|
on Economics of Ageing |
| By: | Selahattin Imrohoroglu; Sagiri Kitao |
| Abstract: | We build a general equilibrium model of overlapping generations that incorporates endogenous saving, labor force participation, work hours, and Social Security benefit claims. Using this model, we study the impact of three Social Security reforms: 1) a reduction in benefits and payroll taxes; 2) an increase in the earliest retirement age, to sixty-four from sixty-two; and 3) an increase in the normal retirement age, to sixty-eight from sixty-six. We find that a 50 percent cut in the scope of the current system significantly raises asset holdings and the labor input, primarily through higher participation of older workers, and reduces the shortfall of the Social Security budget through a reduction in early claiming. Increasing the normal retirement age also raises saving and the labor supply, but the effects are smaller. Postponing the earliest retirement age has only a negligible effect. When the projected aging of the population is taken into account, the case for a reform that encourages labor force participation of the elderly appears to be much stronger. |
| Keywords: | Labor supply ; Social security ; Employee fringe benefits ; Retirement ; Saving and investment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:436&r=age |
| By: | Giovanni Mastrobuoni |
| Abstract: | In 1995, the Social Security Administration started sending out the annual Social Security Statement. It contains information about the worker's estimated benefits at the ages 62, 65, and 70. I use this unique natural experiment to analyze the retirement and claiming decision making. First, I find that, despite the previous availability of information, the Statement has a significant impact on workers' knowledge about their benefits. These findings are consistent with a model where workers need to gather costly information in order to improve their retirement decision. Second, I use this exogenous variation in knowledge to analyze the optimality of workers' decisions. Several findings suggest that workers do not change their retirement behavior: i) Workers do not change their expected age of retirement after receiving the Statement; ii) monthly claiming patterns do not show any change after the introduction of the Social Security Statement; iii) workers do not become more sensitive to Social Security incentives after receiving the Statement. More research is needed to establish whether workers are already behaving optimally or they are not, but the information contained in the Statement is not sufficient to improve their retirement behavior. |
| Keywords: | social security statements; retirement expectations; retirement behavior; social security incentives |
| JEL: | H55 J26 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:139&r=age |
| By: | Rafael Doménech; Angel Melguizo |
| Abstract: | In this paper we suggest a set of indicators about the future performance of the Spanish public pension system and a suitable method of representing their uncertainty, in order to improve the communication to the public opinion about its main future challenges. Spain seems a particularly interesting case in Europe to illustrate our proposals, since the social security system has been in surplus for nine consecutive years, in sharp contrast to the projections made just a decade ago, but, at the same time, most projections foresee for Spain one of the highest increases in public expenditure among EU countries due to ageing. We argue that simple, transparent, credible, public and periodic indicators, which take explicitly into account the uncertainty about future demographic, economic and institutional developments, may contribute to improve the debate on the policies needed to strengthen the pension system. |
| Keywords: | Pensions, projections, communication, uncertainty. |
| JEL: | E17 H55 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:0911&r=age |
| By: | Becchetti Leonardo; Giachin Elena; Pelloni Alessandra |
| Abstract: | Social leisure is generally found to be positively correlated with life satisfaction in the empirical literature. We ask if this association captures a genuine causal effect of this good on subjective wellbeing by using panel data from the GSOEP. Fixed effect estimation techniques take care of some but not all of the endogeneity issues involved: we then have recourse to instrumental variables estimation. Our identification strategy exploits the change in social leisure brought about by retirement: more specifically we instrument social leisure with the ratio of retired in the sample by year and geographic location (East vs West Germany). Our results show a gendered difference in the impact of this ratio on social life. Our final message is that social leisure has a positive causal effect on life satisfaction, a finding with potentially important policy implications. |
| Keywords: | Life satisfaction, social leisure, retirement |
| JEL: | I30 D61 A11 A13 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0063&r=age |
| By: | Wei Sun; Anthony Webb |
| Abstract: | Individuals can claim Social Security at any age from 62 to 70 although most claim at 62 or soon thereafter. Those who delay claiming receive increases that are approximately actuarially fair. We show that expected present value calculations substantially understate both the optimal claim age and the losses resulting from early claiming because they ignore the value of the additional longevity insurance acquired as a result of delay. Using numerical optimization techniques, we illustrate that for plausible preference parameters, the optimal age for non-liquidity constrained single individuals and married men to claim benefit is between 67 and 70. We calculate that Social Security Equivalent Income, the amount by which benefits payable at suboptimal ages must be increased so that a household is indifferent between claiming at those ages and the optimal combination of ages, can be as high as 19.0 percent. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2009011&r=age |
| By: | Stephen Cecchetti; Madhusudan Mohanty; Fabrizio Zampolli |
| Abstract: | Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future. A number of countries face the prospect of large and rising future costs related to the ageing of their populations. In this paper, we examine what current fiscal policy and expected future age-related spending imply for the path of debt/GDP ratios over the next several decades. Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability. |
| Keywords: | public debt, fiscal deficit, age-related spending, inflation, interest rates, default risk |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:300&r=age |
| By: | Angel Melguizo; Angel Muñoz; David Tuesta; JoaquÃn Vial |
| Abstract: | In this paper we analyze the short and medium term fiscal costs stemming from structural pension reform, taking Chile as workhorse. The Chilean pension system, based on individual capital accounts managed by the private sector, has been in operation for almost 30 years, providing a rich evidence of the impact of pension systems on public accounts. Besides, a recent reform that crucially changes the solidarity pillar is being implemented now. In the paper we argue that although much lower than its benefits, fiscal transition costs tend to be high and persistent, so a fiscal consolidation prior to the reform is advisable. This also allows filling the coverage holes that labour market informality generates, as illustrated for Chile, Colombia, Mexico and Peru. Finally, in more general terms, the exportability of this type of pension reform depends not only on its specific design, but on the quality of market and public institutions. |
| Keywords: | Pension reform, implicit debt, fiscal costs, solidarity pillar, minimum pension, Chile |
| JEL: | E62 H55 H68 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:0915&r=age |
| By: | Denis Gerstorf; Nilam Ram; Jan Goebel; Jürgen Schupp; Ulman Lindenberger; Gert G. Wagner |
| Abstract: | Lifespan psychological research has long been interested in the contextual embeddedness of individual development. To examine if and how regional factors relate to between-person disparities in the progression of late-life well-being, we applied three-level growth curve models to 24-year longitudinal data from deceased participants of the German Socio-Economic Panel Study (N = 3,427; age at death: 18 to 101 years). Results indicate steep declines in well-being with impending death, with some 8% of the between-person differences in both level and decline of well-being reflecting between-county differences. Exploratory analyses revealed that individuals living and dying in less affluent counties reported lower late-life well-being, controlling for key individual predictors including age at death, gender, education, and household income. The regional factors examined did not directly relate to well-being change, but were found to moderate (e.g., amplify) the disparities in change attributed to individual factors. Our results suggest that resource-poor counties provide relatively less fertile grounds for successful aging until the end of life and may serve to exacerbate disparities. We conclude that examinations of how individual and residential characteristics interact can further our understanding of individual psychological outcomes and suggest routes for future inquiry. |
| Keywords: | Neighborhoods; Selective mortality; successful aging; differential aging; psychosocial factors; well-being; longitudinal methods |
| JEL: | I12 J14 R23 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp287&r=age |
| By: | Martin Weale |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:345&r=age |