nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒11‒20
eight papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Reform and backlash to reform : economic effects of ageing and retirement policy By Jensen, Svend E. Hougaard; Jorgensen, Ole Hagen
  2. Social Pensions in Europe: The Aim, The Impact and The Cost By Frieda Vandeninden
  3. Le système de retraite américain : impact de la crise et tendances de long terme By Vincent Touzé
  4. The Impact of Demographic Change, Co-morbidity and European Care Policies on the Choice of Care Arrangement By Annika Meng
  5. The impact of population ageing on international capital flows By Narciso, Alexandre
  6. The distributional impact of reforms to disability benefits for older people in the UK By Hancock R; Pudney S
  7. Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing By Holzmann, Robert; Jousten, Alain
  8. Earnings of Men and Women Working in the Private Sector: Enriched Data for Pensions and Tax-Benefit Modeling By Anna Christina D'Addio; Herwig Immervoll

  1. By: Jensen, Svend E. Hougaard; Jorgensen, Ole Hagen
    Abstract: Using a stochastic general equilibrium model with overlapping generations, this paper studies (i) the effects on both extensive and intensive labor supply responses to changes in fertility rates, and (ii) the potential of a retirement reform to mitigate the effects of fertility changes on labor supply. In order to neutralize the effects on effective labor supply of a fertility decline, a retirement reform, designed to increase labor supply at the extensive margin, is found to simultaneously reduce labor supply at the intensive margin. This backlash to retirement reform requires the statutory retirement age to increase more than proportionally to fertility changes in order to compensate for endogenous responses of the intensity of labor supply. The robustness of this result is checked against alternative model specifications and calibrations relevant to an economic region such as Europe.
    Keywords: Labor Policies,Labor Markets,Pensions&Retirement Systems,Economic Theory&Research,Population Policies
    Date: 2010–11–01
  2. By: Frieda Vandeninden
    Abstract: The aim of this paper is to evaluate the impact in terms of poverty and cost of the introduction of social (or noncontributory) pensions in Europe. We use data from the household survey EU-SILC and focus on 17 countries. After reviewing the existence of social pensions in Europe and evidence of old-age poverty, we simulate – in a static framework – the introduction of two social pension schemes: universal and means tested social pensions. We see that the old-age poverty would substantially decrease (average poverty rate goes from 19.7 to 2.5 percent with the universal scheme) but not totally, even though the level of the universal pension is set up to the poverty line. The impact on poverty with the means tested social pension is quite similar (though always smaller) than the one with the universal pension, since most elderly have few other income sources than pensions. On the opposite, it costs less. In fact, the means test reduces substantially the number of entitled elderly while the universal pension leads to a ‘leakage’ to non-poor elderly.
    Date: 2010
  3. By: Vincent Touzé (Observatoire Français des Conjonctures Économiques)
    Abstract: This paper presents a summary of the U.S. pension system. First, our goal is to explain how unfunded and funded pension schemes work. We also study how the economic and financial crisis has affected these different schemes. Moreover, we examine the official long-run forecasts of the evolution of the unfunded pension scheme (OASDI) according to various economic and demographic scenarios. Finally, we study the nature of the public debate and the policy options for government action. Our work shows that the crisis has not jeopardized the financing of the unfunded pension scheme because the latter stays in surplus in the short and medium term. The crisis only reduced the amount of this surplus. In the long term, the accumulated trust fund should be insufficient to cover future primary deficits. A major reform can not be excluded from 2020 onwards. The financial crisis has sharply devaluated the assets of the funded pension schemes, which conducts to a problem of survival for some pension funds. Without public financial support or a sufficient recovery in financial markets, a drop in the amount of pensions is possible.
    Keywords: US economy, pension schemes, economic crisis.
    JEL: G23 H55 N12
    Date: 2010–10
  4. By: Annika Meng
    Abstract: Recent literature on long-term care looks at the substitutability of informal and professional home-based care arrangements. Other factors that influence the utilization of informal care instead of formal care have been ignored in conditional analyses so far. However, regressors that represent demographic change and the development of co-morbidity are of crucial interest to forecast the future choice between different care services. Therefore, I use SHARE data from 2004 as they contain rich information on illnesses, health limitations, and health behavior. I estimate bivariate and multivariate probit models to identify the determinants of different care arrangements, namely informal care, professional home-based care, or a combination of both types, as well as living in a nursing home. Unobserved factors that affect all forms of care arrangements simultaneously can be accounted for. Moreover, I use data on European long-term care expenditure to examine the effects that public spending has on the choice of care arrangements. Simulations of different scenarios of demographic change illustrate that the developments in frailty are decisive for the future care market structure.
    Keywords: Care arrangement choice; multivariate probit model; European care expenditure provision gap
    JEL: I38 J11 J14
    Date: 2010–11
  5. By: Narciso, Alexandre
    Abstract: This paper is oriented to study the relationship between demographical factors and international capital flows. We analyse the impact of ageing on foreign direct investments (FDI) and foreign portfolio investments (FPI) on a bilateral level. Firstly we present a theoretical foundation of the relationship and then we test it by an empirical model. Theoretical foundations are based on the lifecycle hypothesis and overlapping generations model in a demographic context. The bilateral FDI and FPI are modelled by using fixed effects balanced panel data. The results suggest that the current and future age structure of the nation has significant effect on current international capital flows.
    Keywords: International Capital Flows; Demography; Capital Mobility; FDI; Portfolio Investment
    JEL: G15 E00 F21 J20
    Date: 2010–11–04
  6. By: Hancock R (School of Medicine, Health Policy and Practice, University of East Anglia); Pudney S (Institute for Social and Economic Research)
    Abstract: The UK Attendance Allowance (AA) and Disability Living Allowance (DLA) are non means-tested benefits paid to many disabled people aged 65+. They may also increase entitlements to means-tested benefits through the Severe Disability Premium (SDP). We investigate proposed reforms involving withdrawal of AA/DLA. Despite their present non-means-tested nature, we show that withdrawal would affect mainly low-income people, whose losses could be mitigated if SDP were retained at its current or a higher level. We also show the importance of the method of describing distributional impacts and that use of inappropriate income definitions in official reports has overstated recipientsÂ’ capacity to absorb the loss of these benefits.
    Date: 2010–11–08
  7. By: Holzmann, Robert (World Bank); Jousten, Alain (CREPP, Université de Liège)
    Abstract: The paper provides a framework for the conceptualization, definition and estimation of legacy costs that need to be addressed in a reform that transforms an unfunded defined contribution (NDB) scheme into a notional (or non-financial) defined contribution (NDC) scheme. As the new contribution rate is fixed and, perhaps, reduced, paying for the accrued to date liabilities leaves a financing gap that needs to be estimated and financed, best outside the pension system if a less distorting financing form is available. The paper illustrates the proposed measurement approach with broad estimates under a hypothetical NDC reform in China.
    Keywords: legacy costs, pension reform, NDC, coverage expansion
    JEL: H55 H68 J21 J26
    Date: 2010–10
  8. By: Anna Christina D'Addio; Herwig Immervoll
    Abstract: The OECD’s “Average-Wage” (AW) concept is commonly used as a benchmark for tax-benefit and pension modeling. The purpose of this paper is to examine whether it is possible to use richer sets of earnings data in order to customize these modeling exercises to the situation of different groups of workers, such as high or low-earning men or women. We first take stock of available sources of earnings distribution data and provide a careful assessment of measurement and definitional differences relative to the AW. In a second step, information on the shape of earnings distributions in OECD countries is used to derive synthetic distributions around the AW, distinguishing between the earnings of men and women. We argue that this pragmatic approach yields data that allow extending the scope of tax-benefit and pensions modelling. Moreover, it does so in a way that is consistent with past modeling exercises that relied on the AW. We highlight data quality issues and discuss the potential limitations of the imputed AW-consistent earnings distributions.<BR>Le concept de salaire moyen de l’OCDE (SM) est couramment utilisé comme référence pour la modélisation des impôs/prestations et des retraites. Le but de ce document est d'examiner s’il est possible d’utiliser de plus grands ensembles de données sur les salaires afin d’adapter ces exercices de modélisation à la situation de différents groupes d’actifs, tels que les hommes et les femmes ayant des revenus élevés ou bas. Dans un premier temps, on utilise les sources disponibles sur la répartition des revenus et on fournit une évaluation précise des différences de mesure et de définition concernant le salaire moyen, en faisant une distinction entre le revenu des hommes et celui des femmes. Selon nous, cette approche pragmatique permet d’obtenir des données qui dépassent le but fixé par la modélisation des impôts/prestation et des retraites. De plus, elle le fait en compatibilité avec les exercices de modélisation précédents qui se fondaient sur le SM. Nous mettons en évidence la question de la qualité des données et discutons des possibles limites de la répartition des revenus imputées sur les salaire moyens.
    JEL: J31
    Date: 2010–08–31

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