nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒08‒14
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Hard Work? Patterns of Physically Demand Labor Among Older Workers By Hye Jin Rho
  2. Replacing Family Income During the Retirement Years: How Are Canadians Doing? By Larochelle-Côté, Sébastien; Myles, John; Picot, Garnett
  3. Do European employers support later retirement?. By Dalen, H.P. van; Henkens, K.; Hendrikse, W.; Schippers, J.J.
  4. The effect of age on portfolio choices: evidence form an Italian pension fund By Giuseppe Cappelletti; Giovanni Guazzarotti; Pietro Tommasino
  5. Stochastic Mortality, Subjective Survival Expectations, and Individual Saving Behavior By Thomas Post; Katja Hanewald
  6. Which European model for elderly care? Equity and cost-effectiveness in home based care in three European countries By Francesca Bettio; Giovanni Solinas
  7. The Long-Term Care System in Denmark By Erika Schulz
  8. The Long-Term Care System in Germany By Erika Schulz
  9. A public guarantee of a minimum return to defined contribution pension scheme members By Giuseppe Grande; Ignazio Visco
  10. Socioeconomic Environment and Mortality: A two-level Decomposition by Sex and Cause of Death By Martin Gächter; Engelbert Theurl
  11. Ageing and asset prices By Elod Takats

  1. By: Hye Jin Rho
    Abstract: Employment in physically demanding jobs or in jobs with difficult working conditions is a major cause of early labor-market exit among older workers. Raising the retirement age is particularly concerning for near-retirement age workers with such jobs. Despite the fact that the retirement age increase is supposed to encourage workers to work longer, many workers would be physically unable to extend work lives in their jobs, and they would most likely be left with no choice but to receive reduced benefits. An increase in the retirement age or other cuts in Social Security benefits are also likely to put a greater burden on demographic groups that have higher proportions of workers in difficult jobs. In particular, physically demanding jobs and jobs that had difficult working conditions were more likely to be held by men, Latinos, the least educated (less than a high school diploma), immigrants, and the lowest wage earners.
    Keywords: social security, retirement, retirement age,
    JEL: H H6 H62 H63 H68 J J1 J14 J18 J3 J32 J38
    Date: 2010–08
  2. By: Larochelle-Côté, Sébastien; Myles, John; Picot, Garnett
    Abstract: This paper examines the extent to which family income during working years is replaced during the retirement years. It does so by tracking cohorts as they age from their mid-50s to their late 70s, using a taxation-based longitudinal data source that covers 26 years from 1982 to 2007. Earlier work by the same authors examined this question with respect to the 50% of the population with strong labour force attachment during their mid-50s. This paper extends that work to include almost all Canadians (80% to 85% of the population). The adult-equivalent-adjusted family income available to the median Canadian during his or her late 70s is about 80% of that observed when the same person was in his or her mid-50s (a replacement rate of 0.8). Replacement rates in retirement are negatively correlated with income earned around age 55. Median replacement rates are 1.1 among individuals in the bottom income quintile, 0.75 in the middle quintile, and 0.7 in the top quintile. In retirement, public pensions and other transfers more than replace earnings and other income of bottom quintile individuals. However, some individuals have very low replacement rates. For example, 20% of individuals in the middle income quintile had replacement rates below 0.6. More recent cohorts had higher family incomes in retirement than did earlier cohorts as a result of higher earnings and private-pension income.
    Keywords: Income, pensions, spending and wealth, Seniors, Labour, Work transitions and life stages, Work and retirement
    Date: 2010–07–29
  3. By: Dalen, H.P. van (Tilburg University); Henkens, K. (Tilburg University); Hendrikse, W.; Schippers, J.J.
    Date: 2010
  4. By: Giuseppe Cappelletti (Bank of Italy); Giovanni Guazzarotti (Bank of Italy); Pietro Tommasino (Bank of Italy)
    Abstract: Optimal Portfolio Theory prescribes that investors reduce their exposure to financial market risk as they get near to retirement. To assess the effect of ageing on portfolio choices, we study the case of an Italian defined contribution pension fund during the period 2002-08. We find that on average the willingness to hold risky assets does indeed significantly decrease with age, but we also document that inertial behaviour is quite widespread, and can be very costly.
    Keywords: pension funds, portfolio choice
    JEL: G21 G23
    Date: 2010–07
  5. By: Thomas Post; Katja Hanewald
    Abstract: Theoretical studies suggest that unexpected changes in future mortality and survival probabilities (stochastic mortality) are important determinants of individuals’ decisions about consumption, saving, asset allocation, and retirement timing. Using data on subjective survival expectations elicited in the Survey of Health, Ageing and Retirement in Europe (SHARE) and corresponding life table data from the Human Mortality Database (HMD), we find evidence of respondents’ awareness of stochastic mortality. We also find that respondents’ saving behavior is influenced by stochastic mortality perceptions.
    Keywords: stochastic mortality, subjective survival expectations, forecast dispersion, savings behavior
    JEL: D14 D84 D91 H31 J11
    Date: 2010–07
  6. By: Francesca Bettio; Giovanni Solinas
    Abstract: Long term care for the elderly is growing apace in developed economies. As growth is forcing change in existing production and delivery systems of elderly care services, the question arises as to how different systems compare in terms of cost-effectiveness, equity or quality. Based on an in depth survey carried out in Denmark, Ireland and Italy – the GALCA survey – this articles compares prevailing arrangements of home based long-term care in these three countries, focussing on the overall cost-effectiveness of the provisions as well as on employment equity for the care workers. Comparison between alternative types of provisions within each country suggests that home based care is generally, although not consistently, more cost-effective than care within institutions. Comparison of home care provisions across the three countries suggests that the Italian and the Danish systems are the most cost effective, but the Danish system is more equitable, overall. These latter findings are partly explained by progressive replacement in Italy of unpaid family carers with low cost immigrant workers directly employed by the families and often cohabiting with the elderly, the migrant-in-the-family model of long term care. This new model has spread across Southern Europe and raises complex issues of equity and sustainability from an employment perspective.
    Keywords: elderly care; long term care; cost-effectiveness; migration; welfare
    JEL: I12 I39 J14
    Date: 2009–02
  7. By: Erika Schulz
    Abstract: This document provides an overview of the long-term care system, the number and develop-ment of beneficiaries and the long-term care policy in Denmark. The report is part of the first stage of the European project ANCIEN (Assessing Needs of Care in European Nations), commissioned by the European Commission under the Seventh Framework Programme (FP7). The first part of the project aims to facilitate structured comparison of the long-term care systems and policies in European Nations. Thus, this report is one of comparable reports provided for most European countries.
    Keywords: Long-term care system, long-term care policy, beneficiaries
    JEL: H51 I18 I19
    Date: 2010
  8. By: Erika Schulz
    Abstract: This document provides an overview of the long-term care system, the number and develop-ment of beneficiaries and the long-term care policy in Germany. The report is part of the first stage of the European project ANCIEN (Assessing Needs of Care in European Nations), commissioned by the European Commission under the Seventh Framework Programme (FP7). The first part of the project aims to facilitate structured comparison of the long-term care systems and policies in European Nations. Thus, this report is one of comparable reports provided for most European countries.
    Keywords: Long-term care system, long-term care policy, beneficiaries
    JEL: H51 I18 I19
    Date: 2010
  9. By: Giuseppe Grande (Bank of Italy); Ignazio Visco (Bank of Italy)
    Abstract: The recent financial crisis has clearly demonstrated the exposure of defined contribution (DC) pension scheme members to extreme financial market risks. This paper argues that the government might offer DC plan members a minimum return guarantee, funded by risk based premia. Option pricing formulas show that the guarantee could be quite expensive, but public provision could reduce the costs borne by workers. Such an arrangement would be sustainable for the government and would give workers an acceptable benefit/contribution ratio in worst-case scenarios, while still allowing them to reap the advantages of occupational or individual funded pension schemes.
    Keywords: defined contribution pension schemes, financial market tail risks, return guarantees, exchange option, ModiglianiÂ’s Treasury CFDB swap
    JEL: D10 G23 H55 J14
    Date: 2010–06
  10. By: Martin Gächter; Engelbert Theurl
    Abstract: Gender inequalities in longevity/mortality are a major area of research since the 1970s. Despite substantial insights, the questions posed and the research strategies used are still in a state of flux. In the present paper we shed some light on the question, to which extent socioeconomic variables determine the gender gap in mortality for important causes of death. Thereby we specifically focus on behavior-related causes of death. We follow an ecological approach based on aggregated mortality data from Austria both at the community and the district level covering the time period 1969 - 2004. By using weighted regression analysis (panel fixed effects, pooled and cross section) we find that higher income levels reduce male mortality in most causes of death (including malignant neoplasms and diseases of the circulatory system), while this indicator appear to be insignificant for female mortality in these causes. This indicates that the decreasing effect of the higher socioeconomic status on mortality might be canceled out by a gender role equalization effect for women due to the adoption of unhealthy life styles (e.g. smoking). This finding is also confirmed by the fact that female mortality does not decrease with increasing income levels for smoking-related diseases, ischaemic heart disease and lung cancer. Thus, our results suggest that the decreasing female mortality advantage is mainly caused by increased smoking among women, while in the case of alcohol, violence and accidents the gender equalization seems to work in the opposite direction. In a nutshell, we conclude that the examination of the gender-specific mortality rates and mortality gaps without a disaggregation between different causes of death might mask important patterns of the epidemiological transition and the underlying drivers.
    Keywords: mortality, gender differential, causes of death, life expectancy, Austria
    JEL: I12 I18 J16
    Date: 2010–07
  11. By: Elod Takats
    Abstract: The paper investigates how ageing will affect asset prices. A small model is used to show that economic and demographic factors drive asset, and in particular house, prices. These factors are estimated in a panel regression framework encompassing BIS real house price data from 22 advanced economies between 1970 and 2009. The estimates show that demographic factors affect real house prices significantly. Combining the results with UN population projections suggests that ageing will lower real house prices substantially over the next forty years. The headwind is around 80 basis points per annum in the United States and much stronger in Europe and Japan. Based on the analysis, global asset prices are likely to face substantial headwinds from ageing.
    Keywords: ageing, asset prices, house prices
    Date: 2010–08
  12. By: Mikk Medijainen
    Abstract: Generational accounting is a relatively recent methodology that measures the fiscal burden government policies impose on future generations. Comparing the fiscal burden of future generations to the burden levied on current newborns yields the generational imbalance. Micro data from the Household Budget Survey is combined with data from the national accounts to construct the generational accounts for current and future generations. The results show that as expected there was a relatively mild intergenerational imbalance (64%) in Estonia in 2009. The generational accounts are sensitive to growth forecasts, while population forecasts seem to be of less influence. To achieve intergenerational balance, an imminent and sustained tax rise to increase tax revenue by 9% should be enforced. Alternatively, the indexing of pensions could be made less generous or government net collective expenditures should be cut by approximately 23%.
    Keywords: generational accounting, fiscal sustainability, Estonia
    JEL: H61 H62 H63 H68
    Date: 2010

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