nep-age New Economics Papers
on Economics of Ageing
Issue of 2011‒03‒12
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Economic Crises and the Elderly By Uschi Backes-Gellner; Martin R. Schneider
  2. Does the Retirement Consumption Puzzle Differ Across the Distribution? By Jonathan D. Fisher; Joseph Marchand
  3. Age Groups and the Measure of Population Aging By d'Albis, Hippolyte; Collard, Fabrice
  4. Social Capital and Health of Older Europeans By Nicolas Sirven; Thierry Debrand
  5. Age Biased Technical and Organisational Change, Training and Employment Prospects of Older Workers By Behaghel, Luc; Caroli, Eve; Roger, Muriel
  6. Preferences for Redistribution and Pensions: What Can We Learn from Experiments? By Tausch Franziska; Potters Jan; Riedl Arno
  7. Medical Technology and the Production of Health Care By Baltagi, Badi H.; Moscone, Francesco; Tosetti, Elisa
  8. Effect of Workforce Age on Quantitative and Qualitative Organizational Performance: Conceptual Framework and Case Study Evidence By Uschi Backes-Gellner; Martin R. Schneider; Stephan Veen
  9. China’s New Demographic Challenge: From Unlimited Supply of Labour to Structural Lack of Labour Supply. Labour market and demographic scenarios: 2008-2048 By Michele Bruni

  1. By: Uschi Backes-Gellner (Department of Business Administration, University of Zurich); Martin R. Schneider (Economic Department, University of Paderborn)
    Abstract: Economic crises in the last decades have swept elderly workers more than younger workers out of employment. But now the tide is turning. In affluent societies, elderly workers will have more opportunities of being employed in meaningful and well-paid jobs than ever before. On account of demographic changes, fewer (younger) workers will be around and most of the reasons that in the past have induced employers to lay off older rather than younger workers will disappear. Future employment strategies will have to focus more on an optimal age mix and on benefitting from the full potential of the elderly.
    Keywords: ageing workforce, age productivity profiles, recruiting of elderly, employment of elderly
    JEL: J1 M51 J7
    Date: 2011–03
  2. By: Jonathan D. Fisher; Joseph Marchand
    Abstract: Previous research has repeatedly found a puzzling one-time drop in consumption at retirement at the mean or median. This study expands upon the previous work by examining these same retirement changes across the entire consumption distribution through the application of quantile regression techniques on data from the 1990-2007 Consumer Expenditure Survey. The evidence indicates gradually larger decreases in consumption across the distribution using several measures of consumption, with insignificant changes shown at lower deciles and the greatest drops occurring at the higher deciles.
    Keywords: retirement, life-cycle model, household consumption
    JEL: J26 D91 D12
    Date: 2011–03
  3. By: d'Albis, Hippolyte; Collard, Fabrice
    Date: 2011–02
  4. By: Nicolas Sirven (IRDES institut for research and information in health economics); Thierry Debrand (IRDES institut for research and information in health economics)
    Abstract: This research uses a time-based approach of the causal relationship (Granger-like)between health and social capital for older people in Europe. We use panel data from waves 1 and 2 of SHARE (the Survey of Health, Ageing, and Retirement in Europe)for the analysis. Additional wave 3 data on retrospective life histories (SHARELIFE)are used to model the initial conditions in the model. For each of the first 2 waves, a dummy variable for involvement in social activities (voluntary associations, church, social clubs, etc.) is used as a proxy for social capital as involvement in Putnamesque associations; and seven health dichotomous variables are retained, covering a wide range of physical and mental health measures. A bivariate recursive Probit model is used to simultaneously investigate (i) the influence of baseline social capital on current health - controlling for baseline health and other current covariates, and (ii)the impact of baseline health on current participation in social activities - controlling for baseline social capital and other current covariates. As expected, we account for a reversed causal effect: individual social capital has a causal beneficial impact on health and vice versa. However, the effect of health on social capital appears to be significantly higher than the social capital effect on health. These results indicate that the sub-population reaching 50 years old in good health has a higher propensity to take part in social activities and to benefit from it (social support, etc.). Conversely, the other part of the population in poor health at 50, may see its health worsening faster because of the missing beneficial effect of social capital. Social capital may therefore be a potential vector of health inequalities.
    Keywords: Healthy Ageing, Social Capital, Health Inequality, Granger Causality, Panel Data.
    JEL: C33 I12 Z13
    Date: 2011–02
  5. By: Behaghel, Luc (CREST-INSEE); Caroli, Eve (University Paris Ouest-Nanterre); Roger, Muriel (INRA-CORELA)
    Abstract: We analyse the role of training in mitigating the negative impact of technical and organizational changes on the employment prospects of older workers. Using a panel of French firms in the late 1990s, we first estimate wage bill share equations for different age groups. Consistently with what is found in the literature, we find that adopting new technologies and innovative work practices negatively affects the wage bill share of older workers. In contrast, training older workers more than average increases their share in the wage bill in the next period. So, training contributes to offset the negative impact of ICT and innovative work practices. However, it does not reduce the age bias associated with these innovative devices: the interaction terms between training and ICT/innovative work practices are either insignificant or negative. As a second step, we estimate the impact of ICT, innovative work practices and training on employment flows by age group in the next period. We get similar results to those obtained with wage bill shares. Overall, training appears to have a positive impact on the employability of older workers, but it offers limited prospects to dampen the age bias associated with new technologies and innovative work practices.
    Keywords: technical change, organizational change, training, older workers
    JEL: J14 J24 J26 O30
    Date: 2011–03
  6. By: Tausch Franziska; Potters Jan; Riedl Arno (METEOR)
    Abstract: Redistribution is an inevitable feature of collective pension schemes. It is still largely an open question what people‘s preferences are regarding redistribution—both through pensions schemes as well as more generally. It would seem that economists have little to say about this question, as they routinely assume that people are predominantly selfish. Economic experiments have revealed, however, that most people do in fact have redistributional preferences that are not merely inspired by self-interest. This paper reviews this experimental evidence. For that purpose we distinguish between three fundamentally different types of situations. The first deals with distributional preferences behind a veil of ignorance. What type of income distribution do people prefer when they do not know whether they will end up in an advantaged or disadvantaged position? A main result here is that, contrary to what John Rawls suggested, people do not prefer the maximin rule, but rather favor a utilitarian justice concept appended with a safety net for the poorest. Another result is that people are willing to accept income inequalities—as long as these are due to choices for which people can be held accountable. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Experiments show that preferences for redistribution are strongly dependent on a person‘s own position. People in a relatively disadvantaged position want more redistribution than those in a relatively advantaged position, which shows that preferences for redistribution are clearly affected by self-interest. Still, even many of those in an advantaged position display a preference forredistribution. This holds, in particular, if inequality is due to chance rather than effort. There are also significant differences in preferences between the genders and between people with different political orientations. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. People are dependent upon the cooperation of others for the achievement of their (income) goals. Experiments show that behavioral factors such as trust and reciprocity play a crucial role, and they also indicate that these factors are strongly affected by the institutional setting. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?
    Keywords: public economics ;
    Date: 2011
  7. By: Baltagi, Badi H. (Syracuse University); Moscone, Francesco (Brunel University); Tosetti, Elisa (University of Cambridge)
    Abstract: This paper investigates the factors that determine differences across OECD countries in health outcomes, using data on life expectancy at age 65, over the period 1960 to 2007. We estimate a production function where life expectancy depends on health and social spending, lifestyle variables, and medical innovation. Our first set of regressions include a set of observed medical technologies by country. Our second set of regressions proxy technology using a spatial process. The paper also tests whether in the long-run countries tend to achieve similar levels of health outcomes. Our results show that health spending has a significant and mild effect on health outcomes, even after controlling for medical innovation. However, its short-run adjustments do not seem to have an impact on health care productivity. Spatial spill overs in life expectancy are significant and point to the existence of interdependence across countries in technology adoption. Furthermore, nations with initial low levels of life expectancy tend to catch up with those with longer-lived populations.
    Keywords: life expectancy, health care production, health expenditure, spatial dependence
    JEL: C31 C33 H51
    Date: 2011–03
  8. By: Uschi Backes-Gellner (Department of Business Administration, University of Zurich); Martin R. Schneider (Economic Department, University of Paderborn); Stephan Veen (Department of Business Administration, University of Zurich)
    Abstract: Field studies linking workforce age to performance tend to treat performance as one-dimensional and often focus on individual, not organizational performance. To analyze the effects of workforce age on organizational performance, we suggest treating performance as multi-dimensional with at least two output dimensions: quantity and quality. We provide a novel conceptual framework that borrows insights from multiple disciplines to better understand ageing phenomena in organizations. In particular, we build on psychological and medical studies showing that individual age has different effects on different cognitive capabilities. As a result we argue that workforce ageing may affect various performance dimensions, such as quantity and quality, in different, often opposite ways. In our empirical part we examine a unique dataset containing detailed court data over a time span of 19 years. We find that average workforce age is linked negatively to quantitative organizational performance but positively to qualitative organizational performance. Our findings suggest that future organizational studies should decompose performance at least along the quantity-quality dimension. Our theoretical framework helps to understand the different types of ageing effects and to derive itemized implications for changes in organizational performance. It also helps to reconcile contradictory findings of previous studies and to derive important managerial implications for task assignments, career policies, and company strategies in view of upcoming demographic changes in many developed countries.
    Keywords: ageing workforce, demographic change, organizational performance, age productivity effects
    JEL: J1 M51 J7
    Date: 2011–03
  9. By: Michele Bruni
    Abstract: The paper focuses on the demographic and labour market consequences of the dramatic decline in fertility that has characterized China starting at the beginning of the ‘50s. It is shared opinion that a sustained decline in fertility below replacement level will provoke a decline in Total population, an even more pronounced decline in Working age population and very relevant ageing phenomena. I have recently shown that, on the contrary and coherently with empirical evidence, a decline in fertility provokes a structural lack of labour supply that determines positive migration balances and, finally, positive demographic trends. The paper applies the same approach to China with similar results. The decline in fertility, determined by the process of economic development and its impact on education and urbanization, but promoted also trough the one-child policy, will provoke a relevant and growing structural lack of labour supply, even in the hypothesis that Chinese employment growth should sharply decline. The implication is that in order to continue its road to economic growth and social development, China will have to rely on large and growing migration flows that will determine a demographic expansion. In conclusion, the decline in fertility, actively pursued to set a ceiling to population growth, will end up provoking the opposite result. The uncertainty about the age structure of the Chinese population makes it impossible to determine in which year China will start to be affected by serious labour shortages. Our scenarios do however clearly show that China will reach the Lewis turning point in the next few years and before the middle of the century will become the world largest importer of labour. Our analysis does therefore clearly suggest that any legal restriction to fertility and territorial mobility is totally unwarranted, and that China should start to consider educational and labour policies aimed to mitigate labour shortages. It also indicates the necessity to start an in depth discussion of which immigration and social integration policies could better serve the interests of China, on the light both of the experiences of other countries, and of the role that China wants to play in the international arena.
    Keywords: Demography; Labour market; Demographic and labour market scenarios; Migrations; Lewis turning point; China
    JEL: J11 F22
    Date: 2011–02

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