nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒06‒18
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Social Security and the Age of Retirement By David Rosnick
  2. Retirement-Related Highlights from the 2009 Canadian Financial Capability Survey By Schellenberg, Grant; Ostrovsky, Yuri
  3. Homeownership over the Life Course of Canadians: Evidence from Canadian Censuses of Population By Hou, Feng
  4. The Effects of Health Insurance and Self-Insurance on Retirement Behavior By John Bailey Jones; Eric French
  5. New Forms of Employment and the Social Security System: The Case of Germany By Fachinger, Uwe / UF
  6. Training Participation of an Aging Workforce in an Internal Labor Market By Pfeifer, Christian; Janssen, Simon; Yang, Philip; Backes-Gellner, Uschi
  7. The Downside Risk of Postponing Social Security Benefits By Joseph Friedman; Herbert E Phillips
  8. Who works at older ages? the correlates of economic activity and temporal changes in their effects: evidences from India By Bakshi, Sanjeev; Pathak, Prasanta
  9. Agglomeration processes in aging societies By Theresa Grafeneder-Weissteiner; Klaus Prettner
  10. Demographic change, growth and agglomeration By Theresa Grafeneder-Weissteiner

  1. By: David Rosnick
    Abstract: Unlike a century ago, people expect their children to live past the age of retirement. This fact has important implications for how workers save for retirement, but has no specific implications for the retirement portion of Social Security. In addition, the increase in life expectancy is not nearly as important as it might first appear. A significant part of the increase in life is between birth and age 20. Including declines in child and teen mortality exaggerate the increase in retirement length. Furthermore, much of the gains in life expectancy come during working years—between age 20 and retirement. This means that workers are not only experiencing longer retirements, but longer working lives as well. Finally, each succeeding generation has been vastly more productive than prior generations—a trend that will continue. Thus, not only have workers on average more years of work over their lifetime, they are better able to save for their retirements.
    Keywords: social security, retirement, retirement age
    JEL: H H6 H62 H63 H68 J J1 J14 J18 J3 J32 J38
    Date: 2010–06
  2. By: Schellenberg, Grant; Ostrovsky, Yuri
    Abstract: The Canadian Financial Capability Survey (CFCS), released by Statistics Canada in December 2009, was designed to collect information about Canadians' knowledge, abilities, and behaviours concerning financial decision-making. In addition to information on approaches to money management and financial planning, the CFCS collected information on issues relevant to current discussions about Canada's retirement income system. For example, retired respondents were asked about their financial standard of living in retirement and whether their retirement income is sufficient to comfortably cover their bills and financial commitments. Working-age Canadians were asked about their financial preparations for retirement. This research note provides highlights on retirement issues using the CFCS.
    Keywords: Income, pensions, spending and wealth, Seniors, Work and retirement
    Date: 2010–06–08
  3. By: Hou, Feng
    Abstract: Homeownership affects investment, consumption, and savings decisions of households, and plays a major role in post-retirement well-being. This paper examines two questions. First, to what extent do Canadians acquire and retain homeownership at different life-course stages, particularly after retirement? Second, has the age profile of homeownership changed over generations? Using data from eight Canadian censuses of population, conducted between 1971 and 2006, we find a strong regularity in the age profile of homeownership across generations of Canadians. The homeownership rate rises quickly with the age of household maintainers (i.e., the person(s) who pay(s) for shelter costs) in the period before the age of 40, and continues to climb thereafter at a slower pace until reaching the plateau near age 65, when about three quarters of Canadian households own their homes. We find that the homeownership rate changes little from age 65 to 74 but starts declining after age 75. As well, we note that the level at which homeownership plateaus has risen steadily across birth cohorts since the 1970s.
    Keywords: Income, pensions, spending and wealth, Families, households and housing, Seniors, Income, pensions and wealth
    Date: 2010–06–07
  4. By: John Bailey Jones; Eric French
    Abstract: This paper provides an empirical analysis of the effects of employer-provided health insurance, Medicare, and Social Security on retirement behavior. Using data from the Health and Retirement Study, we estimate a dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that Medicare is important for understanding retirement behavior, and that uncertainty and saving are both important for understanding the labor supply responses to Medicare. Half the value placed by a typical worker on his employer-provided health insurance is the value of reduced medical expense risk. Raising the Medicare eligibility age from 65 to 67 leads individuals to work an additional 0.074 years over ages 60-69. In comparison, eliminating two years worth of Social Security benefits increases years of work by 0.076 years.
    Date: 2010
  5. By: Fachinger, Uwe / UF
    Abstract: The aim of the study is to analyse the consequences of the changing structure of the labour market for the social security system. It will be shown that in the future the restructuring of the labour force will yield a main challenge for social policy and will have much bigger consequences for the social security system than the demographic changes. Numerous new forms of employment were caused by the economic process of tertiarization. Furthermore, these kinds of employment were politically demanded and financially supported. However, those forms of employment have their shortcomings. From an individualistic point of view there is a shortage in the protection against the financial consequences of social risks (e.g. unemployment, invalidity, illness, or the possibility to save for an adequate pension) within the social security system. From an institutionalistic point of view the financial basis of the social security systems becomes weaker and weaker as the reduction of the number of employees with a compulsory membership within the social security systems will inevitable reduce the contribution revenue of the institutions. As a preliminary conclusion it may be said that if the development continues we will not be confronted with the expected costs of the demographic changes but with a growing number of people with no or a low coverage against social risks. These people will depend on a basic system of poverty prevention.
    Keywords: social security, demography, labour market, tertiarization
    JEL: D31 H55 E24 N3 H5 I3 J0
    Date: 2009–11–21
  6. By: Pfeifer, Christian; Janssen, Simon; Yang, Philip; Backes-Gellner, Uschi
    Abstract: We use a long panel data set for four entry cohorts into an internal labor market to analyze the effect of age on the probability to participate in different training measures. We find that training participation probabilities are inverted u-shaped with age and that longer training measures are undertaken earlier in life and working career, respectively. These findings are consistent with predictions from a human capital model which incorporates amortization period and screening effects. Our results point to a market failure in the context of human capital investments to increase employability of older workers.
    Keywords: Human capital, Internal labor markets, Training
    JEL: J14 J24 M53
    Date: 2010–04
  7. By: Joseph Friedman (Department of Economics, Temple University); Herbert E Phillips (Department of Finance, Temple University)
    Abstract: The point that only live participants may initiate or receive Social Security benefits is typically overlooked. Thus a postponement of benefits at any eligible retirement age may be likened to participation in a game of chance in which the participant is subject to a variant form of gambler’s ruin at death. The typical assumption, therefore, that a participant should automatically opt for a postponement if the present value of the resulting benefits, discounted to breakeven age, higher than the present value of the opportunity costs, carries with it the implication of risk neutrality in relation to the consequence of dying before reaching breakeven death age. While this implication of risk neutrality is sometimes correct, it is more likely not. In marked contrast to conclusions reached in previous studies, this paper shows that a single Social Security participant, who is risk averse as regards the chances– and contingent consequences– of dying before reaching breakeven death age, would be well advised to initiate benefits at the earliest age at which he or she would not be subject to earned income tax penalties.
    Keywords: Social Security, Social Security Benefit Initiation, Social Security Benefit Postponement, Social Security Benefit Optimization, Retirement Annuities.
    JEL: D14 H55
    Date: 2010–06
  8. By: Bakshi, Sanjeev; Pathak, Prasanta
    Abstract: India is an ageing population. A large informal sector provides ample scope to absorb human resources even at older ages. Therefore, like other developing countries a large proportion of older adults in India lead an economically active life. The present study investigates the association of various factors namely, gender, household per capita monthly expenditure, place of residence, education, marital status, age etc. with the state of being economically active. For this purpose three nationally representative samples that were collected as a part of the national sample survey (NSS) are utilized. These samples represent the older adult population of India during the periods 1986-87, 1995-96 and 2004. The logistic regression models are then applied to estimate the effects of all these factors. These effects are analyzed and changes in these effects are compared over time points. In a nutshell the states of the variables that are conducive to being economically active are being male, residing in rural areas and lower educational levels. Ill health on the other hand adversely affects the probability of being economically active. The study emphasizes the need for taking care of the health needs of the older adults to help them remain active for longer duration.
    Keywords: ageing; economic activity; older adults
    JEL: J14 J1
    Date: 2010–06–01
  9. By: Theresa Grafeneder-Weissteiner (Department of Economics, Vienna University of Economics & B.A.); Klaus Prettner (Vienna Institute of Demography, Austrian Academy of Sciences)
    Abstract: This article investigates agglomeration processes in aging societies by introducing an overlapping generation structure into a New Economic Geography model. Whether higher economic integration leads to spatial concentration of economic activity crucially hinges on the economies' demographic properties. While population aging as represented by declining birth rates strengthens agglomeration processes, declining mortality rates weaken them. This is due to the fact that we allow for nonconstant population size. In particular, we show that population growth acts as an important dispersion force that augments the distributional effects on agglomeration processes resulting from the turnover of generations.
    JEL: R12 J10 F15 C61
    Date: 2010–06
  10. By: Theresa Grafeneder-Weissteiner (Department of Economics, Vienna University of Economics & B.A.)
    Abstract: This article presents a framework within which the effects of demographic change on both agglomeration and growth of economic activities can be analyzed. I introduce an overlapping generation structure into a New Economic Geography model with endogenous growth due to learning spillovers and focus on the effects of demographic structures on long-run equilibrium outcomes and stability properties. First, life-time uncertainty is shown to decrease long-run economic growth perspectives. In doing so, it also mitigates the pro-growth effects of agglomeration resulting from the localized nature of learning externalities. Second, the turnover of generations acts as a dispersion force whose anti-agglomerative effects are, however, dampened by the growth-linked circular causality being present as long as interregional knowledge spillovers are not perfect. Finally, lifetime uncertainty also reduces the possibility that agglomeration is the result of a self-fulfilling prophecy.
    JEL: F43 O33 J10 R11
    Date: 2010–06

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