nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒08‒06
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labor supply and retirement policy in an overlapping generations model with stochastic fertility By Jorgensen, Ole Hagen; Jensen, Svend E. Hougaard
  2. Incomes of Retirement-age and Working-age Canadians: Accounting for Home Ownership By Brown, W. Mark; Hou, Feng; Lafrance, Amélie
  3. An evaluation of the effect of the 2003 reform on the retirement behaviour - The case of public secondary-school teachers By M. BARATON; M. BEFFY; D. FOUGÈRE
  4. Pension Coverage and Earnings Replacement Rates Among Canadian Couples By Ostrovsky, Yuri; Schellenberg, Grant
  5. Coping with the Job Crisis and Preparing for Ageing: The Case of Finland By Henrik Braconier
  6. Income and Longevity Revisited: Do High-Earning Women Live Longer? By Friedrich Breyer; Jan Marcus
  7. The new Destinie 2 microsimulation model: main characteristics and illustrative results By D. BLANCHET; S. BUFFETEAU; E. CRENNER; S. LE MINEZ
  8. The pension projection package of the Destinie 2 model: users guide By D. BLANCHET; E. CRENNER
  9. Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations By Lorenzo Corsini; Pier Mario Pacini; Luca Spataro
  10. Preferences for Redistribution and Pensions: What Can We Learn from Experiments? By Tausch, Franziska; Potters, Jan; Riedl, Arno
  11. Social security distortions onto the labor market: estimates for Colombia By Cuesta, Jose; Olivera, Mauricio
  12. The Rise in Absenteeism: Disentangling the Impacts of Cohort, Age and Time By Biorn, Erik; Gaure, Simen; Markussen, Simen; Roed, Knut

  1. By: Jorgensen, Ole Hagen; Jensen, Svend E. Hougaard
    Abstract: Using a stochastic general equilibrium model with overlapping generations, this paper studies a policy rule for the retirement age aiming at offsetting the effects on the supply of labor following fertility changes. The authors find that the retirement age should increase more than proportionally to the direct fall in labor supply caused by a fall in fertility. The robustness of this result is checked against alternative model specifications and parameter values. The efficacy of the policy rule depends crucially on the link between the preference for leisure and the response of the intensive margin of labor supply to changes in the statutory retirement age. The model has subsequently been calibrated for Brazil by Jorgensen (2010), in the context of the Brazil Aging Study.
    Keywords: Labor Markets,Labor Policies,Pensions&Retirement Systems,Economic Theory&Research,Population Policies
    Date: 2010–07–01
  2. By: Brown, W. Mark; Hou, Feng; Lafrance, Amélie
    Abstract: This paper estimates the implicit income generated by the home equity of working-age and retirement-age households. In so doing, it expands our understanding of Canadians' preparation for retirement by taking into account the services that homeowners realize as a result of having invested in their homes. On the basis of both the 2006 Survey of Household Spending and the 2006 Census of Population, we find that housing services make an important contribution to household income. When estimates of the services provided by the equity invested in housing are added to traditional estimates of income, the income of retirement-age households is increased by 9% to 12% for those in the 60-to-69 age class and by 12% to 15% for those in the 70-plus age class. In turn, this additional income reduces the difference in income between working-age and retirement-age households that own their own homes. According to the Survey of Household Spending, net incomes decline by about 45% between the peak household earning years and the 70-plus retirement-age class. This figure is reduced to 42% when the contribution of housing services is taken into account. The Census provides a similar picture: the gap in incomes is 38% when net income alone is considered and 35% when one accounts for housing services.
    Keywords: Income, pensions, spending and wealth, Seniors, Work and retirement
    Date: 2010–07–26
  3. By: M. BARATON (Drees); M. BEFFY (Insee); D. FOUGÈRE (Crest)
    Abstract: While a new retirement pension reform is currently discussed in France, it is crucial to evaluate previous reforms. Up to now, no evaluation of the 2003 reform is available, particularly for civil servants. This article deals with the impact of this reform on the retirement behaviour of public secondary-school teachers. On the one hand, the reform has had an impact on the retirement behaviour of secondary-school teachers who still work at 60. The probability to retire between 60 and 61 years old for those who have paid their social contributions for 37.5 years at 60 years old drops by 9 points. On the other hand, the reform seems to have changed teachers willingness to get the so-called full-pension rate. When the number of missing quarters of social contributions required to benefit from the full pension rate at 60 years old is low, the reform is not found to induce teachers born after 1944 to postpone their retirement after 61 years old. But a large number of missing quarters has still the same effect before and after the reform.
    Keywords: retirement pension reform, public secondary-school teachers, propensity score matching, regression-discontinuity
    JEL: C21 H55 J26
    Date: 2010
  4. By: Ostrovsky, Yuri; Schellenberg, Grant
    Abstract: Using data from the Longitudinal Administrative Database (LAD), this paper compares the earnings replacement rates achieved in retirement by a sample of married and common-law couples in which the husband was aged 55 to 57 in 1991. Emphasis is placed on the outcomes experienced by couples in which one spouse or both spouses had registered pension plan (RPP) coverage and by couples without RPP coverage. The earnings replacement rates achieved by couples without RPP coverage are more widely dispersed than those of couples with RPP coverage. When compared at the mid-points of the pre-retirement earnings distributions, the median earnings replacement rates of couples without RPP coverage are about three to six percentage points lower than those of couples with RPP coverage. In contrast, the average earnings replacement rates of couples without RPP coverage are generally six to twelve percentage points higher than those of couples with RPP coverage.
    Keywords: Income, pensions, spending and wealth, Seniors, Work and retirement
    Date: 2010–07–22
  5. By: Henrik Braconier
    Abstract: Maintaining high participation and employment in the face of the recent recession and a rapidly ageing population are major challenges for policy makers in Finland. The recession of the early 1990s showed that high unemployment can leave long–lasting scars on labour markets, while rapid ageing requires longer working lives to ensure sustainable public finances. Minimising the effect of the recession on the labour market calls for nominal wage increases in line with economic conditions, greater flexibility in wage setting, ensuring earlier activation of unemployed and reforming unemployment and social benefits to better support work incentives. Finland has an unusual combination of elevated unemployment replacement rates and late referral to labour market activation, which contributes to high levels of inactivity and a large number of beneficiaries. This combination risks building up greater structural unemployment over time. More ambitious activation needs to be accompanied by lower replacement rates in the unemployment insurance and related schemes to support labour market participation, job search and employment. Institutional responsibilities in labour market policies should be simplified and made more transparent. With an already low effective retirement age, additional early permanent exit from the labour market needs to be discouraged. The recent success of restricting access to the unemployment pipeline should be followed up by a complete abolition of the system. Stricter criteria for entry into disability pensions should also be applied. The 2005 pension reform was a step in the right direction, but the old–age retirement system should be further adjusted to lower fiscal costs, raise the minimum retirement age and increase work incentives for older individuals. This Working Paper relates to the 2010 Economic Survey of Finland. (<P>Faire face à la crise de l’emploi et anticiper le vieillissement : le cas de la Finlande<BR>Maintenir un haut niveau d’activité et d’emploi face à la récente récession et au vieillissement rapide de la population est un défi majeur pour les responsables publics de la Finlande. La récession du début des années 90 a montré qu’un haut niveau de chômage peut laisser des cicatrices durables sur le marché du travail, tandis que le vieillissement rapide nécessite un allongement de la durée de la vie active pour assurer la viabilité des finances publiques. Minimiser les effets de la récession sur le marché du travail suppose des augmentations des salaires nominaux en lien avec la situation économique, plus de flexibilité dans la fixation des salaires, une activation plus précoce des chômeurs et une réforme des allocations chômage et prestations sociales pour renforcer davantage les incitations en faveur de l’activité. La Finlande présente une conjonction inhabituelle de taux de remplacement élevés et d’orientations tardives vers les dispositifs d’activation sur le marché du travail, ce qui contribue à des niveaux d’inactivité élevés et à des effectifs de bénéficiaires nombreux. Cette conjonction d’éléments risque d’entraîner un gonflement du chômage structurel au fil du temps. Une politique d’activation plus ambitieuse doit aller de pair avec des taux de remplacement plus faibles, assurés par les systèmes d’indemnisation du chômage et les dispositifs connexes de façon à encourager la participation à l’activité, la recherche d’emploi et l’emploi. Les responsabilités institutionnelles concernant les politiques du marché du travail devraient être rendues plus simples et plus transparentes. L’âge effectif de départ à la retraite étant déjà faible, les dispositifs annexes permettant des retraits permanents précoces du marché du travail sont à proscrire. Les efforts déployés récemment pour restreindre l’accès à la filière du chômage devraient déboucher maintenant sur l’abolition complète du système. De même, les critères d’accès à une pension d’invalidité devraient être durcis. La réforme des pensions de 2005 était un pas dans la bonne direction, mais d’autres ajustements devraient encore être introduits dans le système de pensions de vieillesse afin d’abaisser le coût budgétaire, élever l’âge minimum de la retraite et renforcer les incitations en faveur de l’activité en direction des personnes d’un certain âge. Ce document de travail porte sur l'Étude économique de la Finlande (
    Keywords: unemployment, Finland, pensions, retirement, disability, unemployment benefits, ALMP, wage formation, unemployment pipeline, chômage, retraites, pensions, Finlande, invalidité, allocations chômages, PAMT, formation des salaires, filière du chômage
    JEL: J21 J26 J31 J61 J64 J68
    Date: 2010–05–31
  6. By: Friedrich Breyer; Jan Marcus
    Abstract: The empirical relationship between income and longevity has been addressed by a large number of studies, but most were confined to men. In particular, administrative data from public pension systems are less reliable for women because of the loose relationship between own earnings and household income. Following the procedure first used by Hupfeld (2010), we analyze a large data set from the German public pension scheme on women who died between 1994 and 2005, employing both non-parametric and parametric methods. To overcome the problem mentioned above we concentrate on women with relatively long earnings history. We find that the relationship between earnings and life expectancy is very similar for women as for men: Among women who contributed at least for 25 years, a woman at the 90th percentile of the income distribution can expect to live 3 years longer than a woman at the 10th percentile.
    Keywords: Life expectancy and income, women, public pensions, Germany
    JEL: I12 H55
    Date: 2010
  7. By: D. BLANCHET (Insee); S. BUFFETEAU (Drees); E. CRENNER (Drees); S. LE MINEZ (Dares)
    Abstract: The Destinie model is a dynamic microsimulation model that has been developed and used at the French national statistical institute (INSEE) since the mid-1990s and whose main application is the analysis of pension policies. The paper presents the new version of the model that is progressively becoming operational. The main goals of this new version have been to improve the robustness and the flexibility of the instrument. This new model has two separate components: (a) a generator of demographic and employment biographies, whose results are stored in intermediate output files and (b) a library of subroutines allowing an easy programming of ad hoc pension projections based on data from these intermediary files. We explain the advantages of this new structure and we provide some preliminary results showing the impacts of the 1993 and 2003 reforms, or of the long-term impact, on pensions, of various post-crisis growth scenarios.
    Keywords: Pensions, microsimulation, retirement behavior
    JEL: H55 J26
    Date: 2010
  8. By: D. BLANCHET (Insee); E. CRENNER (Drees)
    Abstract: The Destinie model is a dynamic microsimulation model whose main purpose is the long run projection of pensions both at the macro and micro levels. This document presents how such simulations can be built with the new version of the model. They do not rely on a closed ready-made program where variants would be obtained by just changing values for a predetermined set of parameters. The new Destinie 2 model has been rather designed as a toolbox of modules, allowing the construction of ad hoc projection programs that can be tailored to users demands. We provide a comprehensive view of this toolbox. This document addresses the needs of both basic users and more advanced ones, including for applications that would eventually require the building of additional modules.
    Keywords: Microsimulation, pensions
    JEL: C63 H55
    Date: 2010
  9. By: Lorenzo Corsini; Pier Mario Pacini; Luca Spataro
    Abstract: In this paper we aim at providing a theoretical framework to model workers’ choice problem of switching between different pension schemes. This choice problem is common in several countries that have reformed their social security system in the last decades. Although with some specific features, such process is currently affecting private sector employees in Italy, since the reform of the TFR mechanism in 2007. This reform basically allows workers to choose between a scheme directly managed by the firms and an external defined contribution scheme. In their decision workers not only have to weight out the different pros and cons that different schemes offer but they also have to consider the effect that their choice exerts on the financial structure of the firm they work in. Once we have formalized this decision problem, we carry out some simulations in order to replicate the Italian data and to shed some light on the outcomes of the Italian reform.
    Keywords: pension funds, saving decisions, search models
    JEL: J64 J32 G23
    Date: 2010–05–01
  10. By: Tausch, Franziska (Maastricht University); Potters, Jan (Tilburg University); Riedl, Arno (Maastricht University)
    Abstract: Redistribution is an inevitable feature of collective pension schemes and economic experiments have revealed that most people have a preference for redistribution that is not merely inspired by self-interest. Interestingly, little is known on how these preferences interact with preferences for different pension schemes. In this paper we review the experimental evidence on preferences for redistribution and suggest some links to redistribution through pensions. For that purpose we distinguish between three types of situations. The first deals with distributional preferences behind a veil of ignorance. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?
    Keywords: redistribution, fairness, pension, insurance, experiment
    JEL: C90 D01 D63 D64 H55
    Date: 2010–07
  11. By: Cuesta, Jose; Olivera, Mauricio
    Abstract: This paper identifies and quantifies three distortions caused by the existing social security and social assistance systems in Colombia. These distortions refer to the discrepancy between the cost of formal social security for the employer and the worker's valuation of the received service (social distortion): the differences in social security benefits received by salaried and self-employed formal workers (occupational distortion); and the discrepancy caused by the cost in employing a formal instead of an informal worker (informal distortion). Based on recently collected information concerning Colombian workers'willingness to pay for several packages of social security benefits, the study calculates that social distortions range from 2 to 27 percent of the workers'labor earnings; the occupational distortion amounts to 50 percent of formal salaried workers'earnings; and the informal distortions represent between 45 and 56 percent of formal workers'labor income. Results indicate that valuations of the contributive and noncontributive protection systems play a key role in explaining these distortions. In addition, the Colombian social protection system thereby places a hefty tax on the formal worker (and employer) while transferring resources to the informal worker, but these distortions are not sufficient to revert differentials in earnings among formal and informal workers.
    Keywords: Health Monitoring&Evaluation,Labor Markets,Labor Policies,Labor Standards,Population Policies
    Date: 2010–07–01
  12. By: Biorn, Erik (University of Oslo); Gaure, Simen (Ragnar Frisch Centre for Economic Research); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Roed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: We examine the remarkable rise in absenteeism among Norwegian employees since the early 1990's, with particular emphasis on disentangling the roles of cohort, age, and time. Based on a fixed effects model, we show that individual age-adjusted absence propensities have risen even more than aggregate absence rates from 1993 to 2005, debunking the popular hypothesis that the rise in absenteeism resulted from the inclusion of new cohorts – with weaker work-norms – into the workforce. We also reject the idea that the rise in absenteeism resulted from more successful integration of workers with poor health; on the contrary, a massive rise in disability rolls during the 1990’s suggest that poor-health workers have left the labor market in unprecedented numbers.
    Keywords: sickness absence, endogenous selection, multicollinearity, fixed effects logit
    JEL: C23 C25 I38 J22
    Date: 2010–07

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