nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒08‒23
twenty-six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Changes in Labor Force Participation of Older Americans and Their Pension Structures: A Policy Perspective By Frank W. Heiland; Zhe Li
  2. Option Value of Work, Health Status, and Retirement Decisions: New Evidence from the Japanese Study on Aging and Retirement (JSTAR) By Shimizutani, Satoshi; Fujii, Mayu; Oshio, Takashi
  3. Developing Asia’s Pension Systems and Old-Age Income Support By Donghyun Park; Gemma B. Estrada
  4. Mortality transition and differential incentives for early retirement. By d'Albis, Hippolyte; Lau, Paul S.; Sanchez-Romero, Miguel
  5. Evaluating the possible impact of pension reforms on future living standards in Europe By Aaron George Grech
  6. Health and Wealth in Early Retirement By Geoffrey L. Wallace; Robert Haveman; Karen Holden; Barbara Wolfe
  7. Income Distribution among those of 65 Years and Older in Sweden By Lindquist, Gabriella Sjögren; Wadensjö, Eskil
  8. Does Raising the Retirement Age increase Employment of Older Workers? By Stefan Staubli; Josef Zweimüller
  9. Retirement and Cognitive Development: Are the Retired Really Inactive? By Andries de Grip; Arnaud Dupuy; Jelle Jolles; Martin van Boxtel
  10. Redistribution Effect of Taxes and Social Security: Evidence from JSTAR (Japanese) By NAKATA Daigo
  11. The Impact of Longevity Improvements on U.S. Corporate Defined Benefit Pension Plans By John Kiff; Michael Kisser; Mauricio Soto; Stefan E. Oppers
  12. Demographic pressures and the sustainability of social security in Emerging Europe and Central Asia By Jaromir Cekota; Claudia Trentini
  13. Health Care Expenditures and Longevity: Is There a Eubie Blake Effect? By Friedrich Breyer; Normann Lorenz; Thomas Niebel
  14. Savings Adequacy Uncertainty: Driver or Obstacle to Increased Pension Contributions? By Ron J.G. van Schie; Bas Donkers; Benedict G.C. Dellaert
  15. Pension Inequalities and Redistribution within the French Public Pension System By P. AUBERT; M. BACHELET
  16. Growth of Asian Pension Assets : Implications for Financial and Capital Markets By Yuwei Hu
  17. Who Claimed Social Security Early Due to the Great Recession? By Matthew S. Rutledge; Norma B. Coe; Kendrew Wong
  18. The characteristics and regional distribution of older workers in Portugal By João Carlos Lopes; Paula Cristina Albuquerque
  19. Legal Constraints on Changes in State and Local Pensions By Alicia H. Munnell; Laura Quinby
  20. Monetary transfers from children and the labour supply of elderly parents: evidence from Vietnam By Ha Trong Nguyen; Amy Y.C. Liu; Alison L. Booth
  21. Quantifying Impact of Aging Population on Fiscal Space By Seok Gil Park
  22. Future Changes of the Industrial Structure due to Aging and Soaring Demands for Healthcare Services in Japan - an Analysis Using a Multi-Sector OLG Model in an Open Economy - By Daisuke Ishikawa; Junji Ueda; Real Arai
  23. Will you still want me tomorrow? The dynamics of families' long-term care arrangements By Michelle Sovinsky Goeree; Bridget Hiedemann; Steven Stern
  24. Unemployment and Mortality: Evidence from the PSID By Timothy J. Halliday
  25. Microeconomic Foundations of the Demographic Dividend By David E. Bloom; David Canning; Günther Fink; Jocelyn E. Finlay
  26. Development and social security system sustainability By Burz, Răzvan-Dorin

  1. By: Frank W. Heiland; Zhe Li
    Abstract: We investigate how the shift in private pension coverage from defined benefit (DB) to defined contribution (DC) retirement plans since the 1980s has contributed to the substantial rise in labor force participation of older Americans. We develop a life cycle model of retirement that captures important aspects of private (DB and DC) and public (Social Security Old-Age) pensions. We demonstrate how this novel framework can assist policy makers and researchers in analyzing the complex interrelations of labor supply decisions, retirement behavior, and wealth accumulation. We begin by illustrating important differences in the incentives for labor supply and retirement behavior provided by DB and DC pensions. We show that the timing of the exit from the labor force is closely tied to wealth accrual in DB plans, while wealth accrual in DC plans does not provide similar incentives for the timing of retirement. We then use the model to conduct a cohort-based simulation analysis of labor force participation for the period 1977 to 2010. The results illustrate the potential significance of the rise in employer-sponsored DC pensions in explaining the increase in labor force participation of older Americans. We estimate that, holding the share of individuals with employer-sponsored pensions constant, the shift from DB to DC pension coverage increased the labor force participation rate of workers age 60 to 64 by 4.9 percentage points (1.7 points for ages 65-69). Finally, we show that DC pension holders are more concentrated at the earliest take-up age for Social Security old-age retirement benefits and are less responsive to changes in Social Security retirement age policy than DB pension holders.
    Date: 2012–08
  2. By: Shimizutani, Satoshi; Fujii, Mayu; Oshio, Takashi
    Abstract: This study examines retirement decisions in Japan, using the option value (OV) model proposed by Stock and Wise (1990) and examined by subsequent studies. This model assumes that an individual maximizes a weighted average of utility from labor income until retirement as well as that from pension income afterwards and determines when to retire based on the OV of postponing retirement. Using micro-level data collected from the Japanese Study on Aging and Retirement (JSTAR), we computed the OV for each individual working in 2007 and examined its association with retirement decisions made in 2009. We found that the probability of retirement correlates negatively with the OV and that healthier individuals are somewhat more sensitive to the OV. Furthermore, our simulations based on the OV models show that more generous parameters vis-a-vis eligibility for disability pension benefits slightly increases the probability of retirement, while a reduced pension benefit has no significant impact.
    Keywords: retirement, option value model, social security wealth, JSTAR
    JEL: H55 J26
    Date: 2012–07
  3. By: Donghyun Park (Asian Development Bank Institute (ADBI)); Gemma B. Estrada
    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: Pension system, Old-age income support, Asia, East and Southeast Asia, pension reform
    JEL: H55 J11 J14
    Date: 2012–04
  4. By: d'Albis, Hippolyte; Lau, Paul S.; Sanchez-Romero, Miguel
    Abstract: Many studies specify human mortality patterns parametrically, with a parameter change affecting mortality rates at different ages simultaneously. Motivated by the stylized fact that a mortality decline affects primarily younger people in the early phase of mortalitytransition but mainly older people in the later phase, we study how a mortality change at an arbitrary age affects optimal retirement age. Using the Volterra derivative for a functional, we show that mortality reductions at older ages delay retirement unambiguously, but that mortality reductions at younger ages may lead to earlierretirement due to a substantial increase in the individualʼs expected lifetime human wealth.
    Keywords: incentive for early retirement; lifetime human wealth effect; years-to-consume effect; mortality decline;
    JEL: D91 J11 J26
    Date: 2012
  5. By: Aaron George Grech
    Abstract: Successive reforms enacted since the 1990s have dramatically changed Europe's pensions landscape. This paper tries to assess the impact of recent reforms on the ability of systems to alleviate poverty and maintain living standards, using estimates of pension wealth for a number of hypothetical cases. By focusing on all prospective pension transfers rather than just those at the point of retirement, this approach can provide additional insights on the efficacy of pension systems in the light of increasing longevity. Our estimates indicate that while reforms have decreased generosity significantly, in most countries poverty alleviation remains strong. However, moves to link benefits to contributions have made some systems less progressive, raising adequacy concerns for certain groups. In particular, unless the labour market outcomes of women and of lower-income individuals change substantially over the coming decades, state pension transfers will prove inadequate, particularly in Eastern European countries. Similarly while the generosity of minimum pensions appears to have either been safeguarded by pension reforms, or improved in some cases, these transfers generally remain inadequate to maintain individuals above the 60% relative poverty threshold throughout retirement. Our simulations suggest that the gradual negative impact of price indexation on the relative adequacy of state pensions is becoming even more substantial in view of the lengthening of the time spent in receipt of retirement benefits. The consumption smoothing function of state pensions has declined noticeably, strengthening the need for longer careers and additional private saving. When pressed, policymakers, particularly in Western Europe, seem to have been more willing to sacrifice the income smoothing function of pensions rather than its poverty alleviation function. Policymakers in some counties, notably Germany, France and the UK, have sought to refocus state pension systems towards generating better outcomes for people in the bottom half of the income distribution, probably with the insight that middle- to high-income individuals are possibly in a better position to accommodate the effect of state pension reforms by increasing their private saving. However in some cases, notably in Eastern Europe, results suggest that policymakers may not have fully considered the full impact of their policies on those on low incomes, on those with incomplete careers and on women.
    Keywords: Social Security, Public Pensions, Retirement, Poverty, Retirement Policies
    JEL: H55 I38 J26
    Date: 2012–05
  6. By: Geoffrey L. Wallace; Robert Haveman; Karen Holden; Barbara Wolfe
    Abstract: Retirement years are a precarious time for many older Americans. Even if successful in accumulating resources expected to be sufficient to maintain their pre-retirement standard of living, many retirees face unexpected adverse health shocks after retirement. Because of the uncertainty of shocks to physical and cognitive health, there exists the potential for significant deterioration in resource adequacy both at the time of retirement and into the retirement years due to their occurrence. In this study, we select a sample of new retirees constructed from the Health and Retirement Study (HRS) data and follow them during the first decade of their retirement. Using these data, we identify the nature of shocks to physical and cognitive health for which individuals are at risk during their retirement years, and estimate both the absolute and relative risk of these shocks. We then estimate the impact of the occurrence of these shocks on wealth-based measures of retirement adequacy.
    Date: 2012–08
  7. By: Lindquist, Gabriella Sjögren (SOFI, Stockholm University); Wadensjö, Eskil (Stockholm University)
    Abstract: The population of Sweden is ageing and the number of pensioners is increasing. This means that the incomes of older people and the income differences between older and younger people and among pensioners have become more important in terms of public debate and research. In this paper, we examine the income distribution of those 65 years and older. The income differences among both men and women have increased among those of 65-74 years and older since 1982. Women generally have lower incomes and pensions than men. Foreign born persons generally have lower incomes and pensions compared to natives. This difference has increased, especially with regard to those coming from non-OECD countries. Among those with low pensions, women, the foreign born and those who have been self-employed are overrepresented. Many who retire have large amount of net wealth, especially in the form of property (houses, apartments).
    Keywords: older workers, retirement, pension, income inequality
    JEL: J14 D31 H55
    Date: 2012–07
  8. By: Stefan Staubli; Josef Zweimüller
    Abstract: Two pension reforms in Austria increased the early retirement age from 60 to 62 for men and from 55 to 58.25 for women. The reforms reduced early retirement by 18.9 percentage points among affected men aged 60-62 and by 22.3 percentage points among affected women aged 55-58.25. The associated increase in employment was merely 6.8 percentage points among men and 10.1 percentage points among women. The reforms had large spillover effects to the unemployment insurance program but negligible effects on disability insurance claims. Specifically, unemployment increased by roughly 10 percentage points both among men and women. Spillover effects had substantial fiscal implications. Absent spillover effects, the reduction of net government expenditures would have amounted to 264 million Euros per year. Due to higher unemployment insurance claims and associated foregone income tax revenues the actual reduction was only 148 million Euros. High-wage and healthy workers carried the bulk of the fall in net government expenditures. Low-wage and less healthy workers generated much less government savings as they either continue to retire early via disability pensions or bridge the gap to regular retirement by drawing unemployment benefits.
    Keywords: Retirement age, policy reform, labor supply, disability, unemployment
    JEL: J14 J26
    Date: 2012–05
  9. By: Andries de Grip (ROA, Maastricht University, IZA and Netspar); Arnaud Dupuy (Reims Management School, ROA, IZA and Netspar. Corresponding address: Maastricht University PO Box 616, NL-6200, MD, The Netherlands. Email:; Jelle Jolles (Faculty of Psychology and Education, Free University of Amsterdam); Martin van Boxtel (Department of Neuropsychology, Maastricht University)
    Abstract: This paper uses longitudinal test data to analyze the relation be- tween retirement and cognitive development. Controlling for individ- ual …xed e¤ects and lagged cognition, we …nd that retirees face greater declines in information processing speed than those who remain em- ployed. However, remarkably, their cognitive exibility declines less, an e¤ect that appears to be persistent 6 years after retirement. Both e¤ects of retirement on cognitive development are comparable to the e¤ect of a …ve to six-year age di¤erence. We show that the e¤ects of retirement on cognitive decline cannot be explained by (1) a re- lief e¤ect after being employed in low-skilled jobs, (2) mood swings or (3) changes in lifestyle. Controlling for changes in blood pressure, which are negatively related to cognitive exibility, we still …nd lower declines in cognitive exibility for retirees. Since the decline in in- formation processing speed after retirement holds particularly for the low educated, activating these persons after retirement could lower the social costs of an aging society.
    Keywords: Cognitive decline, labor market activity, retirement
    JEL: J24 J26
    Date: 2012–07
  10. By: NAKATA Daigo
    Abstract: Using the Japanese Study of Aging and Retirement (JSTAR) dataset (1st wave and 2nd wave), we examine the redistribution effect of taxes and social security on the labor participation decisions for elderly households. We show that the redistribution of taxes and social security in Japan works only with the generation of pensioners over the age of 65 and is ineffective for the working generation. The pension benefits prevent elderly households from falling into relative poverty, but the effect is comparatively weak in relation to the labor income. In addition, the curbing effects for the labor supply of pension benefits are observed only in the elderly with significant benefits. Moreover, mental and physical health also significantly affects the elderly's labor participation decisions.<br />The results of this paper suggest that social security benefits need to be designed to harmonize with the elderly's self-help or employment situation, and that some measures to improve their quality of life (QOL) are essential to encourage their labor participation.
    Date: 2012–08
  11. By: John Kiff; Michael Kisser; Mauricio Soto; Stefan E. Oppers
    Abstract: This paper provides the first empirical assessment of the impact of life expectancy assumptions on the liabilities of private U.S. defined benefit (DB) pension plans. Using detailed actuarial and financial information provided by the U.S. Department of Labor, we construct a longevity variable for each pension plan and then measure the impact of varying life expectancy assumptions across plans and over time on pension plan liabilities. The results indicate that each additional year of life expectancy increases pension liabilities by about 3 to 4 percent. This effect is not only statistically highly significant but also economically: each year of additional life expectancy would increase private U.S. DB pension plan liabilities by as much as $84 billion.
    Keywords: Corporate sector , Economic models , Pensions , Private sector ,
    Date: 2012–06–29
  12. By: Jaromir Cekota (United Nations Economic Commission for Europe); Claudia Trentini (United Nations Economic Commission for Europe)
    Abstract: This paper investigates the long-term effects of population ageing in a number of ECE emerging market economies. The latest revision of the UN World Population Prospects implies that all of the countries of Eastern Europe, Caucasus and Central Asia (EECCA) and South-Eastern Europe (SEE) will experience population ageing over the period 2010-2050. In most of them, the ageing process will be associated with rising dependency ratios as the share of the working-age groups in the total population shrinks. In these economies, the combination of an ageing and declining population is likely to reduce the effective labor supply, threatening to undermine the sustainability of their public pension and health systems. The analysis of available demographic and economic data confirms the severity of the demographic crisis' consequences for fiscal sustainability. Further, the results provide compelling evidence on the necessity for most of the countries in the region to undergo wide reaching policy reforms with a particular focus on pension systems and labor markets. Ageing is one of the significant cost factors, but not the only one, that will impact health spending in SEE and EECCA countries. The public health sector needs to be reformed with a view to increasing its efficiency.
    Keywords: aeging, social security, health, welfare, labor force, transition
    JEL: H55 H51 I3 J11 P36
    Date: 2012–07
  13. By: Friedrich Breyer; Normann Lorenz; Thomas Niebel
    Abstract: It is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE) in a population. According to the "red herring" hypothesis, the positive correlation between age and HCE is exclusively due to the fact that mortality rises with age and a large share of HCE is caused by proximity to death. As a consequence, rising longevity - through falling mortality rates - may even reduce HCE. However, a weakness of previous empirical studies is that they use cross-sectional evidence to make inferences on a development over time. In this paper we analyse the impact of rising longevity on the trend of HCE over time by using data for a pseudo-panel of German sickness fund members over the period 1997-2009. Using (dynamic) panel data models, we find that age, mortality and five-year survival rates have a positive impact on per-capita HCE. Our explanation for the last finding is that physicians treat patients more aggressively if they think the result will pay off for a longer time span, which we call "Eubie Blake effect". A simulation on the basis of an official population forecast for Germany is used to isolate the effect of demographic ageing on real per-capita HCE over the next decades.
    Keywords: Health care expenditures, ageing, longevity, 5-year survival rate
    JEL: H51 J11 I19
    Date: 2012
  14. By: Ron J.G. van Schie (Erasmus University Rotterdam); Bas Donkers (Erasmus University Rotterdam); Benedict G.C. Dellaert (Erasmus University Rotterdam)
    Abstract: Deciding how much to save for retirement is a difficult task that includes many uncertainties. In this paper, we use data from a representative Dutch household panel to study the impact of uncertainty regarding one's savings adequacy on retirement savings contributions and information search processes. We combine ideas from the literature in psychology and economics that provide opposing predictions regarding the impact of uncertainty on retirement savings contributions. Our results indicate that the effect of uncertainty is moderated by two factors: an individual's perceived adequacy of current savings and that individual's financial constraints. In particular, we find that uncertainty increases retirement contributions for those who believe that they save adequately; however, it hinders retirement contributions for those who believe that they save inadequately. This effect of uncertainty is further moderated by the availability of financial means: a reduction in uncertainty results in greater contributions to savings only when financial constraints are absent. We also find that uncertainty has both indirect and direct effects on savings information search. In particular, uncertainty indirectly affects savings information search because it impacts individuals' intentions to save, which consequently forces individuals to engage in purchase-oriented information search; however, uncertainty also has a direct effect because individuals engage in ongoing information search processes to directly reduce uncertainty. The implications of these findings are discussed.
    Keywords: uncertainty; savings adequacy; retirement; financial decision making
    JEL: D14 D83 D91 M38
    Date: 2012–04–11
  15. By: P. AUBERT (Insee); M. BACHELET (Insee)
    Abstract: In this study, we quantify the amount of redistribution that is performed by the French public pension system, using Insees dynamic microsimulation model DESTINIE. We more precisely focus on two issues: to what extent does the pension system reduce variability within the distribution of pensions compared to the variability within the distribution of wages ? do redistribution mechanisms really benefit to lower income individuals ? Our results show that pension inequalities are much lower than wage inequalities, which strengthen the idea that the French pension system indeed performs a large amount of redistribution. The decrease in variability mainly concerns the lower part of the distributions of pensions and wages. Besides, women benefit from redistribution more than men: this stems both from their lower pensions on average (due to their lower wages and shorter career) and from the existence of some redistribution mechanisms that target mothers. Most redistribution tools have been implemented in the pension system during the 1970s. This has resulted in an increase of the systems capacity to reduce inequalities among pensioners, up to the cohorts that are going into retirement nowadays.
    Keywords: pension systems, redistribution, microsimulation
    JEL: H55 J26
    Date: 2012
  16. By: Yuwei Hu (Asian Development Bank Institute (ADBI))
    Abstract: Pension assets have seen rapid growth world-wide over the past decades, although they suffered large losses during the global financial crisis of 2007–2008. Such growth is notably due to both structural and parametric pension reforms since the 1980s. In the Asian region too, the pension market has steadily expanded. This paper seeks to identify the impact of Asian pension funds on selected key transmission mechanisms from pension reform to financial development. Utilizing a panel error correction model, we found a statistical relationship between pension asset growth and development of financial and capital markets. The main policy implication is that governments in Asia should continue and/or strengthen pension reforms towards more pre-funding of future liabilities, since it brings beneficial impacts on the financial market.
    Keywords: Asian pension assets, financial and capital markets, Asia, pension reforms, financial development
    JEL: G23 G28 C54
    Date: 2012–05
  17. By: Matthew S. Rutledge; Norma B. Coe; Kendrew Wong
    Abstract: Between 2007 and 2009, the percent of 62 year olds claiming Social Security benefits reversed a decadelong decline and increased sharply before reverting back to trend. This phenomenon raises two questions: 1) who was induced to claim early?; and 2) how much monthly retirement income have they lost as a result? To address these questions, this brief, which reflects findings from a recent paper, uses individuallevel data from the Health and Retirement Study(HRS). The discussion proceeds as follows. The first section presents trends in early Social Security claiming over the past two decades. The second section, focusing on the period before the economic crisis, explores whether the type of people who claim at age 62 tends to vary with economic conditions. The third section tests how sensitive the claiming decision was to the surge in unemployment during the Great Recession. The fourth section assesses how much money these early claimers lost. The conclusion is that the Great Recession induced more than 5 percent of the eligible population to claim their benefits at age 62, and this impact was similar for individuals across the income spectrum. These early claimers ended up with monthly benefits that were 5 percent less than they would have had if their claiming plans had not been disrupted. Creation-Date: 2012-07
    Date: 2012–07
  18. By: João Carlos Lopes; Paula Cristina Albuquerque
    Abstract: Population ageing is a common trend in most developed countries with many important economic, social and political consequences. In Portugal, this trend has been particularly strong. The ageing index was 34% in 1970, it is about 129% in 2011, according to the provisory results of the last Census and most recent demographic projections, is expected to be over 240% in 2030. One of the main issues associated with ageing is its effect on the composition of the labour force. The main purpose of this paper is to study the changes in the age structure of the Portuguese labour force between 1989 and 2009. First of all, the size and relative weight of older workers are quantified, both as a group (people with more than 54 years old), by age sub-groups (55-59; 60-64; 65+) and gender. Then, particular attention is given to the regional distribution of these workers, both at the Nuts II (7 regions) and Nuts III (30 regions) levels. The sectoral distribution is also measured, at national and regional levels. Finally, a comparative analysis is made between younger and olderer workers, considering the education levels, establishments’ size, labour compensation and part-time versus full time work regime. The main data used are Quadros de Pessoal, from Ministry of Solidarity and Social Security covering people working in the private business sector (around 3,3 million workers, in 2009) and excluding liberal professionals.
    Keywords: Older workers; Private business sector; Portuguese regions
    Date: 2012–07
  19. By: Alicia H. Munnell; Laura Quinby
    Abstract: State and local government pension reform has become a front-burner issue in the wake of the economic crisis, which sharply reduced funded ratios for most plans. Policymakers have responded primarily by raising employee contributions for all workers and/or reducing benefits for new workers. One option that has largely been off the table is reducing future benefits for current workers. The reason is that many states face legal constraints on their ability to make such changes. These constraints not only tie the hands of pension reformers but also accord public employees greater protections than their private sector counterparts. This brief provides a comprehensive overview of the legal environment in which state and local plans operate with respect to benefit protections for current workers. The analysis relies on a thorough review of secondary sources and consultations with plan legal counsels. The brief is organized as follows. The first section covers the major types of legal protections that apply to public pension benefits. The second section suggests an approach for increasing the flexibility of plan sponsors to alter benefits. The final section concludes that it may be less difficult to make such changes than the conventional wisdom suggests.
    Date: 2012–08
  20. By: Ha Trong Nguyen; Amy Y.C. Liu; Alison L. Booth
    Abstract: In the absence of a broad-based pension scheme, the elderly in developing countries may rely on monetary transfers made by their children and on their own labour supply. This paper examines whether monetary transfers from children help to reduce elderly parents’ need to work. Taking the possible endogeneity of children’s transfers in the parents’ labour supply into account and using maximum likelihood methods and Vietnamese data, we find that monetary transfers help the elderly cope with risks associated with old age or illness. At the same time, however, monetary transfers are not sufficient to fully substitute for parents’ labour supply.
    Keywords: old-age support, labour supply, inter-generational transfers, endogenous variable, maximum likelihood
    JEL: J14 J22 J26
    Date: 2012–07
  21. By: Seok Gil Park
    Abstract: This paper quantitatively investigates how population aging trend affects fiscal space measured as unused revenue generating capacity by utilizing a standard neoclassical growth model. A calibration exercise for G-7 countries shows that France, Germany and Italy suffer greater revenue impact from a given reduction in hours worked due to their larger government expenditure. Corrective measures such as pension reform and flexible expenditure policy would be required in order to mitigate the impact of aging on fiscal space.
    Keywords: Aging , Cross country analysis , Economic models , Fiscal policy , France , Germany , Group of seven , Italy , Labor supply , Population , Tax revenues ,
    Date: 2012–06–25
  22. By: Daisuke Ishikawa (Policy Research Institute, Ministry of Finance Japan); Junji Ueda (Policy Research Institute, Ministry of Finance Japan); Real Arai (Graduate School of Social Sciences, Hiroshima University)
    Abstract: In order to quantify the effects of declining birthrate and changing demographic structure on the Japanese economy, we show the results of simulations by using a multi-sector dynamic general equilibrium model with overlapping generations (OLG) in an open economy. The model is constructed to incorporate substitutability between domestic products and imports and show the evolution of the industrial structure, reflecting the impacts of aging population from both supply and demand sides of the economy. Based on the scenario of increasing public demands for healthcare services, the share of healthcare sector expands to almost 2.5 times in 2050 relative to the base year 1985. The result of a simulation based on an alternative scenario where the government increases net transfer to the elderly shows smaller labor participation and GDP per capita, due to the income effects and crowding out of private capital by the increase of government debt outstanding in the long run.
    Keywords: multi-sector OLG model, demographic change, soaring public healthcare spending
    JEL: J11 H51 H68
    Date: 2012–07
  23. By: Michelle Sovinsky Goeree; Bridget Hiedemann; Steven Stern
    Abstract: We estimate dynamic models of elder-care arrangements using data from the Assets and Health Dynamics Among the Oldest Old Survey. We model the use of institutional care, formal home health care, care provided by a child, and care provided by a spouse in the selection of each care arrangement, the primary arrangement, and hours in each arrangement. Our results indicate that both observed heterogeneity and true state dependence play roles in the persistence of care arrangements. We find that positive state dependence (i.e., inertia) dominates caregiver burnout, and that formal care decisions depend on the cost and quality of care.
    Keywords: Dynamic models, long-term care, home health care, informal care
    JEL: C51 C61 J14
    Date: 2012–07
  24. By: Timothy J. Halliday (University of Hawai’a at Manoa and IZA)
    Abstract: In this paper, we use the death file from the Panel Study of Income Dynamics to investigate the relationship between county-level unemployment rates and mortality risk. After partialling out important confounding factors including baseline health status as well as state, industry and occupation fixed effects, we show that poor local labor market conditions are associated with higher mortality risk for working-aged men. There is little to no such relationship for people with weaker labor force attachments such as women or the elderly. Our results contribute to a growing body of work that suggests that poor economic conditions pose health risks and illustrate an important contrast with studies based on aggregate data. The latter underscores the need to arrive at a better understanding of the aggregation mechanism linking the micro and macro studies.
    Keywords: Recessions, Mortality, Health, Aggregation
    JEL: I0 I12 J1
    Date: 2012–08–02
  25. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Günther Fink (Harvard School of Public Health); Jocelyn E. Finlay (Harvard Center for Population and Development Studies)
    Abstract: The potential economic returns to the demographic transition are high. As countries move from a steady state with high mortality and high fertility to an equilibrium with low mortality and fewer children, lower dependency ratios, higher investment in human and physical capital as well as increased female labor force participation contribute to economic growth. In this paper, we analyze the demographic transition at the household level, investigating the distributional patterns of the economic and welfare benefits associated with the demographic transition across socioeconomic groups within countries and over time. We find large differences in the effects of the demographic transition across socioeconomic status (SES) groups in the early stages of the demographic transition, but also substantial behavioral change across all groups during phases of rapid fertility decline, so that the long-run effects of the demographic transition on inequality remain ambiguous.
    Keywords: demographic transition, socioeconomic status, fertility
    Date: 2012–08
  26. By: Burz, Răzvan-Dorin
    Abstract: In this paper we propose to investigate the link between economic development, social security system and the sustainability of the policies pursued by states. In doing so, we start from clarifying and summarizing the main ideas on the concepts of development and social security. Depending on the approach to social security (narrow or broad) and the developing status of the states (developed or developing) we propose a matrix of classification and analysis that can offer new perspectives on decisions about type of policy to be pursued by governments to ensure sustainable development and social security system sustainability.
    Keywords: economic development; durable development; sustainable development; social security; sustainability
    JEL: O10 I31 Q01
    Date: 2012

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