nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒08‒28
eight papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Consumption, Retirement and Life-cycle Prices: Evidence from Spain By Maria Jose Luengo-Prado; Almudena Sevilla-Sanz
  2. Are Older Workers Worthy of Their Pay? An Empirical Investigation of Age-Productivity and Age-Wage Nexuses By Cardoso, Ana Rute; Guimaraes, Paulo; Varejão, José
  3. A Theory of Socioeconomic Disparities in Health Over the Life Cycle By Titus Galama; Hans van Kippersluis
  4. Easy Money? Health and 401(k) Loans By Christian E. Weller; Jeffrey Wenger
  5. Beyond Population: Everyone Counts in Development By Joel E. Cohen
  6. Small But Effective: India's Targeted Unconditional Cash Transfers By Puja Dutta; Stephen Howes; Rinku Murgai1
  7. Projecting future health care expenditure at European level: drivers, methodology and main results. By Bartosz Przywara
  8. OLG fife cycle model transition paths: alternate model forecast method By Evans, Richard W.; Phillips, Kerk L.

  1. By: Maria Jose Luengo-Prado; Almudena Sevilla-Sanz
    Abstract: Evidence from several countries reveals a substantial drop in household consumption around retirement age that some researchers believe is difficult to reconcile with standard life-cycle models. Using detailed expenditure data from a Spanish panel survey, we find no evidence of a consumption-retirement puzzle in Spain for the period of 1985-2004. However, we find a drop in food expenditure at home from 1998 to 2004 and evidence on households paying lower prices for the food they purchase after retirement in this latter period. Our findings are consistent with a household model that allows for home production whereby retirees substitute away from market goods to home production, as long as one accounts for the greater participation in housework by men after retirement coinciding with the latter period of the survey.
    Keywords: Consumption, Retirement, Home-production, Household, Social norms
    JEL: E21
    Date: 2010
  2. By: Cardoso, Ana Rute (IAE Barcelona (CSIC)); Guimaraes, Paulo (University of South Carolina); Varejão, José (University of Porto)
    Abstract: Using longitudinal employer-employee data spanning over a 22-year period, we compare age-wage and age-productivity profiles and find that productivity increases until the age range of 50-54, whereas wages peak around the age 40-44. At younger ages, wages increase in line with productivity gains but as prime-age approaches, wage increases lag behind productivity gains. As a result, older workers are, in fact, worthy of their pay, in the sense that their contribution to firm-level productivity exceeds their contribution to the wage bill. On the methodological side, we note that failure to account for the endogenous nature of the regressors in the estimation of the wage and productivity equations biases the results towards a pattern consistent with underpayment followed by overpayment type of policies.
    Keywords: aging, productivity, wages
    JEL: J14 J24 J31
    Date: 2010–08
  3. By: Titus Galama; Hans van Kippersluis
    Abstract: Understanding of the substantial disparity in health between low and high socioeconomic status (SES) groups is hampered by the lack of a sufficiently comprehensive theoretical framework to interpret empirical facts and to predict yet untested relations. The authors present a life-cycle model that incorporates multiple mechanisms explaining (jointly) a large part of the observed disparities in health by SES. In their model, lifestyle factors, working conditions, retirement, living conditions and curative care are mechanisms through which SES, health and mortality are related. Their model predicts a widening and possibly a subsequent narrowing with age of the gradient in health by SES.
    Keywords: socioeconomic status, education, health, demand for health, health capital, medical care, life cycle, age, labor, retirement, mortality
    JEL: D91 I10 I12 J00 J24
    Date: 2010–07
  4. By: Christian E. Weller; Jeffrey Wenger
    Abstract: Rising health care costs and declining personal savings rates are nearly synonymous with household medical debt. For some, defined contribution (DC) retirement savings plans provide a ready source of funds to meet these medical debts. We examine whether health status and health insurance coverage predict the likelihood of having a DC loan using data from the Federal Reserve’s triennial Survey of Consumer Finances from 1989 to 2007. We find that poor health raises the likelihood that a household will borrow from their DC plans, even controlling for other forms of debt, access to credit, and whether households are covered by health insurance. Our estimates of the amount of the DC loan, taking selection effects into account, indicates that DC loan amounts are also influenced by health status; those with poor health borrow more from their DC plans. Apart from health status, once a household decides to borrow from their retirement funds, race and education also influence how much to borrow. We argue that public policy can improve the long-term financial retirement security of households by offering more opportunities to save for medical emergencies, while cautiously maintaining the opportunity to borrow from DC plans.<span> </span><p> </p>
    Keywords: Defined contribution retirement savings plans; pension debt; health insurance coverage; health status
    Date: 2010
  5. By: Joel E. Cohen
    Abstract: This essay reviews important demographic trends expected to occur between 2010 and 2050, indicates some of their implications for economic and global development, and suggests some possible policies to respond these trends and implications. The century from 1950 to 2050 will have witnessed the highest global population growth rate ever, the largest voluntary fall in the global population growth rate ever, and the most enormous demographic shift ever between the more developed and less developed regions. In the coming half century, according to most demographers, the world’s population will grow older, larger (albeit more slowly), and more urban than in the 20th century, but with much variance within and across regions. No one knows what population and demographic characteristics of humans are sustainable, but it is clear that having a billion or people chronically hungry today results from collective human choices, not biophysical necessities. Concrete policy options to respond to demographic trends include providing universal primary and secondary education, eliminating unmet needs for contraception and reproductive health, and implementing demographically sensitive urban planning, particularly construction for greater energy efficiency and for an aging population.
    Keywords: demography; urbanization; ageing; population growth; universal education; contraception
    JEL: A12 J11 J13 J14 O13 Q01 Q56
    Date: 2010–07
  6. By: Puja Dutta; Stephen Howes; Rinku Murgai1
    Abstract: India’s approach to social security stresses the provision of subsidized food and public works. Targeted, unconditional cash transfers are little used, and have been little evaluated. An evaluation of cash transfers for the elderly and widows based on national household survey data and surveys on social pension utilization in two of India’s states, Karnataka and Rajasthan, reveal that these social pension schemes work reasonably well. Levels of leakage (corruption) are low, funds flow disproportionately to poorer rather than richer households, and there is strong evidence that the funds reach vulnerable individuals. A comparison to the public distribution system reveals that the main strength of the social pensions scheme is its relatively low level of leakage. We hypothesize that social pensions suffer less from corruption than India’s other safety net programs either because of the low levels of discretion involved in their delivery, or the small size of the transfers involved. Since we cannot choose between these two hypotheses, the scaling-up of the social pension schemes, currently underway, while warranted, should be closely monitored.
    Keywords: social security, pensions, unconditional cash transfers, India, widows
    JEL: H55 I38 J14 J16
    Date: 2010
  7. By: Bartosz Przywara
    Abstract: Summary for non-specialistsTo correctly assess the demography-related risks facing public finances in the EU over the next couple of decades and establish adequate policy responses to the demographic, social and economic developments, it is essential to devise a reliable method to estimate future health care expenditure. To tackle this issue, the European Commission and the Economic Policy Committee projected future public health care expenditure in all EU Member States over the period 2007-2060. A unique internationally comparable database has been established and a model built allowing to project health care spending in a common, coherent framework of macroeconomic variables. The model incorporates the most recent developments in demography and epidemiology and draws on new insights from health economics, allowing the comparison of the challenges facing both individual countries' health care systems and European society in its entirety.
    Keywords: Healths Ageing Demography Budgetary projection Public finances Health care expenditure
    JEL: H51 I18 J11 J14
    Date: 2010–07
  8. By: Evans, Richard W.; Phillips, Kerk L.
    Abstract: The overlapping generations (OLG) model is an important framework for analyzing any type of question in which age cohorts are affected differently by exogenous shocks. However, as the dimensions and degree of heterogeneity in these models increase, the computational burden imposed by rational expectations solution methods for non-stationary equilibrium transition paths increases exponentially. As a result, these models have been limited in the scope of their use to a restricted set of applications and a relatively small group of researchers. In addition to providing a detailed description of the benchmark rational expectations computational method, this paper presents an alternative method for solving for nonstationary equilibrium transition paths in OLG life cycle models that is new to this class of model. We find that our alternate model forecast method reduces computation time to 15 percent of the benchmark time path iteration computation time, and the approximation error is less than 1 percent.
    Keywords: Computable General Equilibrium Models; Heterogeneous Agents; Overlapping Generations Model; Distribution of Savings
    JEL: D31 C68 C63 D91
    Date: 2010–08–20

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