nep-age New Economics Papers
on Economics of Ageing
Issue of 2009‒12‒19
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Aging, cognitive abilities and retirement in Europe By Fabrizio Mazzonna; Franco Peracchi
  2. Population Aging and the Direction of Technical Change By Irmen, Andreas
  3. Heterogeneity matters: labour productivity differentiated by age and skills By Muriel Roger; Malgorzata Wasmer
  4. The Role of International Diversification in Public Pension Systems: The Case of Pakistan By Pfau, Wade Donald
  5. On the Causal Impact of Relational Goods on Happiness By Leonardo Becchetti; Elena Giachin Ricca; Alessandra Pelloni
  6. How Representative are Representative Workers? An Assessment of the Hypothetical Workers Commonly Used in Social Security Studies By Pfau, Wade Donald
  7. Demographic and Economic Trends: Implications for International Mobility By Martin, Philip
  8. The Funded Pension Scheme in Uzbekistan: An Analysis By Khasanbaev, Alisher; Pfau, Wade Donald
  9. New Forms of Employment and the Social Security System: The Case of Germany By Fachinger, Uwe / UF
  10. Pension Reform: How Canada can Lead the World By Keith Ambachtsheer
  11. Remittances, Living Arrangements, and the Welfare of the Elderly By Pfau, Wade Donald; Giang, Thanh Long
  12. Départ des travailleurs âgés et formation continue dans les entreprises innovantes By Luc Behaghel; Eve Caroli; Muriel Roger
  13. Should Canada Diversify its Trade Pattern? An Overlapping- Generations CGE Analysis of Trade and Ageing By Patrick Georges; Marcel Mérette; Aylin Seckin§
  14. Demographic Changes and the Gains from Globalisation: An Overlapping Generations CGE Analysis By Marcel Mérette; Patrick Georges
  15. Unfunded pensions and endogenous labor supply By Torben M. Andersen; Joydeep Bhattacharya

  1. By: Fabrizio Mazzonna (Faculty of Economics, University of Rome "Tor Vergata"); Franco Peracchi (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We investigate the relationship between aging, cognitive abilities and retirement using the Survey on Health, Aging and Retirement in Europe (SHARE), a longitudinal survey that offers the possibility of comparing several European countries using nationally representative samples of the population aged 50+. We use a version of the model proposed by Grossman (1972) as a guide for our empirical specification of the age-profile of cognitive abilities. According to the model, retirement plays a fundamental role in explaining the process of cognitive deterioration. Our empirical results confirm this key prediction. They also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities.
    Keywords: Aging; cognitive abilities; retirement; education; SHARE
    JEL: J14 J24 C23
    Date: 2009–12–04
  2. By: Irmen, Andreas
    Abstract: An analytical framework is developed to study the repercussions between endogenous capital- and labor-saving technical change and population aging. Following an intuition often attributed to Hicks (1932), I ask whether and how population aging affects the relative scarcity of factors of production, relative factor prices, and the direction of induced technical change. Aging is equivalent to an increase in the old-age dependency ratio of an OLG-economy with two-period lived individuals. In this framework aging increases the relative scarcity of labor with respect to capital. Therefore, there will be more labor- and less capital-saving technical change. Unless there are contemporaneous knowledge spillovers across innovating firms technical change induced by a small increase in the old-age dependency ratio has no first-order effect on current GDP. The presence of capital-saving technical change is shown to imply that the economy's steady-state growth rate is independent of its age structure.
    Keywords: Demographic Transition; Capital Accumulation; Direction of Technical Change
    JEL: O41 O33 D92 D91
    Date: 2009–12–11
  3. By: Muriel Roger; Malgorzata Wasmer
    Abstract: This study aims at evaluating the actual profile of marginal productivity across the age groups within the workforce. As age-productivity profile might differ between occupations, we differentiate the workforce simultaneously by skills (low-skilled, high-skilled) and by age (young, middle-aged, old). Estimating a production function with a nested constant-elasticity-of-substitution (CES) specification in labour allows the imperfect substitution between different categories of workers. We use French dataset for manufacturing, services and trade sectors. Labour productivity is found to be the lowest for the low-skilled older workers while high-skilled senior employees in manufacturing and trade are the most productive group. Throughout the sectors, wage rates vary considerably less than productivity and wage profiles are steeper for high-skilled workers. The relative productivity over wage ratio is found to be sector-specific. It is the highest for young workers in manufacturing while in services and trade it is the highest for the mid-age employees.
    Date: 2009
  4. By: Pfau, Wade Donald
    Abstract: Pakistan’s pension system is in the process of increasing funding in anticipation of providing for a growing elderly population. The pension assets are mainly invested domestically, as it was just in January 2007 that regulations changed to allow the purchase of international assets. In this paper, we quantify how diversification of the pension funds to include world financial assets could help a great deal in improving the sustainability of Pakistan pensions by simultaneously increasing expected returns and decreasing volatility. These arguments are made using historical data, and the robustness of our findings is demonstrated using a large variety of alternative assumptions about future asset returns, risks, and correlations. We find that international diversification could dramatically help to create sustainability for Pakistan’s main public pension system available to private workers.
    Keywords: pension; asset allocation; financial markets; Asia; Pakistan
    JEL: G11 H55 G23
    Date: 2009–09
  5. By: Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Elena Giachin Ricca (Faculty of Economics, University of Rome "Tor Vergata"); Alessandra Pelloni (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We study the effect of relational goods on life satisfaction. We consider that retirement is an event after which the time investable in personal relationships increases so we instrument social life, which we suspect of being endogenous, with the sample proportion of retired by year. With such approach we document that relational goods have a positive and significant effect on life satisfaction.
    Keywords: life satisfaction, relational goods, social capital.
    JEL: I30 D61 A11 A13
    Date: 2009–12–04
  6. By: Pfau, Wade Donald
    Abstract: An understanding of the financial and distributional consequences of Social Security reform requires knowledge about the actual life circumstances of participants, including the level and pattern of their lifetime earnings and when they retire. Some analyses of Social Security reform make simplifying assumptions about these characteristics by using “hypothetical workers” with set career paths. We seek to develop greater understanding about actual lifetime earnings patterns to compare with hypothetical workers and find discrepancies which lead typical hypothetical workers to produce a more favorable impression for defined-contribution pension reforms. We suggest modifications to make a more suitable hypothetical worker.
    Keywords: Social Security; Hypothetical Workers; Defined-Contribution Pensions
    JEL: H55
    Date: 2009–06
  7. By: Martin, Philip
    Abstract: About three percent of the world’s 6.1 billion people were international migrants in 2000. Population growth is expected to slow between 2000 and 2050 in comparison to 1950-2000, but international migration is expected to rise as persisting demographic and economic inequalities that motivate migration interact with revolutions in communications and transportation that enable people to cross borders. The default policy option to manage what is sometimes deemed out-of-control migration, adjusting the rights of migrants, is unsatisfactory, prompting this review of longer term factors affecting migration patterns, including aging in industrial countries, rural-urban migration that spills over national borders, and the migration infrastructure of agents and networks that moves people. The paper concludes with an assessment of the likely effects of the 2008-09 recession on international migration.
    Keywords: Global population and labor force; aging; international migration; rural-urban migration; recession and migration
    JEL: O15 J0
    Date: 2009–05–01
  8. By: Khasanbaev, Alisher; Pfau, Wade Donald
    Abstract: In recent years, the share of elderly in the total population is increasing around the world. Rising proportionally are claims on public pension systems and health care expenditures. This places extra pressure on government budgets. As a result, countries which implement only pay-as-you-go pensions face fiscal deficits. This paper examines Uzbekistan’s statutory pension system, which consists of two pillars: a public pay-as-you-go defined-benefit pension scheme, and a mandatory public funded defined-contribution scheme. We focus in particular on the funded scheme and evaluate ways to improve it by considering the achievements of other developing and transitioning countries in similar positions. The analysis focuses on the choice of fund ownership, contribution rates, investment returns, the population coverage rate, and the feasibility of further reforms.
    Keywords: pensions; pension reform; defined-contribution; Uzbekistan
    JEL: H55
    Date: 2009–03
  9. By: Fachinger, Uwe / UF
    Abstract: The aim of the study is to analyse the consequences of the changing structure of the labour market for the social security system. It will be shown that in the future the restructuring of the labour force will yield a main challenge for social policy and will have much bigger consequences for the social security system than the demographic changes. Numerous new forms of employment were caused by the economic process of tertiarization. Furthermore, these kinds of employment were politically demanded and financially supported. However, those forms of employment have their shortcomings. From an individualistic point of view there is a shortage in the protection against the financial consequences of social risks (e.g. unemployment, invalidity, illness, or the possibility to save for an adequate pension) within the social security system. From an institutionalistic point of view the financial basis of the social security systems becomes weaker and weaker as the reduction of the number of employees with a compulsory membership within the social security systems will inevitable reduce the contribution revenue of the institutions. As a preliminary conclusion it may be said that if the development continues we will not be confronted with the expected costs of the demographic changes but with a growing number of people with no or a low coverage against social risks. These people will depend on a basic system of poverty prevention.
    Keywords: social security, demography, labour market, tertiarization
    JEL: D31 H55 E24 N3 H5 I3 J0
    Date: 2009–11–21
  10. By: Keith Ambachtsheer
    Keywords: Canada Supplementary Pension Plan (CSPP), public pension reform
    JEL: H55 J32
    Date: 2009–11
  11. By: Pfau, Wade Donald; Giang, Thanh Long
    Abstract: During a time of rapid economic transformation in Vietnam, we examine two possibilities for elderly support: living together with children and receiving remittances. Our analysis uses four household surveys conducted in Vietnam between 1992 and 2004. With the highly detailed 1997/98 survey, we find that 73.1 percent of Vietnamese elderly are living with children and 34.8 percent were either receiving remittances directly or married to a recipient. From our logistic regression analysis, we can further determine that living with children and remittances both serve continuing roles for elderly support, and our findings suggest that expanding the pension system in Vietnam can potentially play an important role in reducing elderly poverty without crowding out these other support mechanisms.
    Keywords: Elderly; Vietnam; Welfare; Remittances
    JEL: F24
    Date: 2009–03
  12. By: Luc Behaghel; Eve Caroli; Muriel Roger
    Abstract: Nous analysons dans quelle mesure la formation peut atténuer les effets défavorables pour l'emploi des seniors du changement technologique et organisationnel. A partir d'un panel d'entreprises françaises suivies sur seconde moitié des années 1990, nous confirmons le caractère biaisé des nouvelles technologies et de certaines pratiques de travail innovantes à l'encontre des salariés âgés. Internet et l'adoption d'ordinateurs connectés en réseau ainsi que l'élargissement des responsabilités confiées aux opérateurs tendent à accroître la part des trentenaires et à réduire celle des seniors dans la masse salariale. En revanche, le raccourcissement de la chaîne de commandement sous la forme d'une réduction du nombre de niveaux hiérarchiques est favorable aux seniors. La formation continue contribue à protéger les seniors en termes d'emploi et/ou de rémunérations.###[English abstract: We analyze the role of training in mitigating the negative impact of technical and organizational changes on the employment of older workers. Using a panel of French firms in the late 1990s, our empirical analysis confirms that new technologies and some innovative workplace practices are biased against older workers. The use of the Internet and the adoption of computer networks tend to increase the wage share of middle-aged workers and to reduce the share of workers older than 50. By contrast, the reduction of the number of hierarchical layers is favourable to older workers. Training contributes to protect older workers in terms of employment and/or of wages.]###
    Date: 2009
  13. By: Patrick Georges (Graduate School of Public and International Affairs, University of Ottawa); Marcel Mérette (Department of Economics, University of Ottawa); Aylin Seckin§ (Department of Economics, Istanbul Bilgi University, Kurtulus Deresi Cad. No 47, Dolapdere, Istanbul, Turkey.)
    Abstract: A recurrent theme from politicians and commentators alike is that Canada is too exposed to the U.S. economy and could benefit from diversifying its trade pattern. In this paper we examine the validity of these calls in a context of world demographic changes. Although population ageing in Canada is expected to have a negative impact on welfare, international trade should prop up real consumption per capita through terms of trade improvements during the first half of the 21st century. This reflects a population ageing gap between Canada and many of its trading partners with younger populations whose demographic projections entail relatively smaller negative supply shocks and lesser relative price increases. The gains resulting from the globalization of trade flows might be intensified through an accurate pattern of North-South trade diversification that takes into account the extent and timing of population ageing in diverse regions of the world. The main policy implication of this analysis is that a diversification of Canada’s trade away from the U.S. in favor of faster-ageing countries such as Japan or Europe is not necessarily desirable.
    Keywords: Globalization, trade diversification, ageing, overlapping generations, computable general equilibrium modeling
    JEL: C68 D58 F13 F15 J11
    Date: 2009
  14. By: Marcel Mérette (Department of Economics, University of Ottawa); Patrick Georges (Graduate School of Public and International Affairs,University of Ottawa)
    Abstract: This paper develops a multi-country overlapping-generations general equilibrium model to gauge the economic impacts of demographic changes in the global economy and its transmission effects on different countries. Although severe demographic pressures contribute to significantly lower real GDP per capita across several regions in the world, globalisation through international trade generates an improvement in the terms of trade of older OECD countries, which sustains their real consumption per capita, while globalisation through capital flows stimulates capital deepening and therefore growth in younger countries such as India and various parts of the Rest of the World. The general equilibrium nature of the ageing process is crucial to understand the net foreign asset dynamics of countries during the demographic transition, and this is particularly relevant for a country like China that is caught, in the global economy, between relatively older and younger countries. On this regard China, unlike older countries, does not benefit from a terms of trade improvement which could otherwise sustain its consumption, nor does it benefit, unlike India, from capital deepening, which could otherwise sustain its GDP growth.
    Keywords: Inequality Demographic transition, ageing, globalisation, overlapping generations, computable general equilibrium modeling
    JEL: D58 F41 J11
    Date: 2009
  15. By: Torben M. Andersen (School of Economics and Management, University of Aarhus, Denmark); Joydeep Bhattacharya (Iowa State University, USA)
    Abstract: Abstract. A classic result in dynamic public economics, dating back to Aaron (1966) and Samuelson (1975), states that there is no welfare rationale for PAYG pensions in a dynamically-efficient neoclassical economy with exogenous labor supply. This paper argues that this result, under the fairly-mild restriction that the old be no less risk-averse than the young, extends to a neoclassical economy with endogenous labor supply.
    Keywords: pay-as-you-go, social security, endogenous labor supply, dynamic efficiency
    JEL: E6 H3
    Date: 2009–12–08

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