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on Economics of Ageing |
| By: | Leora Klapper (Development Research Group, the World Bank); Georgios A. Panos (Essex Business School, University of Essex) |
| Abstract: | Our study contributes to the financial literacy literature by examining its association with retirement planning in an interesting and novel context, i.e. that of a country with a relatively old and rapidly ageing population, large regional disparities and a rapidly emerging financial market. Even though consumer borrowing is increasing very rapidly in Russia, we find that only 36.3% of respondents in our sample know about the working of interest compounding and only half can answer a simple question about inflation. In a country with pervasive public pension provision, we find that financial literacy is significantly and positively related to retirement planning using private pension funds and schemes. Residents in rural areas are much more reliant on the public provision and invest less in private schemes and savings. The results of our study have a clear policy implication; along with encouraging the availability of private retirement plans and financial products, efforts to improve financial literacy can be pivotal to the expansion in the use of such schemes. |
| Keywords: | Financial literacy; Retirement Planning; Pensions; Russia |
| JEL: | D91 G11 G23 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:114&r=age |
| By: | Rob Alessie (University of Groningen); Maarten van Rooij (Netherlands Central Bank); Annamaria Lusardi (Dartmouth College) |
| Abstract: | We present new evidence on financial literacy and retirement preparation in the Netherlands based on two surveys conducted before and after the onset of the financial crisis. We document that while financial knowledge did not increase from 2005 to 2010, significantly more individuals planned for their retirement in 2010. At the same time, employees’ expectations about the level of their pension income are high compared to what retirement plans may realistically provide. However, financially knowledgeable employees report lower expected replacement rates and acknowledge higher levels of uncertainty. Moreover using instrumental variation for financial conditions and financial knowledge of relatives, we find a positive effect of financial literacy on retirement preparation. Employing the panel feature of our dataset, we show that financial knowledge has a causal impact on retirement planning. Our findings suggest that the formation of pension expectations might be an important mechanism contributing to the impact of financial literacy on planning. |
| Keywords: | Financial Sophistication, Retirement Planning, Retirement Expectations |
| JEL: | D91 G11 D80 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:110&r=age |
| By: | Golo Henseke (University of Rostock) |
| Abstract: | This study focuses on the influence of heavy job demands on retirement, using the available SHARE waves. Heavy job demands may have a direct and health mediated effect on individual retirement. An econometric challenge is the dynamic self-selection of workers into jobs. The main findings indicate: the frequency of heavy job demands is higher among workers with low levels of socioeconomic status. Heavy job demands are associated with on average higher retirement probabilities, once workers become eligible to pension benefits. The effect is driven by long-term exposure to heavy job demands during the career. There are overall no retirement effects in the age bracket 50–58 and thus no indication for strong adverse health effects. A change in the level of current job demands does not influence the subsequent probability of retirement. |
| Keywords: | Health, job demands, selection bias |
| JEL: | J26 J28 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:118&r=age |
| By: | Adele Atkinson (OECD Financial Affairs Division. Paris); Flore-Anne Messy (OECD Financial Affairs Division. Paris) |
| Abstract: | Our study contributes to the financial literacy literature by examining its association with retirement planning in an interesting and novel context, i.e. that of a country with a relatively old and rapidly ageing population, large regional disparities and a rapidly emerging financial market. Even though consumer borrowing is increasing very rapidly in Russia, we find that only 36.3% of respondents in our sample know about the working of interest compounding and only half can answer a simple question about inflation. In a country with pervasive public pension provision, we find that financial literacy is significantly and positively related to retirement planning using private pension funds and schemes. Residents in rural areas are much more reliant on the public provision and invest less in private schemes and savings. The results of our study have a clear policy implication; along with encouraging the availability of private retirement plans and financial products, efforts to improve financial literacy can be pivotal to the expansion in the use of such schemes. |
| Keywords: | Financial literacy, measurement, questinnaire, financial education, internatinal comparison, knowledge, retirement plan, financial behaviour, OECD |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:115&r=age |
| By: | Johan Almenberg (Ministry of Finance, Sweden); Jenny Säve-Söderbergh (The Swedish Social Institute for Social Research) |
| Abstract: | We examine the relationship between financial literacy and retirement planning in a representative sample of Swedish adults. We find significant differences in financial literacy between planners and non-planners. Financial literacy levels are also lower among older people, women and those with low education or earnings. When we control for demographic variables we do not find an association between a narrow measure of financial literacy and planning, but with a broader measure the association is positive and statistically significant. We relate these findings to features of the Swedish pension system. |
| Keywords: | Financial literacy,pensions planning |
| JEL: | D10 H55 H75 I22 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:112&r=age |
| By: | Hallberg, Daniel (Institute for Futures Studies) |
| Abstract: | <p> In Sweden, employers pay non-wage costs for their workforce in the form of legislated employment tax and collective fees. For parts of the workforce, the collective fees are progressive with respect to the employee’s age and wage. The objective of this paper is to examine how non-wage costs affect voluntary early retirement. To this end we use a large longitudinal employer–employee matched data set with administrative records of the private sector in Sweden. We exploit the variation in collective fee costs across companies to identify employer incentives to encourage early retirement. The results from the instrumental variable estimator suggest that a 1 percentage point increase in non-wage costs in relation to wage costs increases retirement by 6 percent. Further, given the wage sum and workforce structure, large firms spend more on non-wage compensation than small firms. The share of non-wage costs in relation to the wage sum is also positively linked to net employment growth.<p> |
| Keywords: | Early retirement; Non-wage labor costs; Pensions; Labor demand; Collective fees |
| JEL: | J21 J23 J26 J32 |
| Date: | 2011–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifswps:2011_006&r=age |
| By: | Elsa Fornero (University of Turin and CeRP-Collegio Carlo Alberto); Chiara Monticone (CeRP-Collegio Carlo Alberto) |
| Abstract: | By requiring individuals to decide whether to participate in (newly established) pension funds, how much to contribute and how to invest their retirement wealth, pension reforms have raised concerns about the ability of households to deal with financial decisions. Using the Bank of Italy's Survey on Household Income and Wealth, our empirical analysis shows that most individuals lack knowledge of basic concepts such as interest rates and inflation. Males, the more educated and residents in the Centre-North possess higher literacy. As for the effects, financial literacy has a positive and significant impact on the probability of pension plan participation. |
| Keywords: | Financial literacy, retirement planning,pension plan participation |
| JEL: | D91 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:111&r=age |
| By: | Diana Crossan (Retirement Commission, New Zealand); David Feslier (Retirement Commission, New Zealand); Roger Hurnard (Retirement Commission, New Zealand) |
| Abstract: | We compare levels of financial literacy in New Zealand with levels in five other countries and between the general adult population of New Zealand, people of Maori ethnicity and, more particularly, the people of Ngai Tahu, a Maori tribe based mainly in the South Island of New Zealand who have initiated a long-term savings scheme and are also providing financial education courses for members of their tribe. Our findings indicate that, while the financial knowledge level of Maori people generally is lower than for non-Maori (controlling for demographic and economic factors), there is little difference between the financial knowledge of the people of Ngai Tahu and other New Zealanders. Finally, the analysis finds financial literacy (defined as getting all three test questions correct) is not significantly associated with thinking about planning for retirement ‘a lot’, although it appears to be significant for other measures of financial achievement. This result could reflect the dominant role of New Zealand’s universal public pension in providing retirement income security. |
| Keywords: | Financial literacy, retirement planning, financial education, Maori, Ngai Tahu, New Zeland. |
| JEL: | D9 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:113&r=age |
| By: | Saint-Paul, Gilles |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1003&r=age |
| By: | Annamaria Lusardi (Dartmouth College); Olivia S. Mitchell (University of Pennsylvania - The Wharton School) |
| Abstract: | In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average. Other common patterns are also evident: women are less financially literate than men and are aware of this shortfall. More educated people are more informed, yet education is far from a perfect proxy for literacy. There are also ethnic/racial and regional differences: city-dwellers in Russia are better informed than their rural counterparts, while in the U.S., African Americans and Hispanics are relatively less literate than others. Moreover, the more financially literate are also those most likely to plan for retirement. In fact, answering one additional financial question correctly is associated with a 3-4 percentage point higher chance of planning for retirement in countries as diverse as Germany, the U.S., Japan, and Sweden; in the Netherlands, it boosts planning by 10 percentage points. Finally, using instrumental variables, we show that these estimates probably underestimate the effects of financial literacy on retirement planning. In sum, around the world, financial literacy is critical to retirement security. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:106&r=age |
| By: | Annamaria Lusardi (Dartmouth College); Olivia S. Mitchell (University of Pennsylvania - The Wharton School) |
| Abstract: | We examine financial literacy in the United States using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are also much more likely to plan for retirement, which is likely to leave them better positioned for old-age. Our results will inform those seeking to target financial literacy programs to those in most need. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:107&r=age |
| By: | Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | European countries need to expand employment among older individuals. Many papers have examined this issue from different angles. However, very few seem to have considered its gender dimension properly, despite evidence that lifting the overall senior employment rate requires significantly raising that of women older than 50. The key issue examined by this paper is whether employers are willing to employ more older workers, in particular older women. The answer depends to a large extent on the ratio of older individuals’ productivity to their cost to employers. To address this question we tap into a unique firm-level panel of Belgian data to produce robust evidence on the causal effect of age/gender on productivity and labour costs. We take advantage of the panel structure to identify age/gender-related differences from within-firm variation. Moreover, inspired by recent developments in the production function estimation literature, we address the problem of endogeneity of the age/gender mix, using a structural production function estimator (Olley & Pakes, 1996; Levinsohn & Petrin, 2003) alongside IV-GMM methods where lagged value of labour inputs are used as instruments. Our results indicate a small negative impact of larger shares of older men on the productivity-labour cost ratio. An increment of 10%-points of in their share causes a 0.17 to 0.69%-point contraction. However, the main result is that the equivalent handicap with older women is larger, ranging from 1.3 to 2.0%-points. This is not good news for older women’s employability. And the vast services industry does not seem to offer working conditions that mitigate older women’s disadvantage, on the contrary. |
| Keywords: | Ageing, Labour Productivity, Panel Data Analysis |
| JEL: | J24 C33 D24 |
| Date: | 2011–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2011010&r=age |
| By: | Shizuka Sekita (Istitute of Social and Economic Research, Osaka University) |
| Abstract: | Using micro data on Japanese households, I provide an overview of the level of financial literacy in Japan, analyze the determinants of financial literacy and link financial literacy to retirement planning. Overall, the level of financial literacy is low in Japan. Surprisingly, many Japanese responded that they did not know the answer in at least one question. In addition, I found that females, the young, and individuals with lower incomes and lower education levels are financially illiterate. Moreover, as expected, I found that financial literacy increases the probability of having a savings plan for retirement. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:108&r=age |
| By: | Pfarr, Christian; Schmid, Andreas; Schneider, Udo |
| Abstract: | Self-assessed health (SAH) is a frequently used measure of individuals’ health status. It is also prone to reporting heterogeneity. To control for reporting heterogeneity valid measures of the objective health status are needed. The topic becomes even more complex for cross-country comparisons, as many key variables tend to vary strongly across countries, influenced by cultural and institutional differences. This study aims at exploring the key drivers for reporting heterogeneity in SAH in an international context. To this end, country specific effects are accounted for and the objective health measure is concretized, separating out effects of mental and physical health conditions. We use panel data from the Survey of Health, Ageing and Retirement in Europe (SHARE) which provides a rich dataset on the elderly European population. To obtain distinct indicators for physical and mental health conditions two indices were constructed. Finally, to identify potential reporting heterogeneity in SAH a generalized ordered probit model is estimated. We find evidence that health behaviour as well as health care utilization, mental and physical health condition as well as country characteristics affect reporting behaviour. We conclude that observed and unobserved heterogeneity play an important role when analysing SAH and have to be taken into account. |
| Keywords: | reporting heterogeneity; SHARE; generalized ordered probit |
| JEL: | I12 C23 I10 |
| Date: | 2011–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29900&r=age |
| By: | Tabea Bucher-Koenen (MEA, University of Mannheim); Annamaria Lusardi (Dartmouth College) |
| Abstract: | We examine financial literacy in Germany using data from the SAVE survey. We find that knowledge of basic financial concepts is lacking among women, the less educated, and those living in East Germany. In particular, those with low education and low income in East Germany have little financial literacy compared to their West German counterparts. Interestingly, there is no gender disparity in financial knowledge in the East. In order to investigate the nexus of causality between financial literacy and retirement planning we develop an IV strategy by making use of regional variation in the financial knowledge of peers. We find a positive impact of financial knowledge on retirement planning. |
| Keywords: | Financial sophistication, retirement planning, life-cycle savings, financial education, East Germany |
| JEL: | D91 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:crp:wpaper:109&r=age |
| By: | Mônica Rebouças (Unifesp); Marília Miranda Forte Gomes (Cedeplar-UFMG); Marina Guimarães Paes de Barros (Master in Domography); Fabiane Vaz (UNB); Maurício Gomes Pereira (UNB); Luiz Roberto Ramos (Unifesp) |
| Abstract: | Considering the importance of the Brazilian aging, this work had aimed to compare the input of the second millennium the secondary data on the elderly in four Brazilian states, where it had been done research on the subject, which are, São Paulo, Rio de Janeiro, Minas Gerais and Ceará. The information was at the Brazilian Institute of Geography and Statistics and the Ministry of Health. Survey results suggest it be possible outline the aging in the country by Brazilian state, after the year 2000, offering items be enhanced in places less fortunate, like the northeast, as well as on the benchmarking of information on activities of daily living that are obtained through questions that combine dissimilar difficulties in performing various activities by creating uncertainty in the interpretation of responses. |
| Keywords: | elderly, health indicators, functional ability, activities of daily living |
| JEL: | Y80 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td416&r=age |
| By: | David E. Bloom et al. (Harvard School of Public Health) |
| Abstract: | The Next Generation Task Force was convened to explore Nigeria's future at a time of rapid demographic, social, and economic change. Over the next 20 years, Nigeria will experience huge growth in the number of young adults in its society. If these young people are healthy, well educated, and find productive employment, they could boost the country's economy and reinvigorate it culturally and politically. If not, they could be a force for instability and social unrest. The Task Force report is intended to catalyse a broader debate on Nigeria's future – and especially the needs of its young people. The next generation is beginning to find its voice. If Nigeria can harness its ideas and energy, then its future will surely be bright. |
| Keywords: | Nigeria, demography, growth |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:6210&r=age |