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on Economics of Ageing |
| By: | Sanders, E.A.T.; De Waegenaere, A.M.B.; Nijman, T.E. (Tilburg University, Center for Economic Research) |
| Abstract: | It is common practice for public pension schemes to offer individuals the option to delay benefit claiming until after the normal retirement age and adjust the annual benefit level as a result. This adjustment is often not actuarially neutral with respect to the age at which benefits are claimed. The degree of actuarial nonequivalence varies by interest rates as well as individual characteristics such as gender and age. In this paper we show that actuarial nonequivalence can imply that deferring benefit claiming is suboptimal, irrespective of the preferences of the individual. Specifically, we derive preference-free conditions under which delaying benefit claiming is dominated by claiming benefits early, and using them to buy super-replicating annuity products from an insurance company. We find that the degree of actuarial nonequivalence in public pension schemes is such that such dominating strategies can exist even when the purchase of annuities would be significantly more costly than what is currently observed. If individuals choose to strategically exploit these dominating strategies, this will affect benefit claiming behavior, which in turn affects long run program costs. |
| Keywords: | Pension Benefit Claiming;Delay Options;Actuarial Nonequivalence;Preference-free Dominance |
| JEL: | H55 D14 G22 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:201043&r=age |
| By: | Benjamin Wong; Kam Ki Tang |
| Abstract: | Life-cycle theory predicts ageing exerting long-term macroeconomic impacts through the reduction of private savings. However, empirical research studying macroeconomic determinants of savings generally regard age dependency as the sole measure of ageing, but overlook longevity, which can also give rise to population ageing but exerts an opposite impact on private savings. This paper addresses this potential bias by considering the joint effects age dependency and longevity have on savings. In contrast to the wider literature, not only private savings, but also public savings was studied. Applying dynamic panel models to a dataset of 55 countries over 1972-2004, age dependency was found to exert a negative effect on private savings. However, some of these reductions can potentially be offset by increased longevity. The study also revealed some level of crowding out of private savings by changes in public savings and finds that the Ricardian Equivalence Hypothesis cannot be entirely dismissed. |
| JEL: | J10 E21 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2010-12&r=age |
| By: | Adam Lenart (Max Planck Institute for Demographic Research, Rostock, Germany); Trifon I. Missov (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | For a homogeneous population we study a Gompertz model with a fixed shape and a monotonically decreasing scale parameter. We prove that in these settings life expectancy is infinite. Given that mortality rates decrease geometrically at all ages at the same time, we prove that period life expectancy increases linearly. For such mortality rate reduction we derive formulae for cohort life expectancy and its changes over time in terms of its corresponding period life expectancy. |
| Keywords: | mathematical demography |
| JEL: | J1 Z0 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2010-024&r=age |
| By: | Kirdar, Murat G. (Middle East Technical University) |
| Abstract: | In this paper, I estimate the fiscal impact of immigrants on the German pension insurance (PI) and unemployment insurance (UI) systems when return migration is an endogenous choice. For this purpose, I develop a dynamic stochastic model of joint return migration and saving decisions that accounts for uncertainty in future employment and income and estimate this model using a longitudinal data set on immigrants from five different source countries. I find that allowing for the endogeneity of the return decision makes a substantial difference in the net gain of the PI and UI systems from immigrants. Exogenous return migration – which has been the practice of the literature so far – underestimates the net gain for almost all demographic groups and the amount of underestimation is remarkable for several demographic groups. In addition, age-at-arrival profiles of net contributions of immigrants – which form the basis of suggestions on selective immigration policies in the literature – are rotated significantly. Finally, a counterfactual policy experiment in which cash bonuses are provided conditional on return to unemployed immigrants turns out be ineffective in terms of reducing the burden on the state coffers for most demographic groups. |
| Keywords: | immigrant workers, life cycle models, saving, social security, public pensions, unemployment insurance, public policy |
| JEL: | J61 D91 H55 J65 J68 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4894&r=age |
| By: | Han Lin Shang; Rob J Hyndman; Heather Booth |
| Abstract: | Using the age- and sex-specific data of 14 developed countries, we compare the short- to medium-term accuracy of ten principal component methods for forecasting mortality rates and life expectancy. These ten methods include the Lee-Carter method and many of its variants and extensions. For forecasting mortality rates, the weighted Hyndman-Ullah method provides the most accurate point forecasts, while the Lee-Miller method gives the best point forecast accuracy of life expectancy. Furthermore, the weighted Hyndman-Ullah method provides the most accurate interval forecasts of mortality rates, while the robust Hyndman-Ullah method provides the best interval forecast accuracy of life expectancy. |
| Keywords: | Mortality forecasting, life expectancy forecasting, principal component methods, Lee-Carter method, interval forecasts, forecasting time series |
| JEL: | C14 C23 |
| Date: | 2010–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:msh:ebswps:2010-8&r=age |
| By: | Tamie Matsuura (NLI Research Institute); Masaru Sasaki (ISER, Osaka University) |
| Abstract: | Using two-period panel data from the Nippon Life Insurance Research Institute, this paper tests the hypothesis that an increase in the self-pay ratio of medical expenditures associated with the Japanese health insurance reforms of April 2003 reduced individual medical costs. We find that the increase in the self-pay ratio of medical expenditures has a trivial effect on household medical expenses, implying that a decrease in the quantity demanded for medical services offsets the increase in medical costs. However, according to quantile regression estimates, an increase in the self-pay ratio of medical expenditures has a significantly positive effect on the share of medical costs for relatively high quantile values. This provides corroborating evidence that an increase in the self-pay ratio cannot cut the demand for medical services relatively more for those bearing a higher share of medical costs in household expenditure. An additional finding is that medical services are a necessity good, particularly for those with a relatively high share of medical costs in household expenditure. |
| Keywords: | health insurance, medical costs, Engle curve, middle- and old-aged persons, Japan |
| JEL: | I11 I18 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1013&r=age |
| By: | Smith D (London School of Hygiene and Tropical Medicine); Mcfall S (Institute for Social and Economic Research); Bradshaw B (University of Texas School of Public Health) |
| Abstract: | Survival ratios and death rates for chronic conditions can be estimated from successive, cross-sectional surveys when the condition and the age of onset are obtained. Survival ratios use the estimated population in the first survey period as the denominator and the estimated number of survivors at a later survey period as the numerator. These ratios have independent numerators and denominators and their variance estimates are a modification of the usual formulas. We illustrate the method by estimating annual death rates and their standard errors among diabetics in the United States. |
| Date: | 2010–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2010-12&r=age |