nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒02‒20
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe By Danzer, Alexander M.
  2. Inaccurate age and sex data in the Census PUMS files: Evidence and Implications By J. Trent Alexander; Michael Davern; Betsey Stevenson
  3. Will immigration in the future make it easier to support an ageing population? By Ekberg, Jan
  4. The impact of demographic distance and network ties on individual turnover of professional employees By Bogaert S.; Boone Ch.; Van Witteloostuijn A.
  5. Asymmetric Information and the Demand for Voluntary Health Insurance in Europe By Kristian Bolin; Daniel Hedblom; Anna Lindgren; Bjorn Lindgren
  6. Let them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange By Leemore Dafny; Katherine Ho; Mauricio Varela
  7. Insecurities of the old and marginalized: Inflation, oil shocks, financial crisis and social security By Ashima Goyal

  1. By: Danzer, Alexander M. (Royal Holloway, University of London)
    Abstract: The retirement decision is under researched in developing and emerging countries, despite the topic's close relation to many development issues such as poverty reduction and social security, and despite the fact that population ageing will increasingly challenge the developing world. This paper uses a natural experiment from Ukraine to estimate the causal effect of a threefold increase in the legal minimum pension on labor supply and retirement behaviour at older ages. Applying difference-in-difference and regression discontinuity methods on two independent nationally representative data sets, the paper estimates a pure income effect that caused additional retirement of 30 to 47 percent. Additional evidence suggests that retirement incentives are stronger at the lower tail of the educational distribution and that the strict Labor Code curbed responses at the intensive labor supply margin. Although the substantial pension increase provided strong disincentives to work and put a heavy fiscal burden on Ukraine, it significantly reduced the propensity of falling into poverty for those in retirement.
    Keywords: labor supply, retirement, minimum pension, pure income effect, poverty, difference-in-differences, regression discontinuity
    JEL: J26 I38 O15
    Date: 2010–01
  2. By: J. Trent Alexander; Michael Davern; Betsey Stevenson
    Abstract: We discover and document errors in public use microdata samples ("PUMS files") of the 2000 Census, the 2003-2006 American Community Survey, and the 2004-2009 Current Population Survey. For women and men ages 65 and older, age- and sex-specific population estimates generated from the PUMS files differ by as much as 15% from counts in published data tables. Moreover, an analysis of labor force participation and marriage rates suggests the PUMS samples are not representative of the population at individual ages for those ages 65 and over. PUMS files substantially underestimate labor force participation of those near retirement ages and overestimate labor force participation rates of those at older ages. These problems were an unintentional by-product of the misapplication of a newer generation of disclosure avoidance procedures carried out on the data. The resulting errors in the public use data could significantly impact studies of people ages 65 and older, particularly analyses of variables that are expected to change by age.
    JEL: C42 C8 J0 J1 J12 J14
    Date: 2010–01
  3. By: Ekberg, Jan (Centre for Labour Market Policy Research (CAFO))
    Abstract: Sweden and many other Western countries are facing a demographic development with an ageing population which will burden their public finances. Already today, the sum of yearly public expenditures in Sweden is about 50 percent of gross national product (GNP). Will future immigration alleviate the burden on the welfare system? Immigrants usually have a low proportion of old people and a high proportion of people of working age. Calculations for Sweden up to the year 2050 show, however, that the positive net fiscal contribution of immigrants is small even if they are well integrated on the labour market. The reason is that future immigration will increase the size of the population and thereby raise not only tax receipts but also public expenses. The fiscal impact is sensitive to immigrants’ integration into the labour market. If, for example, the rate of labour force participation of future immigrants will be the same as that of foreign born now living in Sweden, the fiscal consequences would be negative, but small also in that case. For most years up to 2050, the calculated positive/negative net contribution effect is less than one percent of GNP. The same positive net contribution could be achieved through a better integration of immigrants already living in Sweden.
    Keywords: Demography; Forecasting; Immigration
    JEL: J11
    Date: 2010–02–09
  4. By: Bogaert S.; Boone Ch.; Van Witteloostuijn A.
    Abstract: Organizational demographers found that people who are demographically different from their colleagues, are most likely to leave. To explain this fact, demography and network ties are generally treated as equivalent. Critics claim that the use of demographics as a substitute for network ties is not justified, and called for research combining both approaches. The goal of this paper is to understand the subtleties of the turnover process, by simultaneously studying the impact of demographic position and network ties on turnover of professional employees. We test our hypotheses using event history analyses on a longitudinal dataset (1994-2004) of a mediumsized university faculty. Our findings indicate that demographic distance and strong external network ties have independent effects on turnover. We also found some support for interactions between demographic distance and network ties in determining individual turnover.
    Date: 2009–06
  5. By: Kristian Bolin; Daniel Hedblom; Anna Lindgren; Bjorn Lindgren
    Abstract: Several past studies have found health risk to be negatively correlated with the probability of voluntary health insurance. This is contrary to what one would expect from standard textbook models of adverse selection and moral hazard. The two most common explanations to the counter-intuitive result are either (1) that risk-aversion is correlated with health — i.e. that healthier individuals are also more risk-averse — or (2) that insurers are able to discriminate among customers based on observable health-risk characteristics. We revisited these arguments, using data from the Survey of Health, Ageing and Retirement in Europe (SHARE). Self-assessed health served as an indicator of risk: better health, lower risk. We did, indeed, observe a negative correlation between risk and insurance but found no evidence of heterogeneous risk-preferences as an explanation to our finding.
    JEL: D82 I1
    Date: 2010–01
  6. By: Leemore Dafny; Katherine Ho; Mauricio Varela
    Abstract: Most non-elderly Americans purchase insurance through their employers, which sponsor a limited number of plans. We estimate how much employees would be willing to pay for the right to apply their employer subsidy to the plan of their choosing. We make use of a proprietary dataset containing information on plan offerings and enrollment for 800+ large employers between 1998 and 2006; the dataset represents over 10 million Americans annually. We estimate a model of employee preferences using the set of plans they are offered. Using the estimated parameters from this model, we predict employees’ choices in a hypothetical world in which additional plans in a market are available to them on the same terms, i.e. tax-free and subsidized by their employers. Holding employer outlays constant, we estimate that the median welfare gain from expanding choice amounts to roughly 20 percent of premiums. For the vast majority of employee groups and alternative model specifications, the gains from choice are likely to outweigh potential premium increases associated with a transition from large group to individual pricing.
    JEL: I11 L1
    Date: 2010–01
  7. By: Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: The paper examines the impact of recent inflation and financial shocks on the vulnerable, and explores policy design to reduce both future shocks and vulnerability to shocks. Inflation affects the typical savings cum pension portfolio and the specific consumption basket of the old, as prices of services rise compared to manufactured goods. Money illusion and habit, which tend to increase with age, aggravate the psychological trauma associated with inflation. The decline of traditional sources of social security marginalizes those without savings, in the context of sustained rural urban and international migration. Trends determining inflation-domestic and global, institutional change, and greater openness explain why inflation has been moderate in India, compared to other emerging markets. Since the polity is averse to high inflation, and commodity price shocks are moderating, high inflation will not persist. But the shocks demonstrate the importance of food price inflation for aggregate inflation in populous South Asia. Therefore improvements in agricultural productivity, with supportive buffer stock, fiscal and monetary policy are critical to lower the level of chronic inflation. Regulatory changes to reduce excessive risktaking in financial markets and the aggravation of inflation from speculation are examined. Finally, other policy measures to improve security for the old and keep them an active, vital part of the community are drawn together.
    Keywords: Aged, Inflation, Oil shocks, Financial crisis, Social security
    JEL: E31 G18 H55
    Date: 2009–03

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