nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒07‒10
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Economic Security in an Aging Canadian Population By Robert L. Brown
  2. Retirement Decisions of People with Disabilities: Voluntary or Involuntary By Margaret Denton; Jennifer Plenderleith; James Chowhan
  3. Betting on a long life: The role of subjective life expectancy in the demand for private pension insurance of german households By Schulte, Katharina; Zirpel, Ulrike
  4. Spousal Health Shocks and the Timing of the Retirement Decision in the Face of Forward-Looking Financial Incentives By Courtney Harold Van Houtven; Norma B. Coe
  5. Medicare Part D and the Financial Protection of the Elderly By Gary V. Engelhardt; Jonathan Gruber
  6. Criteria for the Optimal Design of a Social Security Retirement System By Robert L. Brown
  7. Issues in the Issuance of Enhanced Annuities By Robert L. Brown; Patricia Scahill
  8. Understanding the Outcomes of Older Job Losers By Matthew Brzozowski; Thomas F. Crossley
  9. Fiscal Incidence When Both Individual Welfare and Family Structure Matter: The Case of Subsidization of Home-care for the Elderly By Haizhen Mou; Stanley L. Winer
  10. China's marriage market and upcoming challenges for elderly men By Das Gupta, Monica; Ebenstein, Avraham; Sharygin, Ethan Jennings

  1. By: Robert L. Brown
    Abstract: This paper has been written for the special issue of the Canadian Journal on Aging on the retrospective on the Butterworths series of monographs in social gerontology. The paper brings up-to-date materials published in 1991 in the volume entitled: Economic Security in an Aging Population. The topics covered are those of the individual chapters of the 1991 publication, namely -- (1) Demographic Background; (2) Income and Expenditure Patterns of the Elderly in Canada; (3) Government-Sponsored Income Security; (4) Employer-Sponsored Pension Plans; (5) Individual Savings/Registered Retirement Savings Plans; (6) Economic Security Aspects of Health Care; (7) Future Funding of Social Security.
    Keywords: Baby Boom, Canada/Quebec Pension Plans, Pension Plans, Registered Retirement Savings Plans, Health Care Costs
    JEL: J18
    Date: 2010–05
  2. By: Margaret Denton; Jennifer Plenderleith; James Chowhan
    Abstract: While some retirement is welcomed and on-time, other retirements are involuntary or forced due to the loss of a job, an early retirement incentive, a health problem, mandatory retirement, lack of control with too many job strains, or to provide care to a family member. An analysis of the 2002 Canadian General Social Survey reveals that 27% of retirees retired involuntarily. This research focuses on the disabled population in Canada and considers factors that influence voluntary and involuntary retirement. Further, consideration is given to the economic consequences of retiring involuntarily. This research will examine issues surrounding retirement and disability through statistical analysis of the Canadian Participation and Activity Limitations Survey (PALS) 2006 data. Methods include the use of descriptive statistics and logistic regression analysis to determine the characteristics associated with involuntary retirement. This study found that those who retired involuntarily were more likely to have the following socio-demographic and socio-economic characteristics: age 55 or less, less than high school education, live in Quebec, rent their home, and have relatively low income. They were also more likely to be worse off financially after retirement and to be receiving social assistance or a disability benefit. In terms of disability, the likelihood of retiring involuntarily was greater for those with poor health at retirement, the age of onset was over 55, higher level of severity, and multiple types of disability. For the discussion, a social inequalities framework is used, where health selection into involuntary retirement depends on social location defined by age and education. Policy initiatives that reduce the effects of disability, and allow individuals to remain in or return to the labour force such as workplace accommodations are discussed.
    Keywords: Retirement, Disabled, Health, Labour Force
    JEL: J14
    Date: 2010–06
  3. By: Schulte, Katharina; Zirpel, Ulrike
    Abstract: With a view to investigating the presence of adverse selection, we analyze determinants of private pension insurance uptake of German households in a probit model. Using survey data on savings and old-age provision, we find that subjective life expectancy is positively related with the probability of having supplementary private pension insurance. This indicates that the German annuities market is in fact characterized by adverse selection. Furthermore, pre-existing annuities from the public pension system tend to be a substitute to private insurance, while financial literacy enhances the uptake. We also find evidence for a bequest motive in old-age provision, but see no indication for pooling longevity risk within couples. --
    JEL: D82 G22 D91 J26
    Date: 2010
  4. By: Courtney Harold Van Houtven; Norma B. Coe
    Abstract: A long and still growing strand of the retirement literature examines the role financial incentives play in the timing of the retirement decision. A more recent second strand of work has focused on the role of health shocks in the retirement decision. This paper combines these two components of the literature in order to measure the marginal impact of current wealth (including pension accrual), forward-looking financial incentives (peak-value pension wealth), and health shocks on married individuals’ retirement decision. This paper helps to clarify whether previously omitted forward-looking financial incentives can explain the strong role attributed to health shocks in the retirement decisions of coupled individuals. We find that financial incentives are the most important determinant of retirement behavior empirically. A husband is about half as responsive to his wife’s financial incentives as he is to his own. Interestingly, we find that married men are responsive to their wives’ health shocks, on both the intensive and extensive margin, but find wives’ decisions concerning work are largely unaffected by their husbands’ health shocks.
    Date: 2010–06
  5. By: Gary V. Engelhardt; Jonathan Gruber
    Abstract: We examine the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and find evidence of substantial crowd-out. Using detailed data from the 2002-7 waves of the Medical Expenditure Panel Survey (MEPS), we estimate that the extension of Part D benefits resulted in 80% crowd-out of both prescription drug insurance coverage and prescription drug expenditures of those 65 and older. Part D is associated with only modest reductions in out-of-pocket spending. This suggests that the welfare gain from protecting the elderly from out-of-pocket spending risk through Part D has been small.
    JEL: H51 I18
    Date: 2010–07
  6. By: Robert L. Brown
    Abstract: This paper discusses a series of selection points in the design and financing of social security retirement systems. For each criterion, the paper lists and discusses advantages and disadvantages of the options available. The selection points include (1) Funded versus PAYGO; (2) Minimum benefits, Demogrant or Welfare; (3) Progressive versus Regressive; (4) Voluntary versus Mandatory; (5) Individual Accounts versus Commingling of Risk (6) Public versus Private sourcing; (7) Automatic Balancing Mechanisms; (8) System Risk Diversification. It is the sincere hope of the author that this discussion will create even more debate of the issues surrounding these important selection criteria which, in turn, will result in better social security retirement systems for all.
    Keywords: Social Security design and financing, Funded pay-as-you-go, Individual Accounts, Automatic Balancing Mechanisms
    JEL: H55
    Date: 2010–05
  7. By: Robert L. Brown; Patricia Scahill
    Abstract: Two forces are about to create a growing market for Individual Annuities in the U. S. and Canada. First, the Post War Baby Boom (born 1946 to 1964) is inexorably moving into retirement. Second, there is a strong move away from Employer-sponsored Defined Benefit pension plans to Defined Contribution pension plans. This trend could even extend (in the U.S.) into the provision of Social Security benefits. Under these arrangements, participants must find a way to mitigate their “longevity” risk (and the investment risk, although this is not the topic of this paper). The most obvious answer is to buy a life annuity. However, at this time in the U. S. and Canada, persons who voluntarily apply to buy a life annuity are generally assumed to be in extremely good health and annuity rates are determined using very low mortality assumptions (high life expectancy assumptions). While there is a growing market in “Enhanced/Impaired Annuities”, especially in the U.K., the present pricing structure for annuities in the U. S. and Canada means that a large proportion of the population cannot get a “fair value” annuity given their less-than-preferred health profile. This paper looks at reasons for this market reality in the U. S. and Canada. It also reviews the underwriting and marketing of life annuities in the United Kingdom where “enhanced” life annuities are available for a broader cross-section of the marketplace.
    Keywords: Individual Annuities, Defined Benefit Pension Plan, Defined Contribution Pension Plan, Retirement Income Security, Life Expectancy, Impaired Mortality
    JEL: G22
    Date: 2010–05
  8. By: Matthew Brzozowski; Thomas F. Crossley
    Abstract: We use an unusually rich Canadian survey to examine how post-job-loss behaviour and outcomes vary with age of the job loser. We find that older job losers experience greater postdisplacement joblessness, and are less likely to return quickly to satisfactory employment. We show that this apparent age effect is not a job tenure effect or wealth effect. We also find that older job losers, compared to mid-career job losers, are as likely to report searching for work, but that they search less intensely (reporting fewer hours of search, and lower out of pocket expenditures on search). They are also less likely to retrain, less likely to undertake a geographic move, and less likely to switch occupations. Thus, the data suggest older job losers are less likely to make career investments after job loss. This may be a rational response to a shorter time horizon, or to more limited labour market opportunities.
    Keywords: job loss, job search, older workers
    JEL: J60
    Date: 2010–05
  9. By: Haizhen Mou; Stanley L. Winer
    Abstract: Demographic ageing in Western countries has increased the pressure on children of elderly parents to provide care privately as an alternative to more costly institutionalization, and this pressure is likely to intensify. While some papers have recently investigated the optimal structure of family policy in this context, there is little work so far on the distributional impact of programs whose purpose is to subsidize the care of seniors who remain at home. We investigate analytically and with simulation the measurement of the fiscal incidence of programs that subsidize home care for the elderly, when both individual welfare and family structure matter. The definition of welfare incidence, the comparison of welfare-based incidence with budgetary incidence for non-cooperative and cooperative families, and the calculation of the shifting of program benefits between family members, some of whom may be altruistic, are key issues in the analysis. The integration of individual welfare, family structure and benefit shifting provides a new perspective on the study of the distributional consequences of home-care programs.
    Date: 2010–06
  10. By: Das Gupta, Monica; Ebenstein, Avraham; Sharygin, Ethan Jennings
    Abstract: Fertility decline has fueled a sharp increase in the proportion of'missing girls'in China, so an increasing share of males will fail to marry, and will face old age without the support normally provided by wives and children. This paper shows that historically, China has had nearly-universal marriage for women and a very competitive market for men. Lower-educated men experience higher rates of bachelorhood while women favor men with better prospects, migrating if needed from poorer to wealthier areas. The authors examine the anticipated effects of this combination of bride shortage and hypergamy, for different regions of China. Their projections indicate that unmarried males will likely be concentrated in poorer provinces with low fiscal ability to provide social protection to their citizens. Such geographic concentration of unmarried males could be socially disruptive, and the paper’s findings suggest a need to expand the coverage of social protection programs financed substantially by the central government.
    Keywords: Population Policies,Population&Development,Demographics,Gender and Law,Gender and Health
    Date: 2010–06–01

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