nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒03‒20
eight 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 Alexander M. Danzer
  2. Impact of Early Retirement Incentives on Labour Market Participation: Evidence from a Parametric Change in the Czech Republic By David Kocourek; Filip Pertold
  3. Ageing Workforce, Productivity and Labour costs of Belgian Firms By Vincent VANDENBERGHE; Fabio WALTENBERG
  4. Down but Not Out: Reforming Social Assistance Rules that Punish the Poor for Saving By John Stapleton
  5. Strong Hysteresis due to Age Effects By Yu-Fu Chen; Gylfi Zoega
  6. The ages of extremal impact on life disparity caused by averting deaths By Peter Wagner
  7. Analytic expressions for life expectancy in Gamma-Gompertz Mortality Settings By Trifon I. Missov
  8. A simple model of mortality trends aiming at universality: Lee Carter + Cohort By Edouard Debonneuil

  1. By: Alexander M. Danzer
    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,<br /> difference-in-differences, regression discontinuity
    JEL: J26 I38 O15
    Date: 2010
  2. By: David Kocourek; Filip Pertold
    Abstract: We investigate the impact of a change in the Czech early retirement scheme on the labor force participation of older male workers. Using the difference-in-differences method we find that a reduction in early retirement benefits by 2–3% leads to approximately the same decrease in the probability of being inactive. Our finding implies high elasticity of older male workers’ participation rate. The public policy implication is that a reduction in early retirement benefits can serve as a very effective tool to increase the participation of older men in the Czech labor market.
    Keywords: Czech Republic, early retirement, labor market participation.
    JEL: J21 J26
    Date: 2009–12
  3. By: Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Fabio WALTENBERG (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)
    Abstract: The Belgian population is ageing due to demographic changes, so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are employers willing to employ older workers? The answer depends to a large extent on the ratio between older workersÕ productivity and their cost to employers. To address this question we tap into a unique firm-level panel data set to produce robust evidence on the causal effect of ageing on productivity and labour costs. Unobserved firm fixed-effects and short-term endogeneity of workforce age pose serious estimation challenges, which we try to cope with. Our results indicate a negative productivity differential for older workers ranging from 20 to 40% when compared with prime-age workers, and these productivity differentials are not compensated by lower relative labour costs. Furthermore, the (now dominant) service sector does not seem to offer working conditions that mitigate the negative age/productivity relationship. Finally, older workers in smaller firms (<100 workers) display a larger productivity differential and a productivity that is less aligned on labour costs.
    Keywords: Ageing, Labour Productivity, Panel Data Analysis
    JEL: J24 C52 D24
    Date: 2010–02–12
  4. By: John Stapleton (St. Christopher House)
    Abstract: Reform is required for social program rules that prevent the poor from saving in Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs), according to this study. The author says that encouraging asset accumulation, even in small amounts, is crucial in helping to lift people out of poverty. Yet most Canadian welfare, disability and social service programs deny or cancel benefits if applicants or recipients place a modest level of savings in an RRSP or TFSA. Barring a province-led effort at reform, says Stapleton, the federal government should take the lead by calling on provinces and territories to exempt meaningful RRSP and TFSA amounts from their welfare asset rules, leaving individual jurisdictions to decide the appropriate levels.
    Keywords: Social Policy, Registered Retirement Savings Plan (RRSP), Tax Free Savings Account (TFSA), social assistance
    JEL: I38 H53
    Date: 2010–03
  5. By: Yu-Fu Chen; Gylfi Zoega
    Abstract: Strong hysteresis in the labour market (see Cross, 1995) requires workers to be heterogeneous in terms of the cost of hiring and firing. We show how such heterogeneity arises naturally in labour markets due to differences in workers’ age by showing that both the hiring and the firing thresholds for productivity are age dependent. The presence of strong hysteresis does not for this reason depend on ad-hoc differences in the cost of hiring and firing workers.
    Keywords: Hysteresis, hiring and firing costs, heterogeneous workers
    JEL: E24 J41 J64
    Date: 2010–02
  6. By: Peter Wagner (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: This paper is concerned with sensitivity analysis of life disparity with respect to changes in mortality rates. Recently Zhang and Vaupel introduced a ”threshold age”, such that averting deaths before that age reduces disparity, while averting deaths after that age increases disparity. We provide a refinement to this result by characterizing the ages at which averting deaths has an extremal impact on life disparity. A procedure is given for approaching the threshold age numerically. The results are illustrated using data for the female populations of Denmark, the US, Japan and France in 2005. [Keywords: life disparity, sensitivity analysis, mortality changes, threshold age]
    JEL: J1 Z0
    Date: 2010–02
  7. By: Trifon I. Missov (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: In a population with Gamma-distributed individual frailty and Gompertz-distributed mortality there is a closed-form analytic expression for calculating the life-expectancy integral. Several simplifications of the resulting formula serve as plausible approximations.
    JEL: J1 Z0
    Date: 2010–02
  8. By: Edouard Debonneuil
    Abstract: The Lee Carter modelling framework is widely used because of its simplicity and robustness despite its inability to model specific cohort effects. A large number of extensions have been proposed that model cohort effects but there is no consensus. It is difficult to simultaneously account for cohort effects and age-adjusted improvements and we here test a simple model that accounts for both: we simply add a non age-adjusted cohort component to the Lee Carter framework. This is a trade-off between accuracy and robustness but, for various countries present in the Human Mortality Database and compared to various models, the model accurately fits past mortality data and gives good backtesting projections.
    Date: 2010–03

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