nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒02‒13
five papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labour Supply Response of a Retirement Earnings Test Reform By Hernæs, Erik; Jia, Zhiyang
  2. Retire Later or Work Harder? By Bell, David N.F.; Hart, Robert A.
  3. Retirement and Social Security: A Political Economy Perspective By Ryo Arawatari; Tetsuo Ono
  4. Our Grandparents, Our Parents, Our Future Selves: Optimizing Function in Old Age. Syracuse Seminar Series on Aging. By Thomas M. Gill
  5. Public Capital, Public Pension, and Growth By Noritaka Maebayashi

  1. By: Hernæs, Erik (Ragnar Frisch Centre for Economic Research); Jia, Zhiyang (Ragnar Frisch Centre for Economic Research)
    Abstract: Norwegian administrative data are used to evaluate the impact of a doubling of the threshold in the earnings test on the labour force activity. We find no impact on labour market participation, but positive effects on earnings. The effect increases with exposure to the reform and is stronger for individuals with earnings around the threshold and with high education. Individuals who remain active until retirement age respond more to the reform than those who left labour force earlier. The results indicate both substantial labour supply responsiveness among elderly, and heterogeneity with respect to preferences, labour market options or both.
    Keywords: Retirement earnings test; Benefit entitlement; Labour supply behaviour; Heterogeneity
    JEL: H55 J14
    Date: 2009–10–30
  2. By: Bell, David N.F. (University of Stirling); Hart, Robert A. (University of Stirling)
    Abstract: We compare two policies of increasing British state pension provision: (a) increase the pensionable age of men and women, (b) maintain the existing retirement age but require older workers to work longer per-period hours. There are reasons for policy makers to give serious consideration to the under-researched alternative (b). First, from wage - hours contract theory we know that there are potential gains to both workers and firms of allowing hours to rise in work experience. Second, there is strong evidence that job satisfaction rises in age. Third, there has in any case been a significant overall increase in the hours supplied by older workers in the last two decades. We review the relevant theory, model the trade-off between later retirement versus increased work intensity, produce relevant background facts, and provide estimates of the policy trade-offs.
    Keywords: older workers, statutory retirement age, hours of work
    JEL: H55 J11 J14 J18 J22 J26
    Date: 2010–01
  3. By: Ryo Arawatari (Faculty of Economics, Shinshu University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: Countries with higher implicit taxes on continued work are associated with lower labor force participation rates of the elderly. This paper constructs a politicoeconomic model that accounts for this feature based on multiple, self-fulfilling expectations of agents. In this model, agents are identical at birth and can become skilled (or remain unskilled) through educational investment. When agents hold expectations of higher future taxation (i.e., higher social security benefits), it provides a disincentive to engage in educational investment, thereby resulting in an unskilled majority. In turn, this unskilled majority supports higher taxation, which induces the retirement of the elderly and thus results in a lower labor force participation rate. The opposite applies when agents have expectations of lower taxes in their old age.
    Keywords: Political equilibrium; Retirement; Self-fulfilling expectations; Social security
    JEL: H55 D72 J26
    Date: 2010–02
  4. By: Thomas M. Gill (Professor of Medicine, Epidemiology, and Investigative Medicine, and the Humana Foundation Professor of Geriatric Medicine, Adler Geriatric Center, 20 York Street, Yale University, New Haven, Connecticut 06510.)
    Abstract: Most of my research at Yale University School of Medicine over the past several years has focused on identifying older adults at risk of functional decline and disability, identifying events that may precipitate the transition from functional independence to disability, and developing strategies to postpone or reduce frailty and disability. As a result of the Precipitating Events Project (PEP) and other research conducted by the Yale Center on Aging/Pepper Center, we now realize that age is only a proxy for other factors that lead to disability, and that some of these factors can be modified to reduce the risk of disability. In fact, disability rates have been steadily declining among older adults for decades.
    Keywords: geriatrics, aging, gerontology, disability, precipitating event, functional decline, vulnerability, compression of morbidity, reserve organ capacity, exercise, physical activity, falls, Yale PREHAB study, lifestyle interventions, independence, elders, FICSIT trial, frailty
    JEL: H51 I12 J14
    Date: 2010–01
  5. By: Noritaka Maebayashi (Graduate School of Economics, Osaka University)
    Abstract: This paper constructs an endogenous growth model with overlapping generations, whose engine of economic growth is productive public capital. The government faces a trade-off in public policy between public investment and social security provision because of its budget constraint. Larger public investment accelerates economic growth. On the other hand, larger public investment reduces the social security provision. This may reduce the consumption stream of agents. We first show that when the government aims at growth maximization, it chooses no social security provision. However, we also show that the growth-maximizing policy does not maximize welfare levels of each generation on the balanced growth path. Early generations may demand social security provision because the benefits from economic growth caused by an acceleration of public investment are relatively small. In contrast, future generations may require no social security provision but a large amount of public capital. Additionally, by setting the tax rate below the level that maximizes the growth rate, the government can make the welfare levels of all generations from the initial state on the balanced growth path better off. Moreover, in an economy facing an aging population, an increase in the social security provision to the old rather than an increase in public investment can be preferable from the viewpoint of social welfare.
    Keywords: public capital, social security, overlapping generations
    JEL: E62 H54 H55
    Date: 2010–01

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