nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒07‒23
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Health and Work At Older Ages: Using Mortality To Assess Employment Capacity Across Countries By Kevin S. Milligan; David A. Wise
  2. Do Wealthier Households Save More? – The Impact of the Demographic Factor By Ansgar Belke; Christian Dreger; Richard Ochmann
  3. The financial impact of Spanish pension reform. A quick estimate By Angel de la Fuente; Rafael Domenech
  4. Do Income Taxes Affect the Progressivity of Social Security? By Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
  5. Demographic Pressure in the European Union By Marga Peeters; Loek Groot
  6. How Many Disability Beneficiaries Forgo Cash Benefits Because of Work? Evidence from a New Measure. Washington, DC: Center for Studying Disability Policy By Jody Schimmel; David Stapleton
  7. The Impact of Population Ageing on House Prices: A Micro-simulation Approach By Yu Chen; Kenneth Gibb; Chris Leishman; Robert Wright
  8. The role of parental cognitive aging in the intergenerational mobility of cognitive abilities By Conti, Valentina; Kopinska, Joanna
  9. Model effect on projected mortality indicators By A. Debòn; S. Haberman; F. Montes; Edoardo Otranto

  1. By: Kevin S. Milligan; David A. Wise
    Abstract: While longevity increased substantially over the last 50 years and health at older ages has improved, labor force participation at older ages has declined. We use mortality rates as a marker for the “health capacity” to work at older ages in 12 OECD countries. Mortality rates can be compared across countries and over time within the same country. For a given level of mortality, we find employment rates of older men vary substantially through time and across countries. At each mortality rate in 2007, if men in France worked as much as men in the United States, they would work 4.6 years more over ages 55 to 69 than they actually did. Comparing the work and mortality of American men in 2007 to the base year of 1977, the same calculation yields 3.7 years more work. These findings suggest a large increase in the health capacity to work, as measured by mortality. The relationship between cross-country mortality and changes in work over time at older ages is weak, suggesting the take-up of this extra capacity to work has varied. However, the dispersion in employment given mortality is strongly influenced by the retirement incentives inherent in public pension programs.
    JEL: J14 J26
    Date: 2012–07
  2. By: Ansgar Belke; Christian Dreger; Richard Ochmann
    Abstract: This paper investigates the relationship between wealth, ageing and saving behaviour of private households by using pooled cross sections of German consumption survey data. Different components of wealth are distinguished, as their impact on the savings rate is not homogeneous. On average, the effect attributed to real estate dominates the other components of wealth. In addition, the savings rate strongly responds to demographic trends. Besides the direct impact of the age structure, an indirect effect arises through the accumulation of wealth. The savings rate does not decrease with age in a monotonic way, as the permanent income hypothesis suggests. Most prominently, older households tend to increase their savings in the second half of their retirement period, probably due to bequest motives and increasing immobility. Given the ongoing demographic trend, an increase of 1.4 percentage points in the aggregated savings rate should be expected over the next two decades.
    Keywords: Savings; wealth; demographic change
    JEL: G10 G11
    Date: 2012–05
  3. By: Angel de la Fuente; Rafael Domenech
    Abstract: In this paper we present a preliminary estimate of the financial impact of the recent reform of the Spanish pension system. After updating the projections of pension expenditure constructed in de la Fuente and Domenech (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 1.4 percentage points of GDP once the reforms have been fully implemented in 2027, thereby stabilizing pension expenditure at a bit over 9% of GDP during the transition period and preventing the emergence of a structural deficit in the system before the end of the next decade. 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 reform, Spain, retirement age
    JEL: H55 J11
    Date: 2012–06
  4. By: Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
    Abstract: Policymakers have designed Social Security to be a progressive retirement program that replaces a larger share of monthly earnings for low- and middle-income workers than for high earners. However, previous research has found that, although the Disability Insurance (DI) component of Social Security is very progressive, the Old-Age and Survivors Insurance (OASI) component may be less progressive than intended. One reason is that high earners tend to live longer than low earners. Since Social Security pays an annuity that lasts throughout retirement, it benefits high earners with greater longevity. Social Security’s progressivity may also be affected by federal income taxes paid by workers and retirees, but research to date has largely ignored this effect. This brief uses data on households from the Health and Retirement Study to examine the interaction between income taxes and Social Security contributions and benefits. The discussion proceeds as follows. The first section describes factors that could affect the progressivity of the OASI component of Social Security. The second section introduces three ways in which the income tax system could impact progressivity: the treatment of employer contributions to Social Security; the Earned Income Tax Credit; and the taxation of Social Security benefits. The third section describes the data and methodology used to analyze households in three birth cohorts and presents the before- and after-tax re­sults for the oldest cohort. The fourth section extends the analysis to the two later cohorts to assess whether the role of taxes changes over time. The conclusion is that the net impact of taxes on progressivity is modest, as large effects from the separate tax provi­sions mainly offset one another. Over time, however, the net impact of taxes appears to be growing more progressive as an increasing number of retirees are required to pay income taxes on their benefits under current law.
    Date: 2012–01
  5. By: Marga Peeters; Loek Groot
    Abstract: On top of the sovereign debt crisis in the European Union, demographic change is exerting enormous pressure on public finances. We analyse four policy options: lowering pension benefits, increasing labour market participation of the native population, immigration and participation of older people. Our results show that the most publically indebted EU economies face the highest increases in public spending on the retiring baby boom generations over the coming decades. Fortunately for these economies, it turns out that adjusting their labour market participation is easier than for their neighbouring economies within the EU. Increasing labour market participation to 60% keeps several countries largely out of the woods.
    Keywords: Demography, fiscal policy, labour, ageing, European Union.
    JEL: C01 D6 E24 E62 F22 H53 H55 J11 J18 J21 J48 O57
    Date: 2012–07–11
  6. By: Jody Schimmel; David Stapleton
    Abstract: This issue brief summarizes findings from a longer report by Mathematica's disability experts, who used a new indicator to determine how many beneficiaries receiving Social Security Disability Insurance and Supplemental Security Income forgo cash benefits because of work.
    Keywords: Disability Beneficiaries, Cash Benefits, Social Security Beneficiaries, SSI, DI
    JEL: I J
    Date: 2012–02–28
  7. By: Yu Chen (School of Social and Political Sciences, University of Glasgow); Kenneth Gibb (School of Social and Political Sciences, University of Glasgow); Chris Leishman (Heriot-Watt University); Robert Wright (Department of Economics, University of Strathclyde)
    Abstract: This paper attempts to estimate the impact of population ageing on house prices. There is considerable debate about whether population ageing puts downwards or upwards pressure on house prices. The empirical approach differs from earlier studies of this relationship, which are mainly regression analyses of macro time-series data. A micro-simulation methodology is adopted that combines a macro-level house price model with a micro-level household formation model. The case study is Scotland, a country that is expected to age rapidly in the future. The parameters of the household formation model are estimated with panel data from the British Household Panel Survey covering the period 1999-2008. The estimates are then used to carry out a set of simulations. The simulations are based on a set of population projections that represent a considerable range in the rate of population ageing. The main finding from the simulations is that population ageingâ€â€or more generally changes in age structureâ€â€is not likely a main determinant of house prices, at least in Scotland.
    JEL: C53 J11 R31
    Date: 2012–06
  8. By: Conti, Valentina (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Kopinska, Joanna (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: This paper studies intergenerational transmission of cognitive abilities from parents to children. We create a measure of parental cognitive evolution across time, which combines cognitive tests scores obtained at the age of 16 with the ones at the age of 50. We are thus able to identify cognitive aging patterns and assess their impact in the intergenerational perspective. The British National Child Development Study (NCDS) allows us to investigate the effect of parental cognition on two distinct offspring's outcomes: cognitive abilities and educational attainment. Our analysis provides novel results concerning the role of parental cognitive transition during adult life. We find that children benefit not only from the stock of cognitive abilities their mothers and fathers hold as adolescents, but also from cognitive evolution their parents achieve as adults. This outcome is significant and robust under various model specifications. Finally, we investigate the determinants of parental cognitive transition. We find that cognitive aging is attenuated for individuals who undergo multiple job variations, follow on-the-job trainings and engage in leisure activities. This analysis delivers new evidence on the role of policy interventions aimed at fostering cognitive function during adult life, which aside from improving individual outcomes, has positive externalities for the subsequent generations.
    Keywords: intergenerational mobility; cognitive ability
    JEL: I20 J24 J62
    Date: 2012–06–21
  9. By: A. Debòn; S. Haberman; F. Montes; Edoardo Otranto
    Abstract: The parametric model introduced by Lee and Carter in 1992 for projecting mortality rates in the US has been a seminal development and has been widely used since then. Different versions of the model, incorporating constraints on the data, and different adjustment methods have led to improvement. All of these changes have increased the complexity of the model with a corresponding improvement in goodness of fit, however, there is little change in the accuracy of forecasts of life expectancy in comparison with the original Lee-Carter model, according to some authors. To evaluate to what point the increments in the complexity and computational cost of the models are reflected in the forecast of such indices as life expectancy and modal age at death, among others, we have compared three different models - the original Lee-Carter with one parameter and the Lee-Carter model with two temporal parameters forecasted by means of two independent time series or by means of a bivariate one. The three sets of predictions so obtained are compared using a mixture of block-bootstrap techniques and functional data analysis.
    Keywords: mortality indicators; block-bootstrap; functional data analysis
    JEL: C53
    Date: 2012

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