nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒04‒03
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Optimal Financial Literacy and Saving for Retirement By Annamaria Lusardi; Pierre-Carl Michaud; Olivia S. Mitchell
  2. Age and Gender Differences in Job Opportunities By Stephan Humpert
  3. Health Outcomes and Socio-Economic Status Among the Elderly in China: Evidence from the CHARLS Pilot By James P. Smith; John Strauss; Xiaoyan Lei; Albert Park; Yan Shen; James P. Smith; Zhe Yang; Yaohui Zhao
  5. The Impact of Colombia's Pension and Health Insurance Systems on Informality By Calderón-Mejía, Valentina; Marinescu, Ioana E.
  6. Reallocation of Purchasing Power due to Demographic Change - The Case of North Rhine-Westphalia By Britta Stöver
  7. What Will My Account Really Be Worth? An Experiment on Exponential Growth Bias and Retirement Saving By Gopi Shah Goda; Colleen Flaherty Manchester; Aaron Sojourner
  8. Age segregation and hiring of older employees: low mobility revisited By Ilmakunnas, Pekka; Ilmakunnas, Seija
  9. The Convergence of Welfare State Indicators in Europe: Evidence from Panel Data By Paetzold, Jörg
  10. Dynamic Wage and Employment Effects of Elder Parent Care By Meghan Skira
  11. The division of parental transfers in Europe By Javier OLIVERA ANGULO
  12. Ageing and Literacy Skills: Evidence from Canada, Norway and the United States By Green, David A.; Riddell, W. Craig
  13. Ageing and Skills: A Review and Analysis of Skill Gain and Skill Loss Over the Lifespan and Over Time By Richard Desjardins; Arne Jonas Warnke
  14. Cross-Country Performance in Social Integration of Older Migrants. A European Perspective By Caroline Berchet; Nicolas Sirven
  15. Education, Health and Mortality: Evidence from a Social Experiment By Costas Meghir; Mårten Palme; Emilia Simeonova

  1. By: Annamaria Lusardi; Pierre-Carl Michaud; Olivia S. Mitchell
    Abstract: Recent studies show that financial literacy is strongly positively related to household wealth, but there is also substantial cross-sectional variation in both financial literacy and wealth levels. To explore these patterns, the authors develop a calibrated stochastic life cycle model which features endogeneous financial literacy accumulation. Their model generates substantial wealth inequality, over and above what standard lifecycle models produce. This is due to the fact that higher earners typically have more hump-shaped labor income profiles and lower retirement benefits which, when interacted with the precautionary saving motive, boosts their need for private wealth accumulation and thus financial literacy. They show that the fraction of the population which is rationally "financially ignorant" depends on the level of labor income uncertainty as well as the generosity of the retirement system.
    Date: 2011–09
  2. By: Stephan Humpert (Institute of Economics, Leuphana University Lueneburg, Germany)
    Abstract: There is only a few literature on age specific occupational segregation. In this descriptive paper, I focus on job opportunities for newly hired older male and female workers. It is an enriched replication study of Hutchens (ILRR,1988), who showed that firms employ older workers, but hire them less. I use a rich dataset for West Germany with information for almost thirty years, the regional file of the IAB Employment Sample (IABS-R04). By drawing segregation curves and calculating different measures, such as Dissimilarity Index and Hutchens Square Root Segregation Index, I find clear evidence that age related segregation exists. While newly hired workers in the age groups of 18 to 34 and 35 to 54 are quiet similar distributed in terms of the indices, the oldest age group of 55 years and older, and especially older women, are more segregated. Differences for older male and female workers over time, may be explained by changes in labor and retirement policies.
    Keywords: Labor Demand, Age Segregation, Older Workers, Gender
    JEL: J23 J24 J21 J14 J16
    Date: 2012–03
  3. By: James P. Smith; John Strauss; Xiaoyan Lei; Albert Park; Yan Shen; James P. Smith; Zhe Yang; Yaohui Zhao
    Abstract: This paper is concerned with measuring health outcomes among the elderly in Zhejiang and Gansu provinces, China, and examining the relationships between different dimensions of health status and measures of socio-economic status (SES). The authors use the China Health and Retirement Longitudinal Study (CHARLS) pilot data to document health conditions among the elderly in Gansu and Zhejiang provinces, where the survey was fielded. They use a very rich set of health indicators that include both self-reported measures and biomarkers. They also examine correlations between these health outcomes and two important indicators of socioeconomic status (SES): education and log of per capita expenditure (log pce), their preferred measure of household resources. While there exists a very large literature that examines the relationships between SES and health measures, little has been done on Chinese data to see whether correlations reported in many other countries are replicated in China, particularly so for the aged. In general education tends to be positively correlated with better health outcomes, as it is in other countries. However, unmeasured community influences turn out to be highly important, much more so than one usually finds in other countries. While it is not yet clear which aspects of communities matter and why they matter, they set up an agenda for future research on this topic. They also find a large degree of under-diagnosis of hypertension, a major health problems that afflicts the aged. This implies that the current health system is not well prepared to address the rapid aging of the Chinese population, at least not in Gansu and Zhejiang.
    Date: 2010–08
  4. By: Somphoom Sawaengkun Author_Email: (Faculty of Management Science, Suan Sunandha Rajabhat University); (School Of Housing, Building And Planning, Universiti Sains Malaysia)
    Keywords: Household Consumption, Old-age Population
    JEL: M0
    Date: 2011–10
  5. By: Calderón-Mejía, Valentina (University of Chicago); Marinescu, Ioana E. (Harris School, University of Chicago)
    Abstract: Social protection systems in developing countries are typically composed of a bundle of benefits, the major ones being health insurance and pensions. Benefit bundling may increase informality and decrease welfare. Indeed, if some of the benefits are valued at substantially less than their cost, workers may choose to forego all benefits, even though some other benefits are valued at or above their cost. We examine the impact of benefit bundling using a series of Colombian reforms. The key reform is the unification of the payment systems for health and pension, which made it more difficult to contribute differently to the one plan versus the other. Using the progressive roll-out of the unified payment system by firm size, we show that benefit bundling increases both full formality and full informality by about 1 percentage point. The increase in full formality is concentrated among salaried workers in small to medium firms, while the increase in full informality is concentrated among independent workers.
    Keywords: informal sector, pensions, health insurance, social protection, Colombia
    JEL: I11 I18 O17
    Date: 2012–03
  6. By: Britta Stöver (GWS - Institute of Economic Structures Research)
    Abstract: The ageing process of populations due to demographic change affects the economy in various ways. The study at hand focuses on the reallocation of income and changes in consumption expenses caused by demographic change. Local disparities on NUTS 3 level are of special interest as the demographic effects can vary considerably between regions depending on their initial position such as population density, age structure, and economic condition. By means of data for the regions of North-Rhine-Westphalia (Germany) a dynamic purchasing power indicator is built that takes the development of different age groups into account and gives a first impression of the effects of ageing on the development of income and consumption behaviour. Regional discrepancies can be identified. While some regions are characterised by a static income situation, i.e. a more or less age independent development, others show distinct increases/decreases in their income caused by their specific structure of demographic change.
    Keywords: demographic change, purchasing power, age groups, income, consumption
    JEL: R20
    Date: 2012
  7. By: Gopi Shah Goda; Colleen Flaherty Manchester; Aaron Sojourner
    Abstract: Recent findings on limited financial literacy and exponential growth bias suggest saving decisions may not be optimal because such decisions require an accurate understanding of how current contributions can translate into income in retirement. This study uses a large-scale field experiment to measure how a low-cost, direct-mail intervention designed to inform subjects about this relationship affects their saving behavior. Using administrative data prior to and following the intervention, we measure its effect on participation and the level of contributions in retirement saving accounts. Those sent income projections along with enrollment information were more likely to change contribution levels and increase annual contributions relative to the control group. Among those who made a change in contribution, the increase in annual contributions was approximately $1,150. Results from a follow-up survey corroborate these findings and show heterogeneous effects of the intervention by rational and behavioral factors known to affect saving. Finally, we find evidence of behavioral influences on decision-making in that the assumptions used to generate the projections influence the saving response.
    JEL: H3 J14
    Date: 2012–03
  8. By: Ilmakunnas, Pekka; Ilmakunnas, Seija
    Abstract: We analyse age segregation in hirings and separations using linked employer-employee data from Finland in the period 1990-2004. This allows us to identify at the firm level employees in different age groups that have been hired during the previous year, and employees who have exited the firms. We analyze firm-level age segregation using segregation curves and Gini indices. The hirings of older employees have clearly been more segregated than exits or the stock of old employees even though hirings have become slightly less segregated towards the end of the period in question. At the same time age segregation in exits and stocks has increased and these trends are not sensitive to small unit bias in measurement. We also examine trends in hiring and exit rates using aggregate data. According to our results the oldest age group is again underrepresented in hirings. There is a positive upward trend in their recruitments related to the increasing cohort size, but it is much weaker than the trend in the relative share of older workers in employment. The exit rate of the older employees indicates cyclical variation while the small number of hirings seems to be insensitive to changing labour demand. We present a decomposition of employment change by age group and with that decomposition we disentangle the role of hirings and exits from factors related to demographics and cohort effects. The latter factors include the effect of the large baby boom generation entering the age group of older employees with higher employment rates than earlier cohorts. Finally, our regression analysis shows that larger firms are more likely to hire older employees, but their hiring rates are lower.
    Keywords: ageing; hiring; segregation; labour demand
    JEL: J14 J26 J23
    Date: 2012–01
  9. By: Paetzold, Jörg (University of Salzburg)
    Abstract: This paper investigates whether there is a convergence in welfare state policies among the old EU member states. To identify such trends, we rely on pension and unemployment net replacement rates as well as on public social expenditures. Empirically, we use a sample of 14 economies (EU-15 excl. Lux.) between 1980 and 2005. The empirical findings reveal a presence of a convergence process, driven by strong catch-up of social protection levels in the Southern member states. Furthermore, convergence in replacement rates is substantially less pronounced than using spending data.
    Keywords: social protection; convergence; pension & unemployment replacement rates; Europeanization; welfare state
    JEL: I32 I38 J68
    Date: 2012–03–22
  10. By: Meghan Skira (Boston College)
    Abstract: This paper formulates and estimates a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman’s current and future labor force participation and wages. Intertemporal tradeoffs, such as decreased future earning capacity due to a current reduction in labor market work, are central to the decision to provide care. The existing literature, however, overlooks such long-term considerations. I depart from the previous literature by modeling caregiving and work decisions in an explicitly intertemporal framework. The model incorporates dynamic elements such as the health of the elderly parent, human capital accumulation and job offer availability. I estimate the model on a sample of women from the Health and Retirement Study by efficient method of moments. The estimates indicate that intertemporal tradeoffs matter considerably. In particular, women face low probabilities of returning to work or increasing work hours after a caregiving spell. Using the estimates, I simulate several government sponsored elder care policy experiments: a longer unpaid leave than currently available under the Family and Medical Leave Act of 1993; a paid work leave; and a caregiver allowance. The leaves encourage more work among intensive care providers since they guarantee a woman can return to her job, while the caregiver allowance discourages work. A comparison of the welfare gains generated by the policies shows that half the value of the paid leave can be achieved with the unpaid leave, and the caregiver allowance generates gains comparable to the unpaid leave.
    Keywords: Informal care, employment, dynamic discrete choice, structural estimation, Fam- ily and Medical Leave Act
    JEL: J14 J18 J22 C51
    Date: 2012–03–27
  11. By: Javier OLIVERA ANGULO
    Abstract: In the extensively studied equal division puzzle, one finds very large shares of equal bequests and unequal inter-vivos transfers given to adult children. However, such puzzle is less evident in Europe as we find a higher prevalence of parents giving equal inter-vivos transfers. We argue that altruistic parents are also concerned with norms of equal division. Thus, parents do not fully offset child income inequality. The parents start to give larger transfers to poorer children if the child income inequality becomes unbearable from the parent’s view. We find econometric evidence for this behaviour using microeconomic data of 12 European countries from the two waves of the Survey of Health, Aging, and Retirement in Europe (SHARE).
    Date: 2011–09
  12. By: Green, David A. (University of British Columbia, Vancouver); Riddell, W. Craig (University of British Columbia, Vancouver)
    Abstract: We study the relationship between age and literacy skills in Canada, Norway and the U.S. – countries that represent a wide range of literacy outcomes – using data from the 1994 and 2003 International Adult Literacy Surveys. In cross-sectional data there is a weak negative partial relationship between literacy skills and age. However, this relationship could reflect some combination of age and cohort effects. In order to identify age effects, we use the 1994 and 2003 surveys to create synthetic cohorts. Our analysis shows that the modest negative slope of the literacy-age profile in cross-sectional data arises from offsetting ageing and cohort effects. Individuals from a given birth cohort lose literacy skills after they leave school at a rate greater than indicated by cross-sectional estimates. At the same time, more recent birth cohorts have lower levels of literacy. These results suggest a pervasive tendency for literacy skills to decline over time and that these countries are doing a poorer job of educating successive generations. All three countries show similar patterns of skill loss with age, as well as declining literacy across successive cohorts. The countries differ, however, in the part of the skill distribution where falling skills are most evident. In Canada the cross-cohort declines are especially large at the top of the skill distribution. In Norway declining skills across cohorts are more prevalent at the bottom of the distribution. In the U.S. the decline in literacy skills over time is most pronounced in the middle of the distribution.
    Keywords: human capital, cognitive skills, literacy, ageing
    JEL: I20 J14 J24
    Date: 2012–03
  13. By: Richard Desjardins; Arne Jonas Warnke
    Abstract: The relationship between ageing and skills is becoming an important policy issue, not least in the context of population ageing. Data from the Programme for the International Assessment of Adult Competencies (PIAAC) will potentially add considerably to the understanding of the relationship between ageing and foundation skills. In particular, the fact that data from the 1994-1998 International Adult Literacy Survey (IALS) and the 2003-2007 Adult Literacy and Lifeskills Survey (ALL) will be linked with PIAAC offers a unique opportunity to examine trends over time at the cohort level for a wide range of countries. Specifically, repeated measures will enable an analysis of whether there is skill gain and skill loss over the lifespan of cohorts and overtime between cohorts. This is especially important because age-skill profiles observed on the basis of a single cross-section are difficult to interpret. With this as a backdrop, this paper has sought to provide an overview of what is known about age-skill profiles and to conduct an analysis that demonstrates how trend data based on repeated cross-sectional observations of direct measures of skill at the cohort level can be used to estimate skill gain and skill loss over the lifespan and over time.<BR>La relation entre l’âge et les compétences constitue une problématique de plus en plus importante pour les pouvoirs publics, surtout dans le contexte du vieillissement de la population. Les données collectées dans le cadre du Programme international d’évaluation des compétences des adultes (PIAAC) permettront certainement de mieux comprendre le lien qui existe entre l’âge et les savoirs fondamentaux. Ainsi, le recoupement des résultats de l’Enquête internationale sur la littératie des adultes (IALS) de 1994-1998 et de l’Enquête sur la littératie et les compétences des adultes (ALLS) de 2003-2007 avec ceux du PIAAC permettra de procéder à une analyse chronologique des tendances observées au niveau des cohortes, dans un large éventail de pays. En l’occurrence, des mesures régulières permettront de déterminer si les compétences augmentent ou diminuent tout au long de la vie des cohortes et dans le temps entre les cohortes. Il s’agit d’une avancée capitale dans la mesure où les profils de compétences établis en fonction de l’âge à partir d’une seule coupe transversale sont difficiles à interpréter. Avec ces éléments en toile de fond, le présent document s’efforce de faire le bilan des connaissances actuelles sur les profils de compétences en fonction de l’âge et de mener une analyse qui montre comment les données tendancielles fondées sur des observations transversales régulières de mesures directes des compétences au niveau des cohortes peuvent être utilisées pour évaluer l’acquisition et la perte de compétences tout au long de la vie et dans le temps.
    Date: 2012–03–27
  14. By: Caroline Berchet (IRDES institut for research and information in health economics); Nicolas Sirven (IRDES institut for research and information in health economics)
    Abstract: This paper provides new empirical evidence on the relationship between migration and social integration. It explores the hypothesis that migrants essentially differ from non-migrants with regard to the length of residence in the country – which is a proxy of migrants’ social distance to natives. The determinants of social participation and interpersonal trust are examined at both the individual and institutional level. Using SHARE data and macroeconomic series, we first analyse the influence of immigrant length of stay in the host country on social integration indicators. We then examine the role institutional characteristics play on cross-country differences in speed of social integration (i.e. immigrants’ propensity to social participation according to their length of stay in the host country). As expected, the immigrant population presents a lower likelihood than the native population to get involved in social activities and to trust other people. Nevertheless, the more immigrants have spent time in the host country, the more they take part in social activities. The analysis also reveals significant cross-country differences in immigrants’ speed of social integration. Macroeconomic series like the GINI coefficient of income inequality and the Corruption perceived index could explain these differences. From a public policy perspective, our results suggest that immigrants’ social integration is more rapidly achieved in “fair” countries – i.e. those with a more favourable social environment – where the levels of income inequality and perceived corruption are lower.
    Keywords: Social capital, Ageing, Income inequality, Multilevel models.
    JEL: F22 O52 C31
    Date: 2012–03
  15. By: Costas Meghir; Mårten Palme; Emilia Simeonova
    Abstract: We study the effect of a compulsory education reform in Sweden on adult health and mortality. The reform was implemented by municipalities between 1949 and 1962 as a social experiment and implied an extension of compulsory schooling from 7 or 8 years depending on municipality to 9 years nationally. We use detailed individual data on education, hospitalizations, labor force participation and mortality for Swedes born between 1946 and 1957. Individual level data allow us to study the effect of the education reform on three main groups of outcomes: (i) mortality until age 60 for different causes of death; (ii) hospitalization by cause and (iii) exit from the labor force primarily through the disability insurance program. The results show reduced male mortality up to age fifty for those assigned to the reform, but these gains were erased by increased mortality later on. We find similar patterns in the probability of being hospitalized and the average costs of inpatient care. Men who acquired more education due to the reform are less likely to retire early.
    JEL: I12 I18 I21
    Date: 2012–03

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