nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒12‒04
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Public pensions and labor supply over the life cycle By Eric French; John Bailey Jones
  2. Early retirement policy in the presence of competing exit pathways: Evidence from policy reforms in Finland By Tomi Kyyrä
  3. Longevity, Growth and Intergenerational Equity - The Deterministic Case By Torben M. Andersen; Marias H. Gestsson
  4. Institutional rules, labour demand and retirement through disability programme participation By Ossi Korkeamäki; Tomi Kyyrä
  5. Economy wide risk diversification in a three-pillar pension system By Du Cai Cai; Muysken Joan; Sleijpen Olaf
  6. Non take up of social benefits in Greece and Spain By Matsaganis M; Levy H; Flevotomou M
  7. Disability Insurance, Population Health and Employment in Sweden By Jönsson, Lisa; Palme, Mårten; Svensson, Ingemar
  8. Is Posner Right? An Empirical Test of the Posner Argument for Transferring Health Spending from Old Women to Old Men By Johannes Schwarze; Christoph Wunder
  9. Does Cost-Effectiveness Analysis Discriminate against Patients with Short Life Expectancy? By Mike Paulden; Anthony J. Culyer

  1. By: Eric French; John Bailey Jones
    Abstract: Virtually all developed countries face projected budget shortfalls for their public pension programs. The shortfalls arise for two reasons. First, populations in developed countries are aging rapidly. Second, until recently older individuals in developed countries have been retiring earlier. These two developments have created serious strains on public pension programs. In order to remain fiscally solvent, many governments have reformed their public pension schemes to encourage labor supply at older ages. These reforms include reductions in the generosity of public pensions and reduced penalties for working past the normal retirement age. In this paper, we consider how reforms to public pension systems affect labor supply over the life cycle. We put the recent empirical evidence on the effect of government pensions on labor supply in a life cycle context, and we present evidence on the effectiveness of tax reforms for stimulating labor supply over the life cycle. Our main conclusion is that the labor supply of older workers is responsive to changes in retirement incentives. The labor supply of younger workers is less responsive. Thus the trend towards lower taxes on older workers in many developed countries is likely to continue to fuel the recent trend towards later retirement. This, in turn, is likely to reduce the financial strain on public pension schemes.
    Keywords: Labor supply ; Pensions ; Retirement
    Date: 2010
  2. By: Tomi Kyyrä
    Abstract: A majority of older Finns withdraw from employment via early retirement schemes years before the statutory retirement age. Over the past 15 years, a series of policy reforms have been introduced to reduce the widespread use of early exit pathways. By exploiting variation in eligibility rules between different cohorts, this study examines the effects of changes in the eligibility age thresholds for unemployment and part-time pension schemes and the effect of tightening medical criteria for disability pension eligibility. The findings imply that these reforms have jointly raised the average age at which older workers leave employment by 3.9 months. This increase is mainly due to a sharp drop in disability pension enrolment from age 58 upwards and to a lower incidence of unemployment at younger ages. The policy effects are found to be heterogeneous, so that different subgroups were affected by different reforms.
    Keywords: Early retirement, policy reform, disability, unemployment
    JEL: J26 J14
    Date: 2010–11–12
  3. By: Torben M. Andersen (School of Economics and Management, Aarhus University, Denmark); Marias H. Gestsson (Central Bank of Iceland)
    Abstract: Challenges raised by ageing (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from pre-savings to indexation of retirement ages have been justified in this way. We develop an overlapping generations model in continuous time which encompasses different generations with different mortality rates and thus longevity. Allowing for both trend increases in longevity and productivity, we address the issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and non-material well being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution.
    Keywords: OLG models, demographics, longevity, taxes, transfers, retirement age, dependency ratio, healthy ageing, decentralization
    JEL: J11
    Date: 2010–11–29
  4. By: Ossi Korkeamäki; Tomi Kyyrä
    Abstract: We use matched employer-employee data from Finland to model transitions out of work into sick leave and disability retirement. To identify the role of institutional factors we exploit reforms that changed medical requirements for disability pension eligibility and experience-rated employer contributions. We find that transitions to sick leave and disability pension benefits are relatively rare in growing establishments, but rather common in establishments with a high degree of excess worker turnover. We also show that transitions to disability retirement depend on the stringency of medical screening and the degree of experience rating applied to the employer.
    Keywords: Disability pension, sick leave, experience rating
    JEL: J26 J23 J14
    Date: 2010–09–27
  5. By: Du Cai Cai; Muysken Joan; Sleijpen Olaf (METEOR)
    Abstract: We model a three-pillar pension system and analyse the impact of exogenous shocks on an open economy, using an overlapping generation model where individuals live for two periods. The three-pillar pension system consists of (1) a PAYG pension system, (2) a defined benefits pension fund, and (3) private savings. The economy is exposed to an ageing trend, inflation and a stock market crash. We show that in the three-pillar pension system the impact of these shocks on the economy is mitigated when compared to a two- pillar system, since each shock has a different impact on the three pillars. In order to illustrate the working of the model with respect to the impact of shocks, both in magnitude and the development over time, we provide simulation results for the Netherlands.
    Keywords: macroeconomics ;
    Date: 2010
  6. By: Matsaganis M; Levy H; Flevotomou M
    Abstract: Even though interest in non take up of social benefits is considerable in many European countries, the topic is under-researched in southern Europe. The paper provides preliminary estimates of the extent of non take up of two pairs of means-tested retirement benefits in Greece and Spain. The benefits examined are (i) the minimum pension supplements pensioner social solidarity benefit ΕΚΑΣ and complementos por mínimos, and (ii) the social pensions pension to uninsured elderly and pensión de jubilación no contributiva. The paper finds that non take up of social benefits in the two countries is rather extensive, examines the methodological difficulties inherent in the analysis of non take up, and concludes with a discussion of the results and their implications.
    Date: 2010–11–23
  7. By: Jönsson, Lisa (Dept. of Economics, Stockholm University); Palme, Mårten (Dept. of Economics, Stockholm University); Svensson, Ingemar (Swedish Pensions Agency)
    Abstract: This paper describes the development of population health and disability insurance utilization for older workers in Sweden and analyses the relation between the two. We use three different measures of population health: (1) the mortality rate (measured between 1950 and 2009); (2) the prevalence of different types of health deficiencies obtained from Statistics Sweden’s Survey on Living Conditions (ULF, 1975-2005); (3) the utilization of health care from the inpatient register (1968–2008). We also study the development of the relative health between disability insurance recipients and non-recipients. Finally, we study the effect of the introduction of less strict eligibility criteria for older workers in 1970 and 1972 as well as the subsequent abolishment of these rules in 1991 and 1997, respectively.
    Keywords: Disability insurance; Population health
    JEL: H51 H55 I18 J26
    Date: 2010–11–25
  8. By: Johannes Schwarze; Christoph Wunder
    Abstract: Posner (1995) proposes the redistribution of health spending from old women to old men to equalize life expectancy. His argument is based on the assumption that the woman’s utility is higher if her husband is alive. Using self-reported satisfaction measures from a long-running German panel survey, the Socio-Economic Panel Study (SOEP), the present study conducts an empirical test of this assumption. Our matching-based estimation reveals satisfaction trajectories of women who experience the death of their spouse and identifies the causal effect of widowhood. The average level of satisfaction in a control group of non-widowed women serves as a reference to measure the degree of adaptation to widowhood. The results suggest bereavement has no enduring effect on satisfaction, and that is evidence against Posner’s assumption.
    Keywords: widowhood, adaptation, subjective well-being, life satisfaction, satisfaction with household income, propensity score matching
    JEL: C14 D10 I31
    Date: 2010
  9. By: Mike Paulden (Toronto Health Economics and Technology Assessment (THETA) Collaborative, University of Toronto, Canada); Anthony J. Culyer (Department of Health Policy, Management and Evaluation, University of Toronto, Canada; Department of Economics and Related Studies, University of York, UK; Centre for Health Economics, University of York, UK; The Rimini Centre for Economic Analysis (RCEA), Italy)
    Abstract: Does the use of quality-adjusted life-years (QALYs) in cost-effectiveness analyses (CEAs) of health care interventions necessarily discriminate against patients with short life expectancy compared with others? This paper reviews the arguments both that it does and that it does not, and demonstrates that whether the use of any time-dependent outcome measure in CEA will result in discrimination depends, in the context of any given choice between interventions, upon the choice of cost-effectiveness ‘threshold’ adopted by the decision maker, whether the incremental cost-effectiveness ratio (ICER) of the intervention for a subgroup of patients with relatively short life expectancy lies above the cost-effectiveness threshold, and whether the ICER for a subgroup of patients with longer life expectancy falls below the cost-effectiveness threshold. For discrimination to result against such patients requires that the long term ratio of costs to QALYs associated with the intervention be lower than the short term ratio of costs to QALYs. The implications for agencies which use CEA as part of their decision making are then discussed.
    Date: 2010–01

This nep-age issue is ©2010 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.