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on Economics of Ageing |
| By: | Markus Knell |
| Abstract: | In this paper I study how PAYG pension systems of the notional defined contribution type can be designed such that they remain financially stable in the presence of increasing life expectancy. For this to happen two crucial parameters must be set in an appropriate way. First, the remaining life expectancy has to be based on a crosssection measure and, second, the notional interest rate has to include a correction for labor force increases that are only due to rises in the retirement age which are necessary to "neutralize" the increase in life expectancy. It is shown that the selfstabilization is effective for various patterns of retirement behavior and also – under certain assumptions – if life expectancy reaches an upper limit. JEL classification: H55, J1, J18, J26 |
| Keywords: | Pension System, Demographic Change, Financial Stability |
| Date: | 2012–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:onb:oenbwp:179&r=age |
| By: | Stéphanie Payet |
| Abstract: | Considering the growing role of private and funded pension provision and the sensitivity of private pension provision to the economic climate, there is an increasing need of comparable and reliable information on private pension plans in order to better monitor retirement income adequacy and the role of private provision in retirement income. Key indicators of the extent to which private pension provision contributes to the adequacy of pensions are the level of coverage that private pensions have across countries‘ workforce, contributions made into pension funds and personal retirement accounts, and benefits paid to retirees. This paper provides the assessment of data sets available to estimate pension coverage, contributions and benefits in private pensions and discusses ways to use available data sets in order to better inform policy discussions on the role of private pensions on retirement benefit adequacy. It covers all EU-27 Member States and selected non-EU countries.<P>Identification et évaluation des sources de données disponibles pour le calcul d'indicateurs sur les pensions privées<BR>Dans un contexte où le rôle des dispositifs de retraite privés et par capitalisation s'accroit et où les dispositifs de retraite privés sont sensibles au climat économique, il existe un besoin croissant d'information comparable et fiable sur les plans de retraite privés afin de mieux contrôler l'adéquation du revenu de retraite et le rôle des dispositifs privés dans le revenu de retraite. Les indicateurs clés qui permettent de mesurer dans quelle mesure les dispositifs privés de retraite contribuent à l'adéquation des pensions sont le niveau de couverture atteint par les pensions privées au sein de la population active des pays, les cotisations effectuées dans les fonds de pension et les compte de retraite personnels, et les prestations payées aux retraités. Ce document fournit l‘évaluation des bases de données disponibles permettant l‘estimation de la couverture, des cotisations et des prestations des pensions privées et discute des moyens d‘utiliser les bases de données disponibles afin de mieux informer les discussions politiques sur le rôle des pensions privées dans l'adéquation des prestations de retraite. Il couvre les 27 États Membres de l'Union Européenne et certains pays hors de l'Union. |
| Keywords: | private pensions, benefits, contribution, coverage, funded pensions |
| JEL: | C81 G23 J26 J32 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaad:21-en&r=age |
| By: | Alicia H. Munnell; Rebecca Cannon Fraenkel; Josh Hurwitz |
| Abstract: | Pension discussions in the last few years have focused primarily on the financial health of state/local plans or on the shift from defined benefit to 401(k) plans in the private sector. Often forgotten is that while coverage at the state/local level is virtually universal, only 42 percent of private sector workers age 25-64 have any pension coverage in their current job. As a result, more than one third of households end up with no coverage at all during their entire worklives and others, who move in and out of coverage, end up with inadequate 401(k) balances. This brief proceeds as follows. The first section describes the pension coverage problem in the private sector. The second section explores the implications of the coverage gap. The third section presents policy options to address the gap. The key finding is that, absent a government initiative to create a new tier of retirement saving, pension coverage is unlikely to increase and many – both with and without 401(k) plans – will end up with inadequate retirement income. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2012-16&r=age |
| By: | Pablo Antolin; Stéphanie Payet; Juan Yermo |
| Abstract: | To adapt pension systems to demographic trends, many countries are reducing pay-as-you-go public pension levels and lifting retirement ages. In this context, funded pensions could play a major role to avoid adequacy gaps. Yet, as this paper shows, the coverage of funded private pensions, as measured by enrolment rates, is highly uneven across countries and between individuals, especially in voluntary systems. Some countries have made funded pensions compulsory (e.g. Australia, Chile) or quasimandatory (e.g. Denmark, the Netherlands) to ensure that most workers are covered and therefore have access to a sufficiently high complementary pension. However, in other countries with relatively low pay-as-you-go public pension benefits, funded private provision remains voluntary. The low level of funded pensions’ coverage in such countries should be a major policy concern. Recent policy initiatives in Germany and New Zealand, involving the introduction of financial incentives (and auto enrolment in New Zealand) have been effective in raising coverage to the highest levels among voluntary pension arrangements, but coverage gaps remain that need to be addressed.<P>Couverture des systèmes de pensions privées : preuve et options politiques<BR>Pour adapter les systèmes de retraite aux tendances démographiques, de nombreux pays réduisent les niveaux des retraites publiques par répartition et relèvent les âges de départ à la retraite. Dans ce contexte, les retraites par capitalisation pourraient jouer un rôle majeur pour éviter des écarts d’adéquation. Toutefois, comme le montre ce document, la couverture des pensions privées par capitalisation, telle que mesurée par les taux d’adhésion, est fortement inégale entre les pays et entre les individus, en particulier dans les systèmes volontaires. Certains pays ont rendu les pensions par capitalisation obligatoires (par ex. l’Australie, le Chile)ou quasi-obligatoires (par ex. le Danemark, les Pays-Bas) pour s’assurer que la plupart des travailleurs sont couverts et ont ainsi accès à une retraite complémentaire suffisamment élevée. En revanche, dans d’autres pays, où les prestations des retraites publiques par répartition sont relativement faibles, l’offre privée par capitalisation reste volontaire. La faible couverture des pensions par capitalisation dans ces pays devrait être un souci politique majeur. De récentes initiatives politiques en Allemagne et en Nouvelle-Zélande, impliquant l’introduction d’incitations financières (et l’adhésion automatique en Nouvelle-Zélande), ont été efficace à augmenter la couverture parmi les plus hauts niveaux au sein des dispositifs de retraites volontaires, mais des écarts de couverture demeurent et doivent être abordés. |
| Keywords: | coverage, compulsion, funded pensions, auto-enrolment, financial incentives, benefit adequacy, Couverture, retraite par capitalisation, coercition, adhésion automatique, incitations financières, adéquation des prestations |
| JEL: | G23 J26 J32 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaad:20-en&r=age |
| By: | Kantarci, T. (Tilburg University) |
| Abstract: | Abstract: The five essays in this dissertation address a range of topics in the micro-economic literature on partial retirement. The focus is on the labor market behavior of older age groups. The essays examine the economic and non-economic determinants of partial retirement behavior, the effect of partial retirement on retirement income and health, and the factors that could limit workers to participate in partial retirement. The analysis is mainly empirical and makes use of survey data on actual retirement opportunities and retirement decisions, but also on stated preferences concerning abrupt and partial retirement scenarios. The data are collected in the United States and the Netherlands through national surveys and through a web-based questionnaire specifically designed for the stated preference analysis. The empirical analysis relies on micro-econometric methods of discrete choice to estimate the empirical relationships between the variables of interest. In the analysis throughout the dissertation, while the main interest lies in partial retirement, the alternative abrupt full retirement scenario is also examined. Other alternative exit routes such as unemployment or disability are not analyzed in this dissertation. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-5637281&r=age |
| By: | Fedotenkov, I. (Tilburg University) |
| Abstract: | The main conclusions of the thesis are that pension reform can be welfare improving if losses and benefits are redistributed by the central government. The possibility of welfare improving social security reform comes from a more efficient use of an immobile production factor, such as land. Furthermore, the reforming country has incentives not to announce the pension reform in advance; however, such an announcement would be appreciated by its neighbours. Population ageing may lead to an inflow or outflow of capital from the ageing country depending on the degree of substitutability between domestic and foreign. Because of differences in pension systems, population ageing may lead countries to specialze in labour intensive goods, which is contrary to what many previous studies have found. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-5590843&r=age |
| By: | Katerina Lisenkova (National Institute of Economic and Social Research); Marcel Merette (University of Ottawa); Robert Wright (Department of Economics, University of Strathclyde) |
| Abstract: | This paper presents a dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model of Scotland. The model is used to examine the impact of population ageing on the labour market. More specifically, it is used to evaluate the effects of labour force decline and labour force ageing on key macro-economic variables. The second effect is assumed to operate through age-specific productivity and labour force participation. In the analysis, particular attention is paid to how population ageing impinges on the government expenditure constraint. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in†a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered. |
| Keywords: | CGE modelling, population ageing, Scotland |
| JEL: | J11 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1213&r=age |
| By: | Dimitrios Christelis (CSEF and CFS); Loreti I. Dobrescu (University of New South Wales) |
| Abstract: | Using micro data from eleven European countries, we investigate the impact of being socially active on cognition in older age. Cognitive abilities are measured through scores on numeracy, fluency and recall tests. We address the endogeneity of social activities through panel data and instrumental variable methods. We find that social activities have an important positive effect on cognition, with the results varying by gender. Fluency is positively affected only in females, while numeracy only in males. Finally, recall is affected in both sexes. We also show that social activities, through their effect on cognition, influence positively households’ economic welfare. |
| Keywords: | Social Activities, Ageing, SHARE, Panel Data |
| JEL: | I10 J14 C23 |
| Date: | 2012–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:320&r=age |
| By: | Julia Lang |
| Abstract: | This study analyses the effects of training participation on wages and perceived job security for employees of different ages. Based on data from the German Socio-Economic Panel, results indicate that only younger workers benefit from training by an increase in wages, whereas older employees’ worries about losing their job are reduced. This observation can also be explained by the fact that goals of training courses are related to the age of participants. Moreover, I differentiate between workers who permanently and only occasionally participate in training. The results indicate that there seem to be decreasing marginal returns to training with respect to job security. |
| Keywords: | Training, Wages, Job security |
| JEL: | J24 J28 J31 M53 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp478&r=age |
| By: | Josep Pijoan-Mas (CEMFI, Centro de Estudios Monetarios y Financieros); José-Víctor Ríos-Rull (University of Minnesota) |
| Abstract: | We develop a new methodology to compute differences in the expected longevity of individuals who are in different socioeconomic groups at age 50. We deal with the two main problems associated with the standard use of life expectancy: that people's socioeconomic characteristics evolve over the life cycle and that there is a time trend that reduces mortality over time. Using HRS data we uncover an enormous amount of heterogeneity in expected longevities between individuals in different socioeconomic groups. Additionally, our analysis allows us to provide an answer to the old question of how health protecting are education, wealth and marital status. To do so, we decompose the longevity differentials into differences in health at age 50, differences in the evolution of health with age, and differences in mortality conditional on health. Remarkably, the latter is the least important for most socioeconomic characteristics. In particular, education and wealth are health protecting but have very little impact on two-year mortality rates conditional on health. Finally, we document an increasing time trend of the socioeconomic gradient of longevity in the period 1992-2008, and a likely increase in the socioeconomic gradient of mortality rates in the near future. Last but not least, we show that the longevity differences that we find have welfare implications that dwarf the differences in consumption accruing to people in different socioeconomic groups. |
| Keywords: | Inequality in health, Heterogeneity in mortality rates, Life expectancies. |
| JEL: | I14 I24 J12 J14 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2012_1210&r=age |
| By: | Jane Golley (Australian Centre On China in the World Australian National University); Rod Tyers (Business School, University of Western Australia) |
| Abstract: | The world’s two population giants have undergone significant, and significantly different, demographic transitions since the 1950s. The demographic dividends associated with these transitions during the first three decades of this century are examined using a global economic model that incorporates full demographic behavior and measures of dependency that reflect the actual number of workers to non-workers, rather than the number of working aged to non-working aged. While much of China’s demographic dividend now lies in the past, alternative assumptions about future trends in fertility and labor force participation rates are used to demonstrate that China will not necessarily enter a period of “demographic taxation” for at least another decade, if not longer. In contrast with China, much of India’s potential demographic dividend lies in waiting for the decades ahead, with the extent and duration depending critically on a range of policy choices. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:uwa:wpaper:12-03&r=age |
| By: | Messe, Pierre-Jean; Rouland, Bénédicte |
| Abstract: | From French data, this paper uses a difference-in-differences approach combined with propensity score matching to identify the effect of an exogenous change in employment protection among older workers on firm’s incentives to sponsor training. Laying off workers aged 50 and above, French firms have to pay a tax to the unemployment insurance system, known as the Delalande tax. In 1999, the measure was subjected to a reform that increased due taxes but that did not concern equally all firms. We find that this exogenous shock to employment protection for older workers substantially rises firms’ incentives to train the 45-49 age group of workers. This result confirms predictions of the simple labor market model we develop in a first stage. |
| Keywords: | older workers; employment protection; firms’ training incentives |
| JEL: | J14 J24 J26 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1206&r=age |
| By: | Bell, David; Rutherford, Alasdair |
| Abstract: | This paper examines the combined effects of population ageing and changes in long-term care policy on the housing market. Those needing care prefer to receive it at home rather than in institutional settings. Public authorities prefer to provide care in residential settings which are generally lower cost than institutional care. The trend away from institutional provision towards care at home is endorsed by national governments and by the OECD. Nevertheless, as the number requiring care increases, this policy shift will maintain the level of housing demand above what it would otherwise be. It will also have distributional consequences with individuals less likely to reduce their housing equity to pay for institutional care, which in turn will increase the value of their bequests. Empirical analysis using the UK Family Resources Survey and the British Household Panel Survey shows that household formation effects involving those requiring long-term care are relatively weak and unlikely to significantly offset the effects of this policy shift on the housing market and on the distribution of wealth. |
| Keywords: | Ageing; Demographic change; Housing market; Long-term care |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2012-13&r=age |
| By: | Bruno Chiarini; Paolo Piselli (-) |
| Abstract: | Using the theoretical framework based on the monopoly union model described in Kidd and Oswald (1987) and Jones (1987), this paper provides an explicit framework to assess the role of wage moderation in Italy in the last twenty years. There are two crucial ingredients to the model: the composition of union membership and the pension system. We show that the increase in pensioners' membership in the presence of a pay-as-you-go (PAYG) pension scheme has led unions to moderate wage claims. However, this result is reversed when we shift from a PAYG system to a fully-funded (FF) regime (recently adopted in Italy): in this case, the model predicts a rise in wages with respect to the standard model, regardless of the share of pensioners in the membership. |
| Keywords: | Union membership, Pensioners, Wage-pension trade-off |
| JEL: | J11 J51 |
| Date: | 2012–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:prt:dpaper:2_2012&r=age |
| By: | Avner Offer (All Souls College, University of Oxford) |
| Abstract: | Western governments typically pay out some 30 percent of GDP for social purposes. This is financed by taxation on a pay-as-you-go (PAYGO) basis. How efficient are these transfers, and can market or other mechanisms do it better? The problem arises since no individual stands alone. During the life cycle there are several periods of unavoidable dependency, in which there is no earning and little to bargain with: motherhood, infancy, childhood, education, illness, disability, unemployment, old age. The problem is how to transfer resources from ‘producers’ to ‘dependants’ over the life cycle. The market solution is for individuals to accumulate financial assets and to transfer them over the life cycle by means of long-term contracts with financial intermediaries. But law, economics, psychology, political science, and history, all suggest that long-term contracts are not reliable. People are myopic. Financial intermediaries exact high rents, and market entitlements are volatile. Equity markets do not have sufficient capacity to support life-cycle transfers. Governments convert private life-cycle transfers into intergenerational cross-sectional ones, financed by PAYGO. The resource base is much larger than financial markets, and is made up of the whole of the tax base. Costs are low, transfer levels are not rigid, are fixed by political consent, and can be adjusted. The national income resource base is stable. The constraints are (1) the demand for security (2) taxable capacity (3) integrity and competence of government (4) potential capture by finance. Because of these constraints, although government can do it better, it cannot do it alone, and the whole repertoire of transfer is required. |
| Date: | 2012–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:esohwp:_103&r=age |