nep-age New Economics Papers
on Economics of Ageing
Issue of 2011‒09‒22
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Effect of Pension Reform on Pension-Benefit Expectations and Savings Decisions in Japan By OKUMURA Tsunao; USUI Emiko
  2. Changing Identity: Retiring from Unemployment By Clemens Hetschko; Andreas Knabe; Ronnie Schöb
  3. Instead of Bowling Alone? Unretirement of Old-Age Pensioners By Pettersson, Jan
  4. Age-Dependent Employment Protection By Arnaud Chéron; Jean-Olivier Hairault; François Langot
  5. Capital Utilisation and Retirement By Bonleu, A.; Cette, G.; Horny, G.
  6. The Effects of Changes in Women’s Labor Market Attachment on Redistribution Under the Social Security Benefit Formula By Alan L. Gustman; Thomas L. Steinmeier; Nahid Tabatabai
  7. Labour Market Reforms in Japan to Improve Growth and Equity By Randall S. Jones; Satoshi Urasawa
  8. Assessing Redistribution in the Uruguayan Social Security System By Alvaro Forteza; Irene Mussio
  9. Who's Above the Social Security Payroll Tax Cap? By Nicole Woo; Janelle Jones; John Schmitt
  10. Long-Term Care, Altruism and Socialization By Grégory Ponthière
  11. No Country for Old Men: Aging Dictators and Economic Growth By Richard Jong-A-Pin; Jochen O. Mierau
  12. Technical Appendix to "Demographic Change, Human Capital and Welfare" By Alexander Ludwig; Thomas Schelkle; Edgar Vogel

  1. By: OKUMURA Tsunao; USUI Emiko
    Abstract: Using the Japanese Study of Aging and Retirement (JSTAR), a Japanese panel survey of people age 50 or older, we find that many Japanese in their early 50s—compared to those in their late 50s and early 60s—expect their level of public pension benefits to decline. We find that recent pension reform (which raised the pensionable age) affected people by increasing the age when they expect to claim their benefits by almost the exact amount for all. Nevertheless, the effect of reform on their expectations for future benefits remained insignificant. We also find evidence that anxiety about the public pension program's future induces people to save more.
    Date: 2011–09
  2. By: Clemens Hetschko; Andreas Knabe; Ronnie Schöb
    Abstract: Using data from the German Socio-Economic Panel from 1984-2009, we follow persons from their working life into their retirement years and find that, on average, employed people maintain their life satisfaction upon retirement, while long-term unemployed people report a substantial increase in their life satisfaction when they retire. These results are robust to controlling for changes in other life circumstances and suggest that retiring is associated with a switch in the relevant social norms that causes an increase in identity utility for the formerly unemployed. This is supportive of the idea that, by including identity in the utility function, results from the empirical life satisfaction literature can be reconciled with the economic theory of individual utility.
    Keywords: life satisfaction, retirement, unemployment, identity, social norm
    JEL: I31 J26
    Date: 2011
  3. By: Pettersson, Jan (Department of Economics)
    Abstract: We study re-entry to the workforce of fully retired persons, so-called unretirement, and whether the decision to resume work depends primarily on social or economic reasons. Using Swedish register data for already retired individuals older than 55, we find unretirement to vary between 6 and 14 per cent under two different definitions. Our results largely support an interpretation that unretirement is a life-style decision rather than a response to a realized negative economic situation post retirement. However, economic motives seem to be more important for younger pensioners.
    Keywords: Retirement; Unretirement; Pensions; Labour supply
    JEL: J14 J26
    Date: 2011–09–09
  4. By: Arnaud Chéron (GAINS - Université du Maine); Jean-Olivier Hairault (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, IZA - Institute for the Study of Labor); François Langot (IZA - Institute for the Study of Labor, GAINS-TEPP - Université du Mans, CEPREMAP - Centre pour la recherche économique et ses applications)
    Abstract: This paper examines the age-related design of firing taxes by extending the theory of job creation and job destruction to account for a finite working life-time. We first argue that the potential employment gains related to employment protection are high for older workers, as they are magnified by the proximity to retirement. But higher firing taxes for these workers increase job destruction rates for the younger generations. Furthermore, from a normative standpoint, when firms cannot ex-ante age-direct their search, the impact of each generation of unemployed workers on the average return on vacancies makes the internalization of the search costs for the other generations imperfect through the ex-post Nash bargaining process. We show that the first best age-profile of firing taxes is typically hump-shaped, partially in contradiction with existing policies in some European countries. Taking into account the fact that the human capital of older workers is more specific than general tends to exacerbate these results.
    Date: 2011–09–14
  5. By: Bonleu, A.; Cette, G.; Horny, G.
    Abstract: This empirical analysis aims at assessing the effect of the economic climate and the intensity of capital utilisation on companies’ capital retirement behaviour. It is conducted using individual company data, as well as original data on the degree of utilisation of production factors. The sample includes 6,998 observations over the period 1996-2008. This database is, to our knowledge, unique for the empirical analysis of the intensity of capital utilisation on firms’ capital retirement behaviour. We adjust for endogeneity biases by means of instrumental variables. The main results obtained from the estimation of capital retirement models may be summarised as follows: i) The retirement rate decreases with the variations in cyclical pressures measured by the changes in output and the workweek of capital; this relation corresponds to a countercyclical decelerator effect on capital retirement; ii) The capital retirement rate increases with the structural intensity of capital utilisation; this effect, which corresponds to a wear and tear one, is nevertheless small compared to the decelerator one; iii) The profit rate does not have a significant impact on the retirement rate. Compared with the existing literature, here mainly Mairesse and Dormont (1985), the contribution of these results is to show, through the use of unique survey data, that the effect of the intensity of capital utilisation on capital retirement is structurally positive, via a wear and tear effect, and cyclically negative, via a decelerator effect which completes that already taken into account via the effect of changes in value added.
    Keywords: Capital, Capital measure, Capital retirement, Capital utilisation.
    JEL: E22 D24 O16
    Date: 2011
  6. By: Alan L. Gustman (Dartmouth College and NBER); Thomas L. Steinmeier (Texas Tech University); Nahid Tabatabai (Dartmouth College)
    Abstract: Studies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. This paper compares outcomes for the earlier cohort with those of a cohort born twelve years later. With greater growth in women's earnings, the aim of the study is to see whether, after the recent growth in two earner households, and the growth in women's labor market activity and earnings, the Social Security system now fosters somewhat more redistribution from high to low earning households. We use data from the Health and Retirement Study to study a population consisting of members of households with at least one person age 51 to 56 in either 1992 or in 2004. We use four different measures of redistribution: the ratio of the present value of benefits to taxes for households arrayed by decile of covered earnings; the fraction of total Social Security benefits redistributed from households with high earnings to those with low earnings; the share of total benefits paid to members of each cohort redistributed from households falling in the highest deciles of earners to those with lower covered earnings; and the rate of return to Social Security taxes for members with different amounts of covered earnings. Considering differences in earnings between cohorts, women enjoyed a more rapid growth of labor force participation, hours of work and covered earnings than men. This increased the redistribution of Social Security benefits among households. Nevertheless, a considerable gap remains between the labor market activities and earnings of women versus men. As a result, the Social Security system remains much less successful in redistributing benefits from households with high covered earnings to those with lower covered earnings than in redistributing benefits from individuals with high covered earnings to those with lower covered earnings.
    Date: 2011–08
  7. By: Randall S. Jones; Satoshi Urasawa
    Abstract: Traditional Japanese labour market practices, which benefited both workers and firms during the highgrowth era, are no longer appropriate in the context of slow economic growth and rapid population ageing. Reforms are needed in light of the upward trend in non-regular employment to break down labour market dualism and to encourage greater labour force participation by women, the elderly and youth. A comprehensive approach that includes improving the social insurance coverage of non-regular workers and upgrading training programmes for them, preventing discrimination against non-regular workers and reducing effective employment protection for regular workers would increase labour market flexibility and human capital. Moreover, such reforms would increase equity across different segments of the labour force. Drawing more women into the labour force requires removing financial disincentives to work, creating more family-friendly workplaces and increasing the availability of childcare. The labour force participation of the elderly should be raised by promoting continuous employment and abolishing mandatory retirement. More effective vocational training is needed for younger workers. This Working Paper relates to the 2011 OECD Economic Survey of Japan (<P>Réformer le marché du travail au Japon pour stimuler la croissance et améliorer l'équité<BR>Les pratiques traditionnellement suivies au Japon sur le marché du travail, bénéfiques aussi bien aux travailleurs qu’aux entreprises en période de forte croissance, ne sont plus de mise dans un contexte de ralentissement de la croissance économique et de vieillissement rapide de la population. Au vu de la tendance à la hausse de l’emploi non régulier, des réformes sont nécessaires pour mettre fin au dualisme du marché du travail et encourager une participation plus intense des femmes, des travailleurs âgés et des jeunes à la vie active. Une démarche globale incluant une amélioration de la couverture sociale et une augmentation des programmes de formation professionnelle pour les travailleurs non réguliers, une exclusion des discriminations contre eux et réduisant la protection de l’emploi dont bénéficient les travailleurs réguliers permettrait de renforcer la flexibilité du marché du travail et d’accroître le capital humain. Les réformes devraient en outre contribuer à améliorer l’équité entre les différents segments de la population active. Pour attirer davantage les femmes vers la vie active, il convient d’éliminer les mécanismes financiers qui jouent contre le travail, en créant des emplois plus conciliables avec la vie de famille et en développant les services de garde d’enfants. L’intégration des plus âgés sur le marché du travail doit être renforcée en favorisant leur maintien en activité et en supprimant l’âge de départ obligatoire à la retraite. Il faut également offrir aux jeunes une formation professionnelle plus efficace. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Japon, 2011 (
    Keywords: Japan, dualism, employment protection, labour force participation rates, female employment, vocational training, non-regular workers, part-time workers, older workers, work-life balance, labour market, fertility rate, Japanese economy, dispatched workers, fixed-term contracts, Japon, marché du travail, travailleurs âgés, dualisme, protection de l'emploi, travailleurs non réguliers, formation professionnelle, travailleurs à temps partiel, activité des femmes, taux de fécondité, équilibre entre travail et vie familiale, économie japonaise, travailleurs intérimaires, contrats à durée déterminée
    JEL: J11 J3 J5 J7
    Date: 2011–09–06
  8. By: Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Irene Mussio (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: We assess redistribution in the Uruguayan main pension and unemployment insurance programs on a lifetime basis. Using administrative records from social security, we simulate lifetime declared labor income and flows of contributions and benefits of affiliates to the programs. Expected present values of income and net flows are also computed. Equipped with these estimations we construct standard measures of distribution and redistribution of lifetime labor income through the social security system. Our findings suggest that these programs reduce income inequality. In particular, social Security reduces the Gini coefficient of expected lifetime formal labor income by almost 2 percentage points.
    Keywords: Redistribution; Social Security; Uruguay
    JEL: H55 J14 J2
    Date: 2011–08
  9. By: Nicole Woo; Janelle Jones; John Schmitt
    Abstract: When most workers look at their pay stubs, they can see that the Social Security payroll tax rate is 12.4 percent – with the employee and employer each paying 6.2 percent. But many workers do not know that any annual wages above $106,800 are not taxed by Social Security. In other words, a worker who makes twice the Social Security wage cap – $213,600 per year – pays Social Security tax on only half of his or her earnings, and one who makes just over a million dollars per year pays the tax on only about a tenth. Raising the Social Security cap – which would make some or all earnings above $106,800 subject to the Social Security tax – has gotten some attention as a way to help alleviate Social Security’s long-term budget shortfall. U.S. Senator Bernie Sanders plans to introduce legislation to keep the current cap at $106,800, but to also apply the Social Security payroll tax to earnings over $250,000. It is similar to previous bills and echoes a proposal by then-Senator Obama on the campaign trail in 2008. While this would leave those making between the current cap of $106,800 and the proposed cap of $250,000 paying the lowest rates, it would help secure the solvency of the program and avoid an increase in taxes on the middle class. To help inform this policy debate, this paper examines Census Bureau data from the most recently available American Community Survey to determine how raising the cap would affect workers based on gender, race or ethnicity, age, and state of residence.
    Keywords: social security, retirement, wage cap
    JEL: H H5 H55
    Date: 2011–09
  10. By: Grégory Ponthière (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The public provision of long-term care (LTC) can replace family-provided LTC when adults are not sufficiently altruistic towards their elderly parents. But State intervention can also modify the transmission of values and reduce the long-run prevalence of family altruism in the population. That evolutionary effect questions the desirability of the LTC public provision. To characterize the optimal LTC policy, we develop a three-period OLG model where the population is divided into altruistic and non-altruistic agents, and where the transmission of (non) altruism takes place through a socialization process à la Bisin and Verdier (2001). The optimal short-run and long-run LTC policies are shown to differ, to an extent varying with the particular socialization mechanism at work.
    Keywords: long-term care ; altruism ; socialization ; optimal policy ; crowding out effect
    Date: 2011–09
  11. By: Richard Jong-A-Pin; Jochen O. Mierau
    Abstract: This paper develops a model of the relationship between the age of a dictator and economic growth. In the model a dictator must spread the resources of the economy over his reign but faces mortality and political risk. The model shows that if the time horizon of the dictator decreases, either due to an increase of mortality risk or political risk, the economic growth rate decreases. The model predictions are supported by empirical evidence based on a threeway fixed effects model including country, year and dictator fixed effects for a sample of dictators from 116 countries. These results are robust to sample selection, the tenure of dictators, the definition of dictatorship, and a broad set of economic growth determinants.
    Keywords: Aging, ,; economic growth; government performance; political instability; political leaders
    JEL: H11 O11 O43
    Date: 2011–09
  12. By: Alexander Ludwig (Universität zu Köln); Thomas Schelkle (London School of Economics); Edgar Vogel (Universität Mannheim)
    Abstract: This appendix of our paper, "Demographic Change, Human Capital and Welfare", contains further material that could not be included in the paper due to space limitations. It is organized as follows. Section A contains the formal equilibrium definition. Section B provides more results on the fit of our model to observed life-cycle profiles of hours and wages, the implied labor-supply elasticities of our model, additional results on predicted aggregate variables during the demographic transition as well as the associated welfare effects and a sensitivity analysis. Our population model is explained in Section C. Details on our computational procedures can be found in Section D.
    Keywords: Population aging; Human capital; Rate of return; Distribution of welfare
    JEL: C68 E17 E25 J11 J24
    Date: 2011

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