nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒01‒30
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labor Market and Immigration Behavior of Middle-Aged and Elderly Mexicans By Emma Aguila; Julie Zissimopoulos
  2. A Note on Defining the Dependent Population Based on Age By Rachel H. Racelis; J.M. Ian S. Salas
  3. Social Security System in India: An International Comparative Analysis By Jha, Rupak Kumar; Bhattacharyya, Surajit
  4. Inheritances, Health and Death By Beomsoo Kim; Christopher J. Ruhm
  5. Liquidity Constraints, Household Wealth, and Self-Employment: The Case of Older Workers By Julie Zissimopoulos; Lynn A. Karoly; Qian Gu
  6. Young in-Old out: a new evaluation based on Generalized Propensity Score By Michela Bia; Roberto Leombruni; Pierre-Jean Messe
  7. Assessing old-age long-term care using the concepts of healthy life expectancy and care duration: the new parameter "Long-Term Care-Free Life-Expectancy (LTCF)" By Rembrandt D. Scholz; Anne Schulz
  8. Driving Forces Behind Changes in the Aggregate Labour Force Participation in Hungary By Gábor Kátay; Benedek Nobilis
  9. Feminization of Ageing and Long Term Care Financing in Singapore By Chia Ngee Choon; Shawna Lim Shi’en; Angelique Chan
  10. Measuring Economic Lifecycle and Flows across Population Age Groups- Data and Methods in the Application of the NTA in the Philippines By Rachel H. Racelis; J.M Ian S. Salas
  11. Have Lifecycle Consumption and Income Patterns in the Philippines Changed between 1994 and 2002? By Rachel H. Racelis; J.M. Ian Salas
  12. Consumption, Income, and Intergenerational Reallocation of Resources- Application of NTA in the Philippines, 1999 By J.M Ian S. Salas; Rachel H. Racelis
  13. Gain and Loss: Marriage and Wealth Changes Over Time By Julie Zissimopoulos
  14. Pension Benefit and Hours Worked By MIYAZAWA Kensuke

  1. By: Emma Aguila; Julie Zissimopoulos
    Abstract: This study analyzed the retirement behavior of Mexicans with migration spells to the United States that returned to Mexico and non-migrants. The analysis is based on rich panel data from the Mexican Health and Aging Study (MHAS). Approximately 9 percent of MHAS respondents age 50 and older reported having lived or worked in the United States. These return migrants were more likely to be working at older ages than non-migrants. Consistent with much of the prior research on retirement in the United States and other developed countries, Mexican non-migrants and return migrants were responsive to institutional incentives. Both groups were more likely to retire if they had publicly provided health insurance and pensions. In addition, receipt of U.S. Social Security benefits increased retirement rates among return migrants. Return migrants were more likely to report being in poor health and this also increased the likelihood of retiring. The 2004 draft of an Agreement on Social Security would coordinate benefits across United States and Mexico boundaries to protect the benefits of persons who have worked in foreign countries. The agreement would likely increase the number of authorized and unauthorized Mexican workers and family member eligible for Social Security benefits. The responsiveness of current, older Mexican return migrants to pension benefits, suggests that an agreement would affect the retirement behavior of Mexican migrants.
    JEL: J14 J21 J61
    Date: 2009–12
  2. By: Rachel H. Racelis; J.M. Ian S. Salas (Philippine Institute for Development Studies)
    Abstract: Dependent population is defined as that part of the population that does not work and relies on others for the goods and services they consume. In practice, specific population age groups have in their entirety been categorized as dependent population, even while the definition may not necessarily apply to every individual in the population with the indicated ages. In general those categorized as dependents include the children and the elderly. The rest of the population constitutes the working age population. The delineation of any boundary for children and for working ages varies across countries and studies, has tended to be discretionary, and thus appears arbitrary. In the Philippines the delineation is based on the legal definition for working ages set at 15 to 64 years (with provision for early retirement at age 60 years.). The implied dependent ages in the Philippines are then 0-14 years and 60 or 65 years and older. The dependent ages used in the OECD definition for dependency ratio are under 20 and over 64. In other studies, children include those in the population up to age 18 or 20 and those in the working ages limited to 59 years or younger. This paper shows that the dependent population(s) defined based on a given set of age cut-offs are generally heterogeneous in terms of personal attributes, particularly in terms of indicators of dependency or non-dependency. Thus, the population defined by any given age boundaries may satisfy some indicators of dependency but not others. That is, the age boundary delineated using one dependency indicator, as reference, could be found unsatisfactory when assessed based on a different indicator. Those considering the use of any defined set of age boundaries to identify the dependent populations, whether for research or for the implementation of support programs, should first assess the appropriateness of the boundaries for the intended use. Identifying the dependency indicators relevant to the intended use would facilitate the assessment.
    Keywords: population dependency, labor force participation, household headship, National Transfer Accounts, lifecycle deficit, financing consumption
    JEL: E21 O15 E22
    Date: 2010–01
  3. By: Jha, Rupak Kumar; Bhattacharyya, Surajit
    Abstract: This paper examines selected components of social security system in India and compares them with their OECD counterparts. Historically, the Indian policy makers have viewed the pension system as a welfare measure and therefore, it lacks in financial professionalism, diversification, and in the belief that pension funds can also be treated as an asset. The Indian system is biased towards the organized formal sector as workers in this sector are benefitted with the provisions under various labor laws. Even then the pension provisions in India are way far behind the OECD benchmark. In the unorganized sector, old age income remains mainly confined to voluntary savings. The New Pension System although makes the pension amount an old age asset, is silent on the social security provisions to the poor. The average income earners are not able to replace their pre-retirement earnings with pensions compared to most of the OECD countries. In terms of the gross pension wealth, India is nearer to the OECD average only in the low income category for men. Out of 5% of health care expenditure as a percentage of GDP, government’s share in India accounts even less than 1% which is significantly lower than the OECD benchmark.
    Keywords: Social Security System; Pension Funds; India; OECD.
    JEL: A13 G23
    Date: 2010–01–15
  4. By: Beomsoo Kim (Department of Economics, Korea University, Seoul, South Korea); Christopher J. Ruhm (University of North Carolina Greensboro and National Bureau of Economic Research)
    Abstract: We examine how wealth shocks, in the form of inheritances, affect the mortality rates, health status and health behaviors of older adults, using data from eight waves of the Health and Retirement Survey (HRS). Our main finding is that bequests do not have substantial effects on health status, although some improvements in quality-of-life are possible. This absence occurs despite increases in out-of-pocket (OOP) spending on health care and in the utilization of medical services, especially discretionary and non-lifesaving types such as dental care. Nor can we find a convincing indication of changes in lifestyles that offset the benefits of increased medical care. Inheritances are associated with higher alcohol consumption, but with no change in smoking or exercise and a possible decrease in obesity.
    Date: 2010
  5. By: Julie Zissimopoulos; Lynn A. Karoly; Qian Gu
    Abstract: Evidence of liquidity constraints affecting entrepreneurship includes increasing rates of business formation with increases in household wealth and no relationship between the likelihood of business formation and wealth at high wealth levels. Using longitudinal data from the Health and Retirement Study on workers over age 50 and employing probit regressions with a non-linear specification of household wealth and liquid wealth, the authors find the relationship between wealth and business formation is consistent with this pattern. The paper also finds that wealth matters more for the formation of businesses requiring high starting capital. Employing the availability of a lump-sum distribution option (LSO) of an employer-provided pension plan as a new proxy for liquidity, the results show that workers with an LSO are more likely than workers with a pension and without an LSO to transition into self-employment. This provides further evidence of the existence and importance of liquidity constraints.
    JEL: D31 L26
    Date: 2009–12
  6. By: Michela Bia; Roberto Leombruni; Pierre-Jean Messe
    Abstract: This paper aims at evaluating the effect of the amount of older workers exits (aged 50 or more) on the entries of youngsters at a local labour market level, during years 1985 - 2002. If we can observe some effect of the exits on the entries, it will shed light on the substitution between older workers and youngsters. Moreover, since in our model the causal agent cannot be specified a – priori, we don’t know what causes what. Hence, we are actually looking for a correlation between these two quantities. Systematic differences in background characteristics, between local markets with different levels of the older workers exits, can bias the effect estimation on the entries of youngsters. In order to adjust for this, we apply propensity score methods as extended and generalized in a setting with a continuous treatment by Hirano and Imbens (2004). Our results show a positive and significant correlation between exits of older workers and entries of youngsters.
    Keywords: Synthetic firms, Evaluation, Non-experimental methods, Continuous treatment, Matching, Generalized propensity score, Dose-response function.
    JEL: C13 C49 J68
    Date: 2009
  7. By: Rembrandt D. Scholz (Max Planck Institute for Demographic Research, Rostock, Germany); Anne Schulz
    Abstract: Achieving old ages is also connected with prevalence of illness and long-term care. With the introduction of the statutory long-term care insurance in 1996 and the long-term care statistics in 1999 research data of about 2.3 million people receiving long-term care benefits is available. Average life expectancy can be qualitatively divided into lifetime spent in good health and lifetime spent in long-term care dependence (average care duration). In Germany women’s and men’s average care duration amount 3.6 years respectively 2.1 years.
    Keywords: Germany, ageing, laboratories, life expectancy
    JEL: J1 Z0
    Date: 2010–01
  8. By: Gábor Kátay (Magyar Nemzeti Bank); Benedek Nobilis (Magyar Nemzeti Bank)
    Abstract: This paper proposes a simple and transparent methodology for decomposing changes in the aggregate labour force participation rate over time into changes in the labour force participation behaviour of different population groups and changes in each group’s population share. Unlike traditional decomposition methods based only on demographic factors, our approach also identifies the contribution of all major factors that can account for the developments in the labour force participation such as change in the general educational level or the most important social welfare programs. An application on Hungarian labour force data shows that the selected variables explain the evolution of the participation rate quite well – especially on the long term. More specifically, our results indicate that the rising labour supply since ’97 in Hungary was principally driven by the increasing average level of education and, most importantly, the gradual tightening of the conditions of old-age retirement. The other estimated effects are also in line with our expectations. Given that the residual term not captured by the model has no visible trend but fluctuates with economic cycles, the explained part can also be interpreted as an indicator of the underlying labour supply.
    Keywords: labour force participation, decomposition, demographic change, schooling, social transfers.
    JEL: J11 J21 J22 J26
    Date: 2009
  9. By: Chia Ngee Choon; Shawna Lim Shi’en; Angelique Chan (Singapore Centre for Applied and Policy Economics)
    Abstract: Feminization of ageing leads to issues relating to long term healthcare financing since females are more susceptible to chronic illnesses. This paper assesses the current provision of long-term care (LTC) in Singapore by first examining the health status of elderly female; and then estimates the present value of LTC expenses. We calibrate the LTC costs for institutional nursing homes, community homes and informal home-based care with domestic helper. We next evaluate the comprehensiveness of a private disability insurance scheme in Singapore (Eldershield) in capturing the expected share of LTC expenditures. We compare the policy comprehensiveness of Eldershield payouts for different utilizations of LTC at different levels of means-tested government subsidies. With subsidies, the LTC cost can be adequately covered by Eldershield; without any subsidies, Eldershield is able to capture 25% to 40% of the LTC costs. We also evaluate the LTC financing implications after an osteoporotic hip fracture surgery.
    Keywords: health financing, long-term care, ageing, disability insurance, policy comprehensiveness
    JEL: H51 I11 J14
    Date: 2010–01
  10. By: Rachel H. Racelis; J.M Ian S. Salas (Philippine Institute for Development Studies)
    Abstract: The age structure of the population of the Philippines, as in many developing countries in the world, will be experiencing significant changes in the next four decades. These changes can have potentially important implications on economic development. Many studies in the Philippines have examined the population-development linkages. The National Transfer Accounts (NTA) offers another way to examine these links. In the NTA the interaction among population age structure, economic lifecycle behavior and systems for intergenerational support, and their potential implications on the accumulation of wealth, rates of economic growth and generational equity are examined. An important feature of the NTA is the central role played by intergenerational transfer of resources in explaining the link between population and development. The main purpose of this paper is to provide an overview of the NTA system and then describe the methods and data used in the application of NTA in the Philippines. The NTA system is consistent with the System of National Accounts. It provides methodologies for assigning labor earnings and consumption to population age groups, and for estimating reallocation or transfer of economic resources across age groups. Age reallocations are generally from the working age groups to children and the elderly. Data sources for the estimation of components of the NTA Flow Accounts for the Philippines include National Income Accounts, National Health Accounts, National Education Expenditure Accounts, household income and expenditure surveys, and government finance documents. Some Philippines NTA results are presented as examples, specifically the age profiles of current consumption (C), labor income (YL) and the life cycle deficit (LCD). Three other papers in the PIDS Discussion Paper Series present more detail on results and analyses of Philippines NTA Flow Account estimates.
    Keywords: National Transfer Accounts, economic lifecycle, intergenerational transfer, income age profile, consumption age profile, lifecycle deficit
    JEL: D91 O10 O15
    Date: 2010–01
  11. By: Rachel H. Racelis; J.M. Ian Salas (Philippine Institute for Development Studies)
    Abstract: Have age profiles of consumption and labor income in the Philippines changed from 1994 to 2002? What are the implications of the changes observed in the lifecycle patterns? The National Transfer Accounts (NTA) methodologies are applied to estimate the per capita age profiles of current consumption and labor income for the Philippines for the years 1994, 1999 and 2002. Age profiles estimated include those for public and private consumption for three broad types, i.e. education, health and other, and two types of labor income, i.e. earnings from paid employment and self employment income. Some of the main findings include- (1) Consumption pattern by age- The age profile for mean per capita current consumption is strongly influenced by the profile of private other consumption being the single largest item of consumption. The pronounced sharp rise in per capita mean consumption observed up to age 18 and the subsequent decline is due to the age pattern of public and private education spending. And the gradual increase in per capita consumption after age 45 may be attributed to the increasing per capita public and private spending for health care as age increases. (2) Consumption age profile over time- The age profiles for current consumption have generally remained unchanged from 1994 to 2002, with mean age of consumption staying at about 27 years. (3) Labor income pattern by age- The age profile of labor income have the expected inverted-U shape, peaking at around age 40 (4) Labor income age profile over time- The overall shape of the age income profiles have generally remained the same, but a gradual shift of the position of the profiles towards the right was observed from 1994 to 2002. The mean age of labor income was 35 in 1994, 38 in 1999 and 39 in 2002. The implications of the consumption and labor income lifecycle patterns and changes observed over time for the Philippines include the following- increase in the deficit age cut-off at older ages; increase in the span of productive or surplus ages; and increase in the lifecycle surplus to deficit ratio.
    Keywords: National Transfer Accounts, economic lifecycle, income age profile, consumption age profile, lifecycle deficit
    JEL: E21 O15 D91
    Date: 2010–01
  12. By: J.M Ian S. Salas; Rachel H. Racelis (Philippine Institute for Development Studies)
    Abstract: A country’s population consists of persons at different ages and stages of their economic lifecycle. Those in the population that are incurring lifecycle deficits would not be able to sufficiently support themselves, while those generating surpluses would have more than they require. Resources then have to be reallocated or transferred from the surplus age groups (working ages) to the deficit age groups (children and elderly) and there are various ways to achieve these across age transfers or intergenerational reallocations. Lifecycle consumption and income patterns, and the systems for age reallocations in the Philippines, are examined in this paper using the 1999 NTA Flow Accounts estimates. This paper finds that- (1) Filipinos incur lifecycle deficits and do not become self-sufficient until after age 25, lifecycle surpluses are generated for the next 35 years, and at age 61 consumption starts to exceed labor earnings and lifecycle deficits are once again incurred; (2) In 1999 the estimated aggregate lifecycle deficits amounted to about PhP 1,061 billion in current prices (with the young and elderly accounting for 93 percent and 7 percent, respectively) while surpluses generated by the working age group amounted to PhP 461 billion, or an excess of PhP600 billion of deficits over surplus; (3) The mix of systems that support the consumption of Filipinos in the deficit ages differ between the young and the elderly groups, with the mix also changing with age for the elderly deficit group; (4) The financing of consumption of children up to age 14 is primarily by public and private transfers, while for the age group 15-25 about half of consumption is already paid for by own wages but a significant part continues to be supported by private transfers; and (5) Consumption of the elderly is financed by own earnings, asset reallocation, private transfers (starting age 73) and to a very small extent by public transfers (starting age 80).
    Keywords: National Transfer Accounts, economic lifecycle, intergenerational transfer, income age profile, consumption age profile, lifecycle deficit
    JEL: E24 E20 E21
    Date: 2010–01
  13. By: Julie Zissimopoulos
    Abstract: Family composition has changed dramatically over the past 25 years. Divorce rates increased and remarriage rates declined. While considerable research established a link between marriage and earnings, far less is empirically understood about the effect of marriage on wealth although wealth is an important measure for older individuals because it represents resources available for consumption in retirement. This research employs eight waves of panel data from the Health and Retirement Study to study the relationship between wealth changes and marital status among individuals over age 50. It advances understanding of the relationship by first, incorporating measures of current and lifetime earnings, mortality risk and other characteristics that vary by marital status into models of wealth change; second, measuring the magnitude of wealth loss and gain associated with divorce, widowing and remarriage and third, estimating wealth change before and after marital status change so the change in wealth change is not the result of individuals entering or leaving the household and other sources of unobserved differences are removed from estimates of the effect of marriage on wealth. The results suggest no differences in wealth change over time among individuals that remain married, divorced, widowed, never married and partnered over 7 years. In the short-run there are substantial wealth changes associated with marital status changes. Divorce at older ages is costly, remarriage is wealth enhancing and people appear to change their savings in response to changes in marital status.
    JEL: D31 J12
    Date: 2009–12
  14. By: MIYAZAWA Kensuke
    Abstract: This paper clarifies the effects of pension benefit systems on aggregate hours worked. By incorporating the labor income taxes and the social security taxes into a representative agent model, previous studies successfully explain the long term decline in the hours worked in some continental European countries, and the differences between these European countries and the U.S. in recent years. However, their model underpredicts the hours worked in Japan and Sweden. We measure the marginal pension benefit rates of the labor supply, which the previous studies do not take into account, and incorporate them into previous studies. We fid that the marginal pension benefit can explain much of the discrepancy between the actual hours worked and the predictions of the previous studies. This result also implies that the pension benefit might offset the effect of the unemployment insurance that is thought to make the prediction worse in some continental European countries.
    Date: 2010–01

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