nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒05‒15
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Developing Asia’s Pension Systems and Old-Age Income Support By Park, Donghyun; Estrada, Gemma
  2. How is Economic Hardship Avoided by Those Retiring Before the Social Security Entitlement Age? By Kevin S. Milligan
  3. Savings for retirement under liquidity constraints: a note By Corsini, Lorenzo; Spataro, Luca
  4. The Effects of Employment Uncertainty and Wealth Shocks on the Labor Supply and Claiming Behavior of Older American Workers By Hugo Benétez-Silva; J. Ignacio Garcéa-Pérez; Sergi Jiménez-Martén
  5. Is Recipiency of Disability Pension Hereditary? By Bratberg, Espen; Nilsen, Øivind Anti; Vaage, Kjell
  6. How does Social Security claiming respond to incentives? considering husbands' and wives' benefits separately By Alice M. Henriques
  7. The effect of the financial crisis on older households in England By James Banks; Rowena Crawford; Thomas Crossley; Carl Emmerson

  1. By: Park, Donghyun (Asian Development Bank Institute); Estrada, Gemma (Asian Development Bank Institute)
    Abstract: Old-age income support is becoming an issue of growing importance throughout Asia. This is especially true in East and Southeast Asia where the population is aging. This paper provides a broad overview of the current state of pension systems in the People’s Republic of China, Indonesia, Republic of Korea, Malaysia, Philippines, Singapore, Thailand, and Viet Nam; analyzes the pension systems; and identifies their major structural weaknesses. The paper concludes with some specific policy directions for pension reform to strengthen the capacity of Asian pension systems in delivering economic security for the large and growing population of elderly looming on the region’s horizon.
    Keywords: asia; pension systems; old-age income support; population aging; pension reform
    JEL: H55 J11 J14
    Date: 2012–05–07
  2. By: Kevin S. Milligan
    Abstract: Governments around the world are reacting to extended lifespans and troubled pension finances by increasing the age of retirement benefit entitlement. One concern that arises is how those who are not working before reaching entitlement age are able to bridge their consumption to the age of entitlement. This paper studies those who retire before the age of full pension entitlement in the United States using data drawn from the Health and Retirement Study. The major finding is that four out of five people who have zero earnings at pre-entitlement ages are able to find a way to lift their incomes over the poverty line. For men, pension and annuity income is important while for women, spousal income helps most to get them over the line. Reaching the early retirement entitlement age at 62 also has a significant impact on poverty avoidance.
    JEL: J14 J26
    Date: 2012–05
  3. By: Corsini, Lorenzo; Spataro, Luca
    Abstract: Pension systems often entail some compulsory saving over which individuals have some degree of choice in terms of the pension plan in which to invest. Our contribution analyses whether the choice between alternative plans is affected by the presence of liquidity constraints during working life. We show that liquidity constraints obviously affect the amount saved and consumed during working life but they do not affect the decision on which pension plan to choose. In fact we prove that the analytical conditions that determine the choice between different plans are the same in the constrained and unconstrained case.
    Keywords: Choice on pension plans; optimal portfolio composition; incomplete markets; liquidity constraints
    JEL: G11 H55 G23 D91 D52
    Date: 2012–05
  4. By: Hugo Benétez-Silva; J. Ignacio Garcéa-Pérez; Sergi Jiménez-Martén
    Abstract: Unemployment rates in developed countries have recently reached levels not seen in a generation, and workers of all ages are facing increasing probabilities of losing their jobs and considerable losses in accumulated assets. These events likely increase the reliance that most older workers will have on public social insurance programs, exactly at a time that public finances are suffering from a large drop in contributions. Our paper explicitly accounts for employment uncertainty and unexpected wealth shocks, something that has been relatively overlooked in the literature, but that has grown in importance in recent years. Using administrative and household level data we empirically characterize a life-cycle model of retirement and claiming decisions in terms of the employment, wage, health, and mortality uncertainty faced by individuals. Our benchmark model explains with great accuracy the strikingly high proportion of individuals who claim benefits exactly at the Early Retirement Age, while still explaining the increased claiming hazard at the Normal Retirement Age. We also discuss some policy experiments and their interplay with employment uncertainty. Additionally, we analyze the effects of negative wealth shocks on the labor supply and claiming decisions of older Americans. Our results can explain why early claiming has remained very high in the last years even as the early retirement penalties have increased substantially compared with previous periods, and why labor force participation has remained quite high for older workers even in the midst of the worse employment crisis in decades.
    Keywords: employment uncertainty, wealth shocks, retirement, labor supply, life-cycle models
    JEL: J14 J26 J65
    Date: 2011–06
  5. By: Bratberg, Espen (Universitetet i Bergen,); Nilsen, Øivind Anti (Norwegian School of Economics,); Vaage, Kjell (University of Bergen)
    Abstract: This paper addresses whether children’s exposure to parents receiving disability benefits induces a higher probability of receiving such benefits themselves. Most OECD countries experience an increasing proportion of the working-age population receiving permanent disability benefits. Using data from Norway, a country where around 10% of the working-age population rely on disability benefits, we find that the amount of time that children are exposed to their fathers receiving disability benefits affects their own likelihood of receiving benefits positively. This finding is robust to a range of different specifications, including family fixed effects.
    Keywords: Disability; intergenerational correlations; siblings fixed effects
    JEL: H55 J62
    Date: 2012–05–09
  6. By: Alice M. Henriques
    Abstract: A majority of women receive most of their Social Security benefits based upon their husbands' earnings history, but previous research has shown that husbands' benefit claiming is inconsistent with maximizing lifetime benefits for the couple. However, that research assumes husbands choose their claim age based on all Social Security incentives facing the household. I show that husbands' claiming behavior responds to the actuarial incentives built into their own retired worker benefit formula, but not to the incentives built into the spouse and survivor formulas that determine their wives' benefits. This failure to incorporate his spouses' incentives reduces wives' lifetime benefits. Variation in incentives comes from rule changes to the Social Security benefit calculation in addition to the age difference between spouses and the relative strength of the wife's labor force history. A variety of robustness checks looking at segments of the population predicted to be more responsive to incentives provide similar results to the main specification.
    Date: 2012
  7. By: James Banks (Institute for Fiscal Studies and University of Manchester); Rowena Crawford (Institute for Fiscal Studies); Thomas Crossley (Institute for Fiscal Studies and University of Cambridge); Carl Emmerson (Institute for Fiscal Studies)
    Abstract: Prices of real and financial assets fell substantially in the UK during 2008–09. The fourth wave of the English Longitudinal Study of Ageing (ELSA) was in the field throughout this ‘financial crisis’. We use these data and earlier ELSA waves first to document the effect of the crisis on the finances of those aged 50 and over in England, and second, to estimate the effect of wealth shocks on household consumption and individual expectations of the future. Many household experienced a significant wealth shocks, but these shocks led to modest spending effects and small revisions to expectations regarding future bequests. Expectations of bequests seem particularly tied to housing wealth.
    Keywords: consumption, expectations, financial crisis, wealth
    JEL: D12 D14 E21 G01 G11
    Date: 2012–04

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