009043&r=age |
| By: | Voňková, Hana (Tilburg University); van Soest, Arthur (Tilburg University) |
| Abstract: | We study effects of financial incentives on the retirement age using stated preference data. Dutch survey respondents were given hypothetical retirement scenarios describing age(s) of (partial and full) retirement and replacement rate(s). A structural model is estimated in which utility is the discounted sum of within period utilities that depend on employment status and income. Parameters of the utility function vary with observed and unobserved characteristics. Simulations show that the income and substitution effects of pensions as a function of the retirement age are substantial and larger than according to studies using data on actual retirement decisions. |
| Keywords: | pensions, flexible retirement, gradual retirement, stated choices |
| JEL: | J22 J26 C81 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4505&r=age |
| By: | Annamaria Lusardi; Olivia S. Mitchell; Vilsa Curto |
| Abstract: | This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications. |
| JEL: | D14 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15469&r=age |
| By: | Javier OLIVERA |
| Abstract: | The distributional impact of the structural pension reform in Latin American countries has been largely absent in the economic debate. However, this reform may widen inequality in old-age and reduce welfare. In this paper we study the consequences of implementing a multi-pillar system in one of these countries. We take advantage of available administrative records for Peruvian workers to estimate inequality in pensions, pension debt and welfare. Overall, our results show that the pension debt and inequality can be substantially reduced without welfare losses. Thus, the proposed multi-pillar system allows recovering the principle of solidarity and saves fiscal resources. |
| Keywords: | Pension reform, pension inequality, social security, Latin America, Peru. |
| JEL: | H55 H63 I30 G23 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces09.11&r=age |
| By: | Hans Fehr (University of Würzburg); Fabian Kindermann (University of Würzburg) |
| Abstract: | The present paper Studies the growth and efficiency consequences of pension funding with individual retirement accounts in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We distinguish between economies with rational and hyperbolic consumers and compare the consequences of voluntary and mandatory retirement plans. Three major findings are derived in our study: First, we quantify the commitment effect of social security for myopic individuals by roughly 1 percent of aggregate resources. It is possible to recapture this commitment technology in IRAs, if those are annuitized. Second, despite the fact that our consumers have an operative bequest motive, the welfare gain from the (implicit) longevity insurance of the pension system is significant and amounts to roughly 0.5 percent of aggregate resources. However, mandatory annuitization reduces unintended bequests so that future generations are significantly hurt. Finally, our results highlight the importance of liquidity effects for social security analysis. These efficiency gains are only attainable if accounts are voluntary and not mandatory. |
| Keywords: | individual retirement accounts, annuities, stochastic general equilibrium, hyperbolic consumers |
| JEL: | H55 J26 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/11/doc2009-23&r=age |
| By: | Bert WEEMAES; Erik SCHOKKAERT |
| Abstract: | We use data from the Survey of Health, Ageing and Retirement in Europe (SHARE) to explain the amount of time invested in volunteering in eight European countries. Direct information on motivations adds to the explanation over and above the effect of socio-demographic variables. The results for specific motivations are in line with the predictions from rational choice theory. While larger levels of ‘warm glow’ and ‘instrumental’ motivations lead to more frequent volunteering, the influence of the ‘public good’ motivation on volunteering frequency is found to be negligible. |
| Keywords: | Volunteering, Motivations, Warm glow, Public good. |
| JEL: | J22 L31 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces09.09&r=age |
| By: | Ana Balsa (Health Economics Research Group, Department of Sociology, University of Miami); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Patricia Triunfo (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República) |
| Abstract: | This paper analyzes and compares socioeconomic inequalities in the use of healthcare services by the elderly in four South-American cities: Buenos Aires, Santiago, Montevideo and San Pablo. We use data from SABE, a survey on Health, Well-being and Aging administered in 2000. After having accounted for socioeconomic inequalities in healthcare needs, we find socioeconomic inequities favoring the rich in the use of preventive services (mammograms, pap tests, breast examinations, and prostate exams) in all of the studied cities. We also find inequities in the likelihood of having a medical visit in Santiago and Montevideo, and in some measures of quality of access in Santiago, Sao Paulo, and Buenos Aires. Santiago depicts the highest inequities in medical visits and Uruguay the worse indicators in mammograms and pap scans tests. For all cities, inequities in preventive services at least double inequities in other services. We do not find evidence of a trade-off between levels of access and equity in access to healthcare services. The decomposition of healthcare inequalities suggests that inequities within each health system are more important than between systems. |
| Keywords: | inequalities, healthcare, medical visit, preventive services |
| JEL: | I1 I11 I12 I18 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:1509&r=age |
| By: | Jarkko Harju (Government Institute for Economic Research) |
| Abstract: | Many countries tax voluntary pension savings using the so-called EET model, based on tax-deductible savings and taxable withdrawals. In Finland the tax reform of 2005 changed the tax rate schedule from progressive to proportional, while the basic structure of the EET model was retained. This paper studies empirically the savers’ behavioural changes as a result of the reform using individual level data. The econometric estimations indicate that the reform altered pension saving behaviour by reducing the labour income and age effects on saving contributions in a statistically significant way. Also, the reform reduced the number of pension savers among high income-earners. |
| Keywords: | voluntary pension savings, tax reform, tax incentives |
| JEL: | H2 H30 C24 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-22&r=age |
| By: | Christian E. Weller |
| Abstract: | <p>The United States experienced an unprecedented financial crisis after 2007. This paper analyzes if retirees had enough wealth built up to weather the financial risks that materialized in the crisis. Financial risks associated with saving for retirement had increasingly shifted onto individuals away from the public and employers during the decades before the crisis. This growing personal responsibility should have gone along with more saving and less risk taking. </p><p>This Working Paper uses data from the Federal Reserve’s triennial Survey of Consumer Finances to first define an income threshold for retirees, specifically whether annuity income is greater than twice the poverty line – a common proxy for basic income needs. Weller then calculates the potential retirement income that retirees could expect if they translated all of their wealth into income and if the income is adjusted for market, idiosyncratic, and longevity risks. He compares the potential risk-adjusted income for retirees with annuity income above twice the poverty line to those retirees with annuity income below twice the poverty line. </p><p>Both groups of retirees should have at least the same level of risk-adjusted potential retirement income. This comparison shows, however, that retirees with annuity income below twice the poverty line did not build up sufficient wealth to compensate for the rising financial risk exposure. Public policy thus should maintain existing sources of annuity income, promote greater annuitization of financial wealth, and encourage additional savings. <p> </p> </p> |
| Keywords: | Retirement income adequacy; personal saving; financial risks |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:uma:periwp:wp206&r=age |
| By: | Kerstin Roeder (Universität Augsburg) |
| Abstract: | This paper derives the optimal pension and tax parameters in a society where individuals differ in two characteristics: rationality and productivity. Rational agents, if not liquidity constrained, smooth consumption over their life-cycle. Myopic agents, by contrast, have ex ante a strong preference for the present and undertake no savings, even though, ex post they regret their decision. Given a paternalistic social objective aiming at maximizing the sum over ex post utilities, this paper shows how both transfer systems interact in their degree of redistribution and generosity. Moreover, it reveals how the optimal policy parameters change if capital markets are imperfect, implying that agents cannot borrow against their retirement benefits. Analytical and numerical results show that in some cases only one transfer system prevails. |
| Keywords: | Social security, redistributive taxation, myopia, credit constraints |
| JEL: | H21 H55 D91 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-28&r=age |
| By: | Hallberg, Daniel (Institute for Futures Studies) |
| Abstract: | <p> In Sweden the most part of intergenerational transfers are made through the public sector. While our knowledge about the economic life cycle is far from complete we face new challenges with an ageing population. This paper discusses the demographic trends and relationship with the economic life cycle. Some possibilities to meet the problems associated with ageing are discussed.<p> |
| Keywords: | ageing population; economic life cycle; retirement; human capital |
| JEL: | J11 J14 |
| Date: | 2009–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2009_018&r=age |