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on Economics of Ageing |
| By: | Li, Jinjing (Maastricht University); O'Donoghue, Cathal (Teagasc Rural Economy Research Centre) |
| Abstract: | This paper estimates a structured life cycle model of family retirement decision using a unique historical dataset back simulated from Living in Ireland survey. Our model takes the advantages of the dataset and models retirement decisions in terms of monetary and leisure incentives, which reflect the complex welfare system in Ireland. The household extension version of the model adapts a collective modelling approach, where the intra-household bargaining is considered. We further incorporate complimentary leisure, which allows us to analyse the interactions of spouses' retirement timing. This methodology enables us to capture the dynamics of retirement and tax-benefit policies and can be used to simulate the effect of policy reform on household retirement behaviours. The paper, in addition, applies the model to assess individual budgetary implications and the labour market impact of rising the minimum retirement age. Our simulation shows that increasing the minimum age for state pension entitlement to 70 would only delay the retirement by less than 2 years according to the individual based model. When we consider the intra-household bargaining and the higher preference of leisure found in the dual career households, the effect of postponing retirement further declines. The result suggests barely postponing the minimum retirement age for state pension without redefining the occupation and private pension rules will only have limited impact for household retirement behaviour in Ireland. |
| Keywords: | retirement, choice modelling, microsimulation |
| JEL: | J14 J26 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5866&r=age |
| By: | Heinemann, Friedrich; Hennighausen, Tanja; Moessinger, Marc-Daniel |
| Abstract: | Although demographic change leaves pay-as-you-go pension systems unsustainable, reforms, such as a higher pension age, are highly unpopular. This contribution looks into the role of intrinsic motivation as a driver for pension reform acceptance. Theoretical reasoning suggests that this driver should be relevant: The choice among different pension reform options (increasing pension age, increasing contributions, cutting pensions) can be analyzed within the framework of an optimal job separation decision. In this optimization, intrinsic job satisfaction matters as it decreases the subjective costs of a higher pension age. We test this key hypothesis on the basis of the German General Social Survey (ALLBUS). The results are unambiguous: In addition to factors such as age or education, the inclusion of intrinsic work motivation helps to improve our prediction of an individual's reform orientation. Our results are of importance for reform acceptance beyond the specific topic of pension reform. They point to the fact that the support for welfare state reform is also decided at the workplace. -- |
| Keywords: | Pension system,reforms,pension age,ALLBUS |
| JEL: | D78 H55 H31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11045&r=age |
| By: | Barrett, Garry F.; Brzozowski, Matthew |
| Abstract: | A substantial body of international research has shown that household expenditure on food and non-durables significantly decreases at the time of retirement - a finding that is inconsistent with the standard life-cycle model of consumption if retirement is an anticipated event. This fall in expenditure has become known as the `retirement-consumption puzzle.' We analyze rich Australian panel data to assess the Australian evidence on the puzzle. We find strong evidence of a fall in expenditures on groceries, food consumed at home and outside meals with retirement. The observed decline in expenditure is explained by a subset of households experiencing an unanticipated wealth shock, such as a major health event or long-term job loss, at the time of retirement. This finding is corroborated by an analysis of alternative measures of household well-being, including indicators of financial hardship, and self-reported financial and life satisfaction. For the majority of households retirement is anticipated and there is no decline in economic welfare at retirement. However, for an important minority, retirement is `involuntary' and these households experience a marked decline across all indicators of economic well-being. |
| Keywords: | Retirement; Household Expenditure; Consumption Smoothing |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2123/7697&r=age |
| By: | Lixin He; Hiroshi Sato |
| Abstract: | This study investigates the redistributive effect of the social security reform in urban China using the nationally representative urban household surveys in 1995 and 2002. The main findings are as follows. First, public pension is the main income for the elderly in urban China. Majority of people aged 60 and over (72% in 1995, 82% in 2002) have pension. Second, the social security system in urban China improved the income of low-income and older age groups and reduced the relative poverty rate. However, the redistributive effect did not offset the expanding income inequality, which resulted in the Gini coefficient of redistributed income in 2002 being higher than that in 1995. Third, during 1995 and 2002, both low income group and high income group get positive net benefit from social security system, but the net benefit is increasing with income. There is an adverse income transfer in social security system no matter measured on annual income or lifetime income. Fourth, assuming that the reformed policy were applied to public sector employees, the long-term redistributive effect of the pension system for the working population, as calculated using their lifetime income, would be larger. |
| Keywords: | lifetime income, income redistribution, social security, pension, China |
| JEL: | E21 H55 P43 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd11-193&r=age |
| By: | Li, Jinjing (Maastricht University); O'Donoghue, Cathal (Teagasc Rural Economy Research Centre) |
| Abstract: | Retirement behaviours and elderly poverty issues have been the subject of much attention and discussion in recent years as most countries are facing a rapidly ageing society. Ireland enjoys a relatively young population compared with other European countries, but is also struggling with increasing fiscal pressures. This paper analyses the retirement pattern and the replacement rate observed in Ireland using the Living in Ireland panel dataset. Since traditional empirical estimations may have selection bias issues as people with low replacement rates may not choose to retire, the paper adopts a combined method with both synthetic household simulation and empirical estimates. The study reveals the social economic attributes patterns associated with the replacement rates and retirement behaviours, and explores the heterogeneities of replacement rates among retirees. |
| Keywords: | retirement, replacement rates, microsimulation |
| JEL: | J14 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5865&r=age |
| By: | Barbara Hanel (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and Institute for the Study of Labor (IZA)) |
| Abstract: | I investigate the incentive effects of disability pensions on the labour supply decision. The implicit tax rate on further work is included as a forward looking incentive measure in order to investigate the effect of disability benefits on disability retirement entry as a special type of early retirement. A substantial change of the disability pension legislation caused exogenous variation in disability benefits in Germany in 2001 and is used to obtain estimates of individual’s responses to financial incentives. Benefit levels appear to have no effect on the labour market behaviour. At the same time, there is a sizable and significant disincentive effect of implicit taxes on labour market income, indicating that alleviating such disincentives would likely increase labour force participation. Since the response to financial incentives occurs mainly among those in good health, such a policy might on the other hand imperil the aim of providing insurance against a health induced loss of ones working capacity. |
| Keywords: | Disability pensions, labour force exit |
| JEL: | I12 J26 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2011n05&r=age |
| By: | Jaume Puig-Junoy (Universitat Pompeu Fabra, and Research Centre for Economics and Health (CRES), Barcelona, Spain); Pilar Garcia-Gomez (Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam, The Netherlands); David Casado-Marinc (Institut d'Avaluacio de Polítiques Publiques (IVALUA), Barcelona, Spain) |
| Abstract: | This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. To evaluate this coinsurance change we use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full population aged 58 to 65 in January 2004 covered by the public insurer in a Spanish region and we follow them until December 2006. We use a difference-in-differences strategy and exploit the eligibility age for Social Security to control for the endogeneity of the retirement decision. Our most conservative results show that the uniform exemption from pharmaceutical copayment granted to retired people in Spain increases the consumption of prescription medicines on average by 9.5%, total pharmaceutical expenditure by 15.2% and the costs borne by the insurer by 47.5%, without evidence of any offset effect in the form of reduced hospitalization. The impact is concentrated among individuals who were consumers of medicines for acute and other non-chronic diseases with a previous coinsurance rate in the range 30% to 40%. |
| Keywords: | pharmaceuticals; cost sharing; hospitalization offsets; health care expenditure |
| JEL: | G22 I18 J14 |
| Date: | 2011–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20110108&r=age |
| By: | Chung Tran; Alan Woodland |
| Abstract: | Inclusion of means testing into age pension programs allows governments to better direct benefits to those most in need and to control funding costs by providing flexibility to control the participation rate (extensive margin) and the benefit level (intensive margin). The former is aimed at mitigating adverse effects on incentives and to strengthen the insurance function of an age pension system. In this paper, we investigate how means tests alter the trade-off between these insurance and incentive effects and the consequent welfare outcomes. Our contribution is twofold. First, we show that the means test effect via the intensive margin potentially improves the insurance aspect but introduces two opposing impacts on incentives, the final welfare outcome depending upon the interaction between the two margins. Second, conditioning on the compulsory existence of pension systems, we find that the introduction of a means test results in nonlinear welfare effects that depend on the level of maximum pension benefits. More specifically, when the maximum pension benefit is relatively low, an increase in the taper rate always leads to a welfare gain, since the insurance and the positive incentive effects are always dominant. However, when maximum pension benefits are relatively more generous the negative incentive effect becomes dominant and welfare declines. |
| JEL: | D9 E2 E6 H3 H5 J1 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2011-550&r=age |
| By: | Pfau, Wade Donald |
| Abstract: | An important and frequently studied question for retirees is: what is the optimal asset allocation during retirement? This article provides a brief but simple message that conservative asset allocations in retirement are quite acceptable after all. A wide range of asset allocations tend to provide very similar results in terms of sustainable withdrawal rates for given probabilities of failure. For example, with Monte Carlo simulations based on historical data parameters, a 4.4 percent withdrawal rate for a 30-year horizon could be supported with a 10 percent chance of failure using a 50/50 asset allocation of stocks and bonds. But the range of stock allocations supporting a withdrawal rate within 0.1 percentage points of this maximum extend from 27 to 87 percent. Though asset allocation will also impact the amount which can be left as bequests, it is the case that relatively low stock allocations can support retirees just as well for a given failure rate and retirement duration. |
| Keywords: | retirement planning; safe withdrawal rates; asset allocation |
| JEL: | G11 C15 D14 |
| Date: | 2011–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32506&r=age |
| By: | Zwick, Thomas |
| Abstract: | This paper shows that training of older employees is less effective. Training effectiveness is measured with respect to key dimensions such as career development, earnings, adoption of new skills, flexibility or job security. Older employees also pursue less ambitious goals with their training participation. An important reason for these differences during the life cycle might be that firms do not offer the 'right' training forms and contents. Older employees get higher returns from informal and directly relevant training and from training contents that can be mainly tackled by crystallised abilities. Training incidence in the more effective training forms is however not higher for older employees. Given that other decisive variables on effectiveness such as training duration, financing and initiative are not sensitive to age, the wrong allocation of training contents and training forms therefore is critical for the lower effectiveness of training. -- |
| Keywords: | Training,Older Employees,Linked-Employer-Employee Data |
| JEL: | J10 J24 J28 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11046&r=age |
| By: | Frosch, Katharina; Göbel, Christian; Zwick, Thomas |
| Abstract: | Adopting a dynamic perspective, this paper investigates age-related staffing patterns in German establishments and their effect on innovative performance. First, we investigate how establishments achieve the necessary workforce rejuvenation - from the inflow of younger or from outflows of older workers. In addition, we explore whether certain staffing patterns are more likely to appear under different economic regimes. In a second step, we analyse whether an establishment's innovative performance is related to the staffing patterns it experiences. The analysis of linked-employer-employee data shows that most of the 585 German establishments covered rejuvenate by inflows of younger workers. Half of the establishments also use the outflow of older workers. Furthermore, workforces are more likely to become more age-heterogeneous in growing establishments. Finally, we do not find evidence that a youth-centred human resource strategy (always) fosters innovation. -- |
| Keywords: | Workforce aging,staffing strategies,innovation |
| JEL: | M51 J24 O31 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11047&r=age |
| By: | James Banks (Institute for Fiscal Studies and University of Manchester); Richard Blundell (Institute for Fiscal Studies and University College London); Antoine Bozio (Institute for Fiscal Studies); Carl Emmerson (Institute for Fiscal Studies) |
| Abstract: | <p>This paper examines changes in health and disability related transfers in the UK over the last thirty years, and describes how they are related to changes in labour force participation. The objective is to present a comprehensive description of the reforms to the institutional setting, along with available time series coming from administrative data on benefit receipt, cross-section or panel data on self-reported health and their interactions with labour force status. By providing systematic evidence on institutions and data, we hope to help future research providing a fuller picture of the trends over this period. We also present evidence on the impact of two large reforms to disability benefits in the UK.</p> |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:11/12&r=age |
| By: | Powdthavee, Nattavudh (Nanyang Technological University, Singapore) |
| Abstract: | This paper tests whether there is a potential payoff to grandparenthood in terms of life satisfaction. Using the new nationwide survey for the UK, which consists of over 5,000 grandparents and 6,000 non-grandparents aged 40 and above, and a flexible multiple-index ordered probit model with varying thresholds, we find that being a grandparent to at least one grandchild is associated positively and statistically significantly with individuals reporting to be very satisfied with life overall. Parents with no grandchildren are no more satisfied with life compared to non-parents of the same age. The findings suggest that even though children may not contribute significantly to parents' satisfaction with life overall, there may well be long-term benefits to having children, provided that our children go on and have children of their own. |
| Keywords: | life satisfaction, grandparenthood, grandchildren, generalized ordered probit, understanding society, happiness |
| JEL: | J13 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5869&r=age |