nep-age New Economics Papers
on Economics of Ageing
Issue of 2011‒04‒30
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. International Economic Crisis and the Hungarian Pension Reform By Andr s Simonovits
  2. The impact of Spanish pension reform on expenditure: A quick estimate By Angel de la Fuente; Rafael Domenech
  3. The Mandatory Private Pension Pillar in Hungary: An Obituary By Andr s Simonovits
  4. Does the implicit pension debt mean anything after all? By Luca Beltrametti; Matteo Della Valle
  5. Retirement and Subjective Well-Being By Bonsang Eric; Klein Tobias J.
  6. Retaining through Training; Even for OlderWorkers By Picchio, M.; Ours, J.C. van
  7. Heterogeneity matters: labour productivity differentiated by age and skills By M. ROGER; M. WASMER
  8. Life Cycle Equilibrium Unemployment By Chéron, Arnaud; Hairault, Jean-Olivier; Langot, François
  9. A Country for Old Men? An Analysis of the Determinants of Long-Term Home Care in Europe By Silvia Balia; Rinaldo Brau
  10. Do Social Security Statements Affect Knowledge and Behavior? By Giovanni Mastrobuoni
  11. Migration, Social Security, and Economic Growth By Chen, Hung-Ju; Fang, I-Hsiang
  12. Legacy writing among the elderly: conceptual bases, dimensioning and a proposed scale for measuring motivations By Samuel Guillemot; Bertrand Urien

  1. By: Andr s Simonovits (Institute of Economics - Hungarian Academy of Sciences)
    Abstract: By 2008, the Hungarian pension system has become too generous and the implied contribution rate hindered growth. When the international economic and financial crisis deprived Hungary from normal credits, its government turned to international organizations for help. The most spectacular element of the conditions attached to the bail-out package was the short and long-run reduction of pension benefits. Within months, the Hungarian government eliminated the unsustainable 13th month benefit, reduced health-insurance contribution rates, replaced wage-price indexation with price indexation and worked out a drastic rise in the normal retirement age in the medium-run. The newly elected conservative party has practically closed the second pillar and plans to use up the released capital to reduce the government deficit, debt and finance public expenditures.
    Keywords: international economic crisis, Hungary, pension reform
    JEL: F34 H55
    Date: 2011–02
  2. By: Angel de la Fuente; Rafael Domenech
    Abstract: In this paper we present a preliminary estimate of the impact of the recent agreement between the Spanish government and the social partners to reform the public contributive pension system. After updating the projections of pension expenditure constructed in de la Fuente and Doménech (2010) for the period 2008-60, we analyze the impact on this variable of raising the retirement age from 65 to 67 years, extending from 15 to 25 years the period over which wages are averaged to calculate the starting pension and increasing from 35 to 37 the number of contribution years required to obtain a “full pension.†Conditional on a series of assumptions about the evolution of employment, productivity and demographics, our estimates suggest that these measures will reduce pension expenditure by up to two percentage points of GDP once the reforms have been fully implemented in 2027. On the other hand, the existing uncertainty about the future evolution of the relevant variables suggests that it would be desirable to bring forward in time the introduction of the periodic evaluation of the system (the so-called sustainability factor) so as to have in place a mechanism that can be used to modulate the rhythm and scope of the reform if the system’s financial situation requires it before the end of the transitional period.
    Keywords: Pension System, reform, aging
    Date: 2011–03
  3. By: Andr s Simonovits (Institute of Economics - Hungarian Academy of Sciences)
    Abstract: In 1998, the left-of-center government of Hungary carved out a second pillar mandatory private pension system from the original mono-pillar public system. Participation in the mixed system was optional for those who were already working, but mandatory for new entrants to the workforce. About 50 per cent of the workforce joined voluntarily and another 25 per cent were mandated to do so by law between 1999 and 2010. The private system has not produced miracles: either in terms of the financial stability of the social security system, or greatly improved social security in old age. Moreover, the international financial and economic crisis has highlighted the transition costs of pre-funding. Rather than rationalizing the system, the current conservative government de facto "nationalized" the second pillar in 2011 and is to use part of the released capital to compensate for tax reductions.
    Keywords: social security reform, old age risk, defined contribution plan, privatization, political aspect, Hungary
    JEL: H55 J26
    Date: 2011–03
  4. By: Luca Beltrametti (Department of Economics, University of Genoa); Matteo Della Valle (Department of Economics, University of Genoa)
    Abstract: We discuss the meaning of the concept of implicit pension debt (unfunded pension liabilities) from a public finance perspective and contrast different definitions such a variable with the notion of public debt. We conclude that the implicit pension is deeply different from public debt but nevertheless is meaningful for economic policy. We compute the implicit pension debt associated to retired workers for several countries for different years adopting a homogeneous algorithm. Our results show that the major countries have implicit pension debt of very different size with different trends in the last few years.
    Keywords: Pension liabilities, implicit debt, sovereign debt.
    JEL: H55 H63
    Date: 2011–04
  5. By: Bonsang Eric; Klein Tobias J. (METEOR)
    Abstract: We provide an explanation for the common finding that the effect of retirement on life satisfaction is negligible. For this we use subjective well-being measures for life and domains of life satisfaction that are available in the German Socio-Economic Panel (GSOEP) and show that the effect of voluntary retirement on satisfaction with current household income is negative, while the effect on satisfaction with leisure is positive. At the same time, the effect on health satisfaction is positive but small. Following the life domain approach we then argue that these effects offset each other for an average individual and that therefore the overall effect is negligible. Furthermore, we show that it is important to distinguish between voluntary and involuntary retirement. The effect of involuntary retirement is negative because the adverse effect on satisfaction with household income is bigger, the favorable effect on satisfaction with leisure is smaller, and the effect on satisfaction with health is not significantly different from zero. These results turn out to be robust to using different identification strategies such as fixed effects and first differences estimation, as well as instrumental variables estimation using eligibility ages and plant closures as instruments for voluntary and involuntary retirement.
    Keywords: labour economics ;
    Date: 2011
  6. By: Picchio, M.; Ours, J.C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper investigates whether on-the-job training has an effect on the employability of workers. Using data from the Netherlands we disentangle the true effect of training incidence from the spurious one determined by unobserved individual heterogeneity. We also take into account that there might be feedback from shocks in the employment status to future propensity of receiving firm-provided training. We find that firm-provided training significantly increases future employment prospects. This finding is robust to a number of robustness checks. It also holds for older workers, suggesting that firm-provided training may be an important instrument to retain older workers at work.
    Keywords: training;employment;human capital;older workers.
    JEL: C33 C35 J21 J24 M53
    Date: 2011
  7. By: M. ROGER (Insee); M. WASMER (University of Fribourg and Université Lumière Lyon 2)
    Abstract: This study aims at evaluating the actual profile of marginal productivity across age groups within the workforce. As age-productivity profiles might differ between occupations, we differentiate the workforce simultaneously by skills (low-skilled, high-skilled) and by age (young, middle-aged, old). Estimating a production function with a nested constant-elasticity-of-substitution (CES) specification in labour allows imperfect substitution between different categories of workers. We use French datasets for manufacturing, services and trade sectors. Labour productivity is found to be the lowest for the low-skilled older workers while high-skilled senior employees in manufacturing and trade are the most productive group. Throughout the sectors, wage rates vary considerably less than productivity and wage profiles are steeper for high-skilled workers. The relative productivity/wage ratio is found to be sector-specific. It is the highest for young workers in manufacturing while in services and trade it is the highest for the middle-age employees.
    Keywords: ageing, older workers, labour productivity, CES production function, endogeneity
    JEL: J24 J31 J41
    Date: 2011
  8. By: Chéron, Arnaud; Hairault, Jean-Olivier; Langot, François
    Abstract: This paper extends the job creation-job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which to recoup investment costs, the life-cycle setting implies age-differentiated labor market flows. Whereas the search effort of unemployed workers presents an age-decreasing profile, the age-dynamics of the separation rate can be either decreasing or increasing. Worker heterogeneity in the context of the undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are necessary to reach the first best allocation.
    Keywords: search; matching; retirement; life cycle
    JEL: J22 J26 H55
    Date: 2011–04
  9. By: Silvia Balia; Rinaldo Brau
    Abstract: This paper investigates long-term home care utilisation in Europe. We use data from SHARE on formal (nursing care or paid domestic help) and informal care (support provided by relatives) to study the probability and the number of hours of both types of care received. We address endogeneity and unobservable heterogeneity in a common latent factors framework. We find that age, disability and proximity-to- death are important joint predictors of home care utilisation. Unlike some previous studies, we find that increasing the number of hours of informal support does not lead to a reduction in formal care utilisation.
    Keywords: long-term care; proximity to death; ageing; latent factors
    JEL: C10 C30 I1
    Date: 2011
  10. By: Giovanni Mastrobuoni
    Abstract: Deciding when to retire and claim Social Security benefits is one of the most important financial decisions that workers face. Therefore, ensuring that they have easy access to clear and timely information about their benefit options is a key goal for policymakers. In 1995, the Social Security Administration introduced the “Statement,” a record of past earnings and a summary of estimated benefits at selected claiming ages that is designed to help workers plan for retirement. The Statement is now mailed annually to all workers age 25 and over. While the Statement has the potential to be a very valuable tool, little research has been done on its impact. A Gallup survey revealed that individuals who had received a Statement had a significant increase in their understanding of basic Social Security features. The most recent U.S. Government Accountability Office report on the Statement found that 66 percent of workers remember receiving a Statement and 90 percent of these workers say that they remember the amount of estimated Social Security benefits. These findings suggest that the Statement might improve knowledge, but provide no information about whether it changes behavior. Both topics are the subject of this brief. This brief is organized as follows. The first section explains the data and methodology used in the analysis. The second and third sections present the findings on how the Statement impacts knowledge and behavior, respectively. The final section concludes that the Statement does increase knowledge for individuals who were not inclined to seek the information on their own, but the Statement does not appear to change behavior.
  11. By: Chen, Hung-Ju; Fang, I-Hsiang
    Abstract: This paper studies the effect of population aging on economic performance in an overlapping-generations model with international migration. Fertility is endogenized so that immigrants and natives can have different fertility rates. Fertility is an important determinant to the tax burden of social security since it affects the quantity and quality of future tax payers. We find that introducing immigrants into the economy can reduce the tax burden of social security. If life expectancy (or the replacement ratio) is high enough, the growth rate of GDP per worker for an economy with international migration will be higher than for a closed economy. Regarding migration policies, our numerical results indicate that economic growth rate of GDP per worker will first decrease then increase as the flow of immigrants increases. Increasing the quality of immigrants will enhance economic growth.
    Keywords: Economic growth; Fertility; Migration; Social security.
    JEL: F22 H55 O15
    Date: 2011
  12. By: Samuel Guillemot (ICI - Laboratoire Information, Coordination, Incitations - Institut Télécom - Télécom Bretagne - Université de Bretagne Occidentale - Brest : EA2652 - Université européenne de Bretagne); Bertrand Urien (ICI - Laboratoire Information, Coordination, Incitations - Institut Télécom - Télécom Bretagne - Université de Bretagne Occidentale - Brest : EA2652 - Université européenne de Bretagne)
    Abstract: This article concerns a relatively unknown phenomenon in marketing that has become, however, extremely popular among older adults: legacy writing. While the writing of "ego-documents" has been the subject of many studies in gerontology, sociology and, above all, literature, research in marketing has yet to examine its specific components. The purpose of this article is to identify the concept of legacy writing and propose an initial scale to the academic and managerial community for measuring the motivations underlying this practice. Two sets of data collected with questionnaires (202 and 508 responses) have been used to develop and confirm the validity of a scale consisting in twenty items, divided into six dimensions (flattering the ego, mending the ego, being remembered, sharing, transmitting, and bearing witness). This research offers a contribution to the theoretical corpus on special objects and intergenerational transmission. It demonstrates that the meaning of a special object is not exclusively restricted to symbolic references that may be lost or denatured, but others that are explicit and inscribed at the very core of the object.
    Keywords: Legacy writing, elderly, intergenerational transmission, identity
    Date: 2010–12

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