nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒10‒30
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Age of Pension Eligibility, Gains in Life Expectancy, and Social Policy By Frank T. Denton; Byron G. Spencer
  2. Prediction of the economic cost of individual long-term care in the Spanish population By Catalina Bolancé; Ramon Alemany; Montserrat Guillén
  3. The Effect of Social Security, Demography and Technology on Retirement By Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues dos
  4. Is Social Security Secure with NDC? By Boeri, Tito; Galasso, Vincenzo
  5. Trends in Pension Eligibility Ages and Life Expectancy, 1950-2050 By Rafal Chomik; Edward R. Whitehouse
  6. Decomposing National Defined-Contribution Pensions: Experience of OECD Countries’ Reforms By Edward R. Whitehouse
  7. The Glacier Grinds Closer: How Demographics Will Change Canada’s Fiscal Landscape By William B.P. Robson
  8. Is health status of elderly worsening in India:A comparison of successive rounds of National Sample Survey data By Husain, Zakir; Ghosh, Saswata
  9. Examining the Gender, Ethnicity, and Age Dimensions of the Healthy Immigrant Effect: Implications for Health Care Policy By Karen M. Kobayashi; Steven G. Prus
  10. Pension rights, human capital development and well-being. By Montizaan, Raymond Michel
  11. Arranjos domiciliares e saúde dos idosos: um estudo piloto qualitativo em um município do interior de Minas Gerais By Rodrigo Caetano Arantes; Cristiane Silva Corrêa; Mirela Castro Santos Camargos; Carla Jorge Machado
  12. Diferenciais de mortalidade por sexo: notas para estudo By Pamila Cristina Lima Siviero; Cássio Maldonado Turra; Roberto Nascimento Rodrigues
  13. Are You Well Prepared for Long-term Care? – Assessing Financial Gaps in Private German Care Provision By Matthias Keese; Annika Meng; Reinhold Schnabel
  14. The Welfare Gains of Age Related Optimal Income Taxation By Bastani, Spencer; Blomquist, Sören; Micheletto, Luca
  15. Height and well-being amongst older Europeans By Kevin Denny

  1. By: Frank T. Denton; Byron G. Spencer
    Abstract: Canadians are living longer and retiring younger. When combined with the aging of the baby boom generation, that means that the “inactive” portion of the population is increasing and there are concerns about possibly large increases in the burden of support on those who are younger. We model the impact of continued future gains in life expectancy on the size of the population that receives public pension benefits. We pay special attention to possible increases in the age of eligibility and the pension contribution rate that would maintain the publicly financed component of the retirement income security system.
    Keywords: age of pension eligibility, pension burden
    JEL: H55 J18 J26
    Date: 2010–10
  2. By: Catalina Bolancé (Departament d'Econometria, Estadística i Economia Espanyola, RFA-IREA, Universitat de Barcelona); Ramon Alemany (Departament d'Econometria, Estadística i Economia Espanyola, RFA-IREA, Universitat de Barcelona); Montserrat Guillén (Departament d'Econometria, Estadística i Economia Espanyola, RFA-IREA, Universitat de Barcelona)
    Abstract: Pensions together with savings and investments during active life are key elements of retirement planning. Motivation for personal choices about the standard of living, bequest and the replacement ratio of pension with respect to last salary income must be considered. This research contributes to the financial planning by helping to quantify long-term care economic needs. We estimate life expectancy from retirement age onwards. The economic cost of care per unit of service is linked to the expected time of needed care and the intensity of required services. The expected individual cost of long-term care from an onset of dependence is estimated separately for men and women. Assumptions on the mortality of the dependent people compared to the general population are introduced. Parameters defining eligibility for various forms of coverage by the universal public social care of the welfare system are addressed. The impact of the intensity of social services on individual predictions is assessed, and a partial coverage by standard private insurance products is also explored. Data were collected by the Spanish Institute of Statistics in two surveys conducted on the general Spanish population in 1999 and in 2008. Official mortality records and life table trends were used to create realistic scenarios for longevity. We find empirical evidence that the public long-term care system in Spain effectively mitigates the risk of incurring huge lifetime costs. We also find that the most vulnerable categories are citizens with moderate disabilities that do not qualify to obtain public social care support. In the Spanish case, the trends between 1999 and 2008 need to be further explored.
    Date: 2010–09
  3. By: Ferreira, Pedro Cavalcanti; Santos, Marcelo Rodrigues dos
    Abstract: This article investigates the causes in the reduction of labor force participation ofthe old. We argue that the changes in social security policy, in technology and indemography may account for most of the changes in retirement over the second partof the last century in the U.S. economy. We develop a dynamic general equilibriummodel with endogenous retirement that embeds social security legislation. The modelis able to match very closely the increase in the retirement rate of males aged 65 andolder. It also quanti es the isolated impact on retirement and on the solvency of thesocial security system of the di¤erent factors. The model suggests that technologicaland demographic changes had a strong in uence on retirement, so that it would haveincreased signi cantly even if the social security rules had not changed. However, asthe latter became much more generous in the past, changes in social security policycan account not only for a sizeable part of the expansion of retirement, but also for themost of the observed increase in the social security expenses as a share of GDP.
    Date: 2010–10–21
  4. By: Boeri, Tito (Bocconi University); Galasso, Vincenzo (Bocconi University)
    Abstract: The introduction of NDC public pension scheme in few European countries, such as Latvia, Sweden, Italy, and Poland, in the nineties was motivated, among other things, by the need (i) to ensure the long term financial sustainability of the public pension system by linking pension returns to economic growth; (ii) to reduce the existing distortions in the labor market, due to the existing strong incentives to retire early, (iii) to increase the intergenerational equity of the system, jeopardized by the different returns across generations; and (iv) to reduce the systematic political interference with public pension systems under aging through the introduction of a sequence of automatic adjustments in the system that do not require government intervention. After more than ten years from their introduction, these systems have performed reasonably well on these accounts. However, some degree of political involvement with the working of the pension systems has continued (f.e., in Italy), and new concerns have emerged. In particular, the combination of a pension system, which strongly bases the benefit calculation on previous contributions (and on thus labor market status), and the existence in some countries of a dual labor market, with young workers being held on the margin of the regular labor market for many years, create a new, potentially strong challenge to these systems. Our simulations of the future pension benefits for the current generation of young workers with a discontinuous working history in Italy and Sweden suggest that the replacement rates will be low, unless the retirement age is significantly increased. This effect may end up jeopardizing the political sustainability of these NDC systems in the future, unless important labor market reforms are introduced. We discuss the effects on the future generation of retirees in Italy and Sweden of a current labor market reform: the introduction of a unique labor market contract, aimed at reducing the dualism between temporary and permanent workers.
    Keywords: notional defined contribution, pay as you go, labor market dualism and pensions
    JEL: J26 J68
    Date: 2010–10
  5. By: Rafal Chomik; Edward R. Whitehouse
    Abstract: The pensionable age is the most visible parameter of retirement-income systems. This paper surveys pensionable ages in the OECD for a period of a century: back to 1950 and forward to 2050. Average pensionable age in OECD countries dropped by nearly two years during the second half of the 20th century to 62.5 for men and 61.1 for women. Legislation already in place will increase it almost to 65 for both sexes by 2050. At the same time, life expectancy has increased in most countries at most times. Between 1960 and the turn of the century, life expectancy after pensionable age is grew from 13.4 to 17.3 years for men and 16.8 to 22.1 years for women on average in OECD countries. However, life expectancy after normal pension age is projected to reach 20.3 and 24.6 years (for men and women respectively) in 2050. This continued increase is projected despite many OECD countries having already legislated for phased increases in the pension age in the future.<BR>L'âge de la retraite est le paramètre le plus visible des systèmes de retraite. Ce document passe en revue les changements dans l'âge de la retraite des pays de l'OCDE sur une période d'environ un siècle: de 1950 jusqu'en 2050. La moyenne d'âge de la retraite dans les pays de l'OCDE a chuté de près de deux ans durant la seconde moitié du 20ème siècle s'établissant à 62,5 pour les hommes et 61,1 pour les femmes. En considérant la législation déjà en place, dans les pays de l'OCDE, pour les années à venir, il augmentera de nouveau, s'établissant à environ 65 pour les deux sexes d'ici à 2050. Dans le même temps, l'espérance de vie a augmenté dans la plupart des pays la plupart du temps. Entre 1960 et 2000, l'espérance de vie, après avoir atteint l'âge de départ à la retraite est passé de 13,4 à 17,3 ans pour les hommes et de 16,8 à 22,1 ans pour les femmes en moyenne dans les pays de l'OCDE. Cependant cette augmentation ne semble pas avoir pris fin: L'espérance de vie après l'âge normal de la retraite devrait atteindre 20,3 et 24,6 ans (pour les hommes et les femmes respectivement) en 2050. Cette augmentation continue est prévue dans de nombreux pays de l'OCDE nonobstant le fait que la plupart des ceux-ci aient déjà légiféré pour tenir compte de l'augmentation progressive de l'âge de retraite à l'avenir.
    JEL: H55 J11 J14 J26
    Date: 2010–10–04
  6. By: Edward R. Whitehouse
    Abstract: This paper compares notional defined-contribution pension schemes (also known as notional accounts) with two alternative designs of earnings-related pension schemes: points systems and definedbenefit plans. It examines, in detail, four economic advantages of notional accounts that deliver retirement incomes in an equitable and economically efficient manner. The issue of equity arises in the treatment of people who draw their pensions at different ages and contribute for a different number of years. The issue of economic efficiency arises because pension systems can and do distort individual decisions to work and save. First, benefits are based on lifetime earnings, rather than a subset of “best” or “final” years’ pay. Secondly, an extra year’s contribution gives rise to an additional benefit. Thirdly, benefits are reduced to reflect the longer expected duration of payment for people who retire early and, similarly, increased for people who retire late. Finally, benefits are reduced as life expectancy increases, again to reflect the longer duration for which benefits would be paid. An analysis of OECD countries’ pension systems – of all different types – shows that most have already achieved most of these objectives, but without adopting notional accounts.<BR>Ce papier compare les systèmes de retraite à comptes notionnels avec deux systèmes alternatifs assis sur les salaires : les systèmes à points et les systèmes à cotisations définies. Il examine, en détail, quatre avantages économiques des comptes notionnels qui permettent de pourvoir des revenus de retraite dans une manière équitable et efficace du point de vue économique. La question de l'équité se présente dans le traitement de gens qui obtiennent leurs retraites aux âges différents et contribuent pendant des périodes différentes. La question de l'efficacité économique se présente parce que les systèmes de retraite peut et en faites déforment les décisions individuelles de travail et d’épargne. Premièrement, les avantages sont fondés sur les gains tout au long de la vie, au lieu d'un sous-ensemble de salaires de « meilleures » ou «dernières l » année de travail. Deuxièmement, le fait de cotiser pendant une année supplémentaire engendre une augmentation du montant du revenu de retraite. Troisièmement, les prestations de retraite sont réduites pour prendre en compte la plus longue durée sur laquelle s’étaleront les paiements pour les individus qui partent plus tôt à la retraite, et symétriquement elles sont augmentées pour les individus qui partent à la retraite plus tard. Enfin, les prestations de retraite sont réduites à l’augmentation de l’espérance de vie, pour prendre en compte une nouvelle fois la plus longue période sur laquelle les prestations de retraites seront versées. Une analyse des systèmes de retraite des pays de l'OCDE – de différents types – montre que la plupart de ceux-ci ont atteint ces objectifs, sans l’adoption d’un système à comptes notionnels.
    JEL: H55 J26
    Date: 2010–09–29
  7. By: William B.P. Robson (C.D. Howe Institute)
    Abstract: The impacts of demographic change on Canada's fiscal landscape will be profound, and as we enter the second decade of the 21st century, they are no longer far away. If current patterns of spending in age-sensitive public programs - healthcare, education, elderly and children's benefits - persist as the population evolves, Canadians will divert more of their incomes from other public and private purposes to fund them. Discounted over 50 years, that increase amounts to an implicit liability of $2.8 trillion for governments, with essentially all the burden falling on the provinces and territories rather than on Ottawa.
    Keywords: Fiscal Policy, Canada, demographics, government programs, health, education, seniors, families
    JEL: J11 E62 H11
    Date: 2010–09
  8. By: Husain, Zakir; Ghosh, Saswata
    Abstract: The increasing graying of India’s population raises concerns about the welfare and health status of the aged. One important source of information of health status of the elderly is the National Sample Survey Rounds on Morbidity and Health Care Expenditure. Using unit level data for 1995-96 and 2004 this paper has examined changes in reported health status of elderly in India and analyzed their relationship with living arrangements and extent of economic dependency. It appears that even after controlling for factors like caste, education, age, economic status and place of residence, there has been deterioration in self-perceived current health status of elderly. This paper argues that, although there have been changes in the economic condition and traditional living arrangements - with a decline in co-residential arrangements - this is not enough to explain the decline in reported health status and calls for a closer look at narratives of neglect being voiced in developing countries.
    Keywords: economic independence; co-residence; elderly; health status; ordered logit model; India
    JEL: J14 C35
    Date: 2010–09–05
  9. By: Karen M. Kobayashi; Steven G. Prus
    Abstract: Using data from the 2005 Canadian Community Health Survey, the current study expands on previous research on the healthy immigrant effect (HIE) in adult populations by considering the effects of both immigrant and visible minority status on health for males and females in mid- (45- 64) and later life (65+). The findings indicate that the HIE applies to recent immigrant men in midlife; that is, new male immigrants – those who immigrated less than 10 years ago – have better health compared to their Canadian-born counterparts, and that the effect is particularly strong for visible minorities. The picture is similar for older women who have recently immigrated, however this advantage largely disappears when a number of socio-demographic, socio-economic, and lifestyle factors are controlled. For older men and middle-aged women of color, however, the reality is strikingly different: both groups report health disadvantages compared to their Canadian-born counterparts, with both recent and longer-term midlife women having poorer health. Findings are discussed in terms of their implications for health care policy for immigrant adults.
    Keywords: healthy immigrant effect, gender, ethnicity, mid-life, later life, health care policy
    JEL: I18
    Date: 2010–10
  10. By: Montizaan, Raymond Michel (Maastricht University)
    Date: 2010
  11. By: Rodrigo Caetano Arantes (Cedeplar-UFMG); Cristiane Silva Corrêa (Estatistica UFRN); Mirela Castro Santos Camargos (Fundacao Joao Pinheiro (FJP/MG)); Carla Jorge Machado (Cedeplar-UFMG)
    Abstract: Brazil experiences a demographic transition characterized by the aging of its population and a proportional increase in the number of the elderly. Therefore, researches that focus on the elderly individual are important. The present qualitative study aims to add to the understanding of this process and its consequences regarding the elderly health based. Objectives: To find out which home arrangement is more advantageous according the point of view of the elderly, especially regarding their health. Methods: In-depth interviews with 20 elderly aged 60 to 80. Elderly living by themselves and elderly living with grandchildren (as other family members) were researched. Results: No difference among the elderly regarding home environment was found, but it was clear that, regardless the arrangements in the way of living, they were, in general, negative when asked about their health. Those who lived with grandchildren and/or other family members participate on the income of the house and have household roles quite defined.
    Keywords: health of the elderly, living arrangement, qualitative research
    JEL: I10
    Date: 2010–10
  12. By: Pamila Cristina Lima Siviero (Cedeplar-UFMG); Cássio Maldonado Turra (Cedeplar-UFMG); Roberto Nascimento Rodrigues (Cedeplar-UFMG)
    Abstract: The aim of the present study was to examine, in the literature, aspects related to mortality differentials among men and women, focusing on age related differences in the time course (for developing countries). We did find evidence that, over the two last centuries, the sex differences followed the demographic and epidemiologic transitions. This process was accompained by a change in the age pattern of mortality comparing men and women. On the other hand, the contribution of the age groups for the differentials in life expectancy at birth not always folowed the change in the gap. We concluded that we should use more than one measure of the gap in mortality.
    Keywords: sex differential in mortality, developing countries, developed countries, level, age pattern
    JEL: I10 I19
    Date: 2010–10
  13. By: Matthias Keese; Annika Meng; Reinhold Schnabel
    Abstract: The development of expenditure for care services is one of the most intensively debated topics in public. However, studies calculating financial provision gaps only focus on the macro-level implications for the compulsory care insurance. In contrast, this paper examines the individuals’ micro-level perspective. We use survey as well as regional and national statistical data to calculate expected individual costs of long-term care on a very detailed care arrangement and care level basis. Afterwards, we compare these costs with the individuals’ total wealth. In our most conservative policy scenario, our results show that about a third of statutorily insured individuals will have to face a financial care provision gap. Among homeowners, an even higher share will have to liquidate the main residence. The privately insured are affected to a somewhat lower extent. In both groups, the situation will become much more severe if the development of public transfers does not keep up with future increases of long-term care costs. Furthermore, regression analyses show that provision gaps are more frequent among statutorily insured individuals, females, and individuals in single households.
    Keywords: Long-term care costs; care prevalence; life expectancy; provision gap
    JEL: D91 H75 J14
    Date: 2010–09
  14. By: Bastani, Spencer (Uppsala Center for Fiscal Studies); Blomquist, Sören (Uppsala Center for Fiscal Studies); Micheletto, Luca (Uppsala Center for Fiscal Studies)
    Abstract: Using a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent nonlinear tax amounts in our benchmark model to around three percent of GDP. The gains are particularly high when there are restrictions on debt policy. The gains of using a nonlinear- as opposed to a linear tax are even larger. Surprisingly, it is of secondary importance to optimally choose the tax on interest income.
    Keywords: labor income taxation; capital income taxation; age-dependent taxes; OLG model
    JEL: H21 H23 H24
    Date: 2010–10–25
  15. By: Kevin Denny (University College Dublin)
    Abstract: This paper uses a cross-country representative sample of Europeans over the age of 50 to analyse whether individuals’ height is associated with higher or lower levels of well-being. Two outcomes are used: a measure of depression symptoms reported by individuals and a categorical measure of life satisfaction. It is shown that there is a concave relationship between height and symptoms of depression. These results are sensitive to the inclusion of several sets of controls reflecting demographics, human capital and health status. While parsimonious models suggest that height is protective against depression, the addition of controls, particularly related to health, suggests the reverse effect: tall people are predicted to have slightly more symptoms of depression. Height has no significant association with life satisfaction in models with controls for health and human capital.
    Keywords: height, depression, well-being, life satisfaction, health
    Date: 2010–10–22

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