nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒10‒13
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Workplace Characteristics and Employment of Older Workers By Chinhui Juhn; Kristin McCue
  2. Author-Name: Social Security, Ageing and Economic Integration By Lionel Artige; Antoine Dedry; Pierre Pestieau
  3. Sharing High Growth Across Generations: Pensions and Demographic Transition in China By Song, Zheng Michael; Storesletten, Kjetil; Wang, Yikai; Zilibotti, Fabrizio
  4. Matching Defined Contribution Pension Schemes in Japan By Takayama, Noriyuki
  5. Housing preferences and attribute importance among Dutch older adults: a conjoint choice experiment By Petra de Jong; Jan Rouwendal; Aleid Brouwer
  6. Optimal life-cycle portfolios for heterogeneous workers By Fabio C. Bagliano; Carolina Fugazza; Giovanna Nicodano
  7. Retirement, Home Production and Labor Supply Elasticities By Johanna Wallenius; Richard Rogerson
  8. Shrouded Costs of Government: Political Economy of State and Local Public Pensions Data By Edward L. Glaeser; Giacomo Ponzetto
  9. Migratory flows and their demographic and economic importance in the Romanian regions. An analysis with special reference to the North-East and South-East Regions By Carmen Beatrice Pauna; Frank Heins
  10. Public debt, child allowances, and pension benefits with endogenous fertility By Yasuoka, Masaya; Miyake, Atsushi
  11. Impact of Educational and Training Program on an Economic Loss from the Population Aging Using an Interregional CGE Model of Korea By Euijune Kim; Geoffrey Hewings; Changkeun Lee
  12. Old-Age Government Transfers and the Crowding Out of Private Gifts: The 70 Plus Program for the Rural Elderly in Mexico By Catalina Amuedo-Dorantes; Laura Juarez
  13. Determinants of Mortality in Russian Regions: an Empirical Analysis By Tatiana Blinova; Svetlana Bylina
  14. Age effects in the Okun's law within the Eurozone By Hutengs, Oliver; Stadtmann, Georg
  15. Demographic change and R&D-based economic growth: reconciling theory and evidence By Klaus Prettner; Timo Trimborn
  16. Life Expectancy, Labor Supply, and Long-Run Growth: Reconciling Theory and Evidence By Holger Strulik; Katharina Werner
  17. The demand for mortgage debt, increases in house prices and the elderly home equity puzzle By Jan Rouwendal; Marcus de Graaf
  18. Exploring the Early-life Causes and Later-life Consequences of Migration through a Longitudinal Study on Ageing By Barrett, Alan; Mosca, Irene
  19. Self-Rated Health Status of the Japanese and Europeans in Later Life: Evidence from JSTAR and SHARE By FUJII Mayu; OSHIO Takashi; SHIMIZUTANI Satoshi

  1. By: Chinhui Juhn; Kristin McCue
    Abstract: As aging of the U.S. population places increased demands on public programs such as Social Security, an important question is how long older Americans are willing and able to work before they retire from the labor force. While studies based on household surveys have provided information on the role of savings, health status, pension and health insurance coverage, there is relatively little information on how workplace and employer characteristics affect the employment of older workers. In this study we use linked employer-employee data to explore the relationship between the characteristics of jobs held at age 55 and early retirement. We focus on a sample of 63-year-olds drawn from the 2005-2008 American Community Survey. We match this sample to information on their earnings, employment, employers and coworkers drawn from the Longitudinal Employer-Household Dynamics data for the years in which they age from 55 to 63. We use employment status as reported in the ACS to split the sample into those who have retired by age 63 and those who continue to work. We then examine differences between early retirees and continuing workers in the characteristics of their employment at age 55, and at how these characteristics change as they approach age 63. We find that early retirees are more likely to be employed by larger employers at age 55 than are continuers. They work for employers with somewhat higher pay than do continuers, and are less likely to have young coworkers.
    Date: 2012–09
  2. By: Lionel Artige; Antoine Dedry; Pierre Pestieau
    Abstract: The purpose of this paper is to analyze the impact of economic integration when countries differ in their social security systems, more specifically in the degree of funding of their pensions, and in the flexibility in the retirement age. It then turns to the impact of ageing, namely the decline in fertility and the increase in longevity, on the welfare of these integrated countries.
    Date: 2012
  3. By: Song, Zheng Michael; Storesletten, Kjetil; Wang, Yikai; Zilibotti, Fabrizio
    Abstract: Intergenerational inequality and old-age poverty are salient issues in contemporary China. China's aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small costs on (richer) future generations. In contrast, a fully funded reform harms current generations, with small gains to future generations. High wage growth is key for these results.
    Keywords: China; Credit market imperfections; Demographic transition; Economic growth; Fully funded system; Inequality; Intergenerational redistribution; Labor supply; Migration; Pensions; Poverty
    JEL: E21 E24 G23 H55 J11 O43 R23
    Date: 2012–09
  4. By: Takayama, Noriyuki
    Date: 2012–09
  5. By: Petra de Jong; Jan Rouwendal; Aleid Brouwer
    Abstract: The “ageing†of the developed world population is a well-known and well documented phenomenon. In the year 2012 16 percent of the Dutch population is aged 65 and older. By the year 2040 this figure will rise to approximately 26 percent. The change in the number and the proportion of older adults in our society will have numerous implications. For one, the increase of older adults will place an enormous burden on existing income systems, health care systems, social services and retirement programs. It has also been estimated that, for the period 2006 to 2015, there is a shortage of 406.000 houses suitable for older adults in the Netherlands. One of the biggest challenges is to provide proper housing conditions that correspond with the diverse housing preferences of an ageing population. In order to respond accurately to this challenge we need to develop a further understanding of the housing preferences of Dutch older adults. Over the years, several modelling approaches have been proposed and applied in research to measure preferences. An emerging, and one of the most popular modelling approaches at the time, is the stated preferences approach. In this research the stated housing preferences of Dutch older adults will be analysed based on a carefully constructed survey, which is designed as conjoint choice experiment. A conjoint choice experiment is an approach that seeks to describe and predict preferences of respondents by looking at their responses to hypothetical residential profiles that can be viewed as integral descriptions of housing situations (characteristics of the house, the environment, etc.). In this study, approximately 1000 older adults are presented with 24 so-called choice sets, each existing out of three residential profiles. The older adults are asked to indicate the first and second most preferred residential profile, thereby revealing their complete orderings of the three. Subsequently, the utility function (e.g. preference) can be estimated by using logistic regression analysis. Based on these estimates it is possible to determine the relative importance of certain housing attributes. Keywords: stated preferences, conjoint analyses, older adults, housing JEL codes: C35 - Discrete Regression and Qualitative Choice Models, J14 - Economics of the Elderly, R21 - Housing Demand
    Date: 2012–10
  6. By: Fabio C. Bagliano (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Carolina Fugazza (Department of Economics, University of Milan-Bicocca); Giovanna Nicodano (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: Household portfolios include risky bonds, beyond stocks, and respond to permanent labour income shocks. This paper brings these features into a life-cycle setting, and shows that optimal stock investment is constant or increasing in age before retirement for realistic parameter combinations. The driver of such inversion in the life-cycle profile is the resolution of uncertainty regarding social security pension, which increases the investor's risk appetite. This occurs if a small positive contemporaneous correlation between permanent labour income shocks and stock returns is matched by a realistically high variance of such shocks and/or risk aversion. Absent this combination, the typical downward sloping profile obtains. Overlooking differences in optimal investment profiles across heterogeneous workers results in large welfare losses, in the order of 17-26% of lifetime consumption.
    Keywords: Life-cycle portfolio choice, background risk, age rule, investor heterogeneity, stock market participation
    JEL: G11 D91
    Date: 2012–09
  7. By: Johanna Wallenius (Stockholm School of Economics); Richard Rogerson (Princeton University)
    Abstract: We show that a life cycle model with home production implies a tight relationship between key preference parameters and the changes in time allocated to home production and leisure at retirement. We derive this relationship and use data from the ATUS to explore its quantitative implications. Our method implies that the intertemporal elasticity of substitution for leisure is quite large, in excess of one and possibly as high as two.
    Date: 2012
  8. By: Edward L. Glaeser; Giacomo Ponzetto
    Abstract: Credit card companies and hotels have charged "shrouded" fees that were difficult for most consumers to assess at the first point of purchase (Gabaix and Laibson 2006). States and localities commit to pension obligations that are similarly difficult for voters to assess. Novy- Marx and Rauh (2010) argue that states and localities have underestimated the shortfall in pension funding by trillions of dollars because of aggressive assumptions about returns on pension investments, and the continuing debate over their conclusions reinforces the point that pension promises are hard to evaluate (Mitchell and McCarthy 1999). How does the difficulty of evaluating the costs of future obligations impact the level of public wages and benefits, and what institutions lead to better outcomes for taxpayers and public-sector workers?
    Keywords: public pensions, state and local government, imperfect information, elections, public sector unions
    JEL: D72 D83 H75 H77
    Date: 2012–09
  9. By: Carmen Beatrice Pauna; Frank Heins
    Abstract: The presentation intends to analyse population change in Romania after 1989 in a regional prospective. Absolute population change and the changes in the age structure as well as internal and international migrations are put into relation to the labour market changes. In the last two decades the Romanian regions experienced a decline of fertility and an increase in the share of the working age population. The share of the population 65 years and older is still relatively low. This demographic situation, combined with a weak labour market (low labour force demand) leads to various forms of underemployment of the active population and to high emigration. Romanians are the most numerous EU-immigrants to EU-27 Member States. The demographic and economic importance of these migration flows will be analysed and their mid- and long-term sustainability will be discussed. The demographic outlook for the future decades and the possible consequences for the labour force supply are based on the various scenarios and international and national population projections for Romania at regional level. The steep population decline projected in some of the scenarios could cause considerable challenges for the economic and social situation of the Romanian regions.
    Date: 2012–10
  10. By: Yasuoka, Masaya; Miyake, Atsushi
    Abstract: The stock of public debt in some developed countries continues to increase because of a lack of tax revenues and the burdens of social security. Many of those developed countries suffer from lower birth rates. Child allowances might help to raise fertility, leading to higher tax revenue in the future because of an increase in the younger population. In this paper, the authors examine whether or not child allowances reduce the public debt stock as a share of Gross Domestic Product (GDP) in an economy with a pension system. As long as the long-run debt ratio is non-negative, child allowances financed by bonds always increase the public debt stock per unit of GDP. --
    Keywords: public debt,endogenous fertility,child allowances,pension
    JEL: G23 H55 J13
    Date: 2012
  11. By: Euijune Kim; Geoffrey Hewings; Changkeun Lee
    Abstract: The spatial policies for coping with the challenges of shifting demographic structures can be practically formulated if the responses of economic agents are specified according to economic incentives and motivations for labor participation by recognizing age-specific productivities. The purpose of this paper is to estimate the effects of educational and training policies on an economic loss from the population aging using an Interregional CGE Model of Korea. The CGE model is developed for seven industrial sectors of two regions, namely the SMA and the rest of Korea. The ICGE model accounts for the economic behavior of producers and consumers on the real side economy, following the neoclassical elasticity approach of Robinson (1989), such as that of market-clearing prices, the maximization of a firm¡¯s profit, and a household¡¯s utility. Three major economic regions constitute our ICGE model: the Seoul Metropolitan Area (SMA) and the rest of Korea (ROK) and one representing the rest of the world (ROW). As explained in the previous section, production activity is divided among three industrial sectors. The industrial sectors were not, unfortunately, classified in detail due to a lack of information for industry by commodity matrix and time series data of regional consumption goods by population cohort. To measure the effects of aging on regional economies, population demographics are disaggregated into nine age cohorts: 0–9, 10–19, 20–29, 30–39, 40–49, 50–59, 60–69, 70–79, and an 80+ age group. Among the age cohorts, those individuals between 0–19 years of age are assumed not to participate in the labor markets, and instead believed to be supported by their parents. More generally, each age cohort carries different parameters and values for labor productivity, mortality rates, and participation rates in the labor market (i.e., share of labor supply relative to total population size) on the supply side, and saving rates and consumption behaviors on the demand side. Average wage rate by region and working age group is estimated according to a Mincerian earning regression, in which the determinants of the wage are gender, education level, job experience, type of occupation and industrial sector, and possession (or lack thereof) of a professional license. This paper showed that aging population has a comparatively negative effect on economic growth in domestic economy, but the economic loss could be reduced by the government¡¯s education and training programs.
    Date: 2012–10
  12. By: Catalina Amuedo-Dorantes (Department of Economics, San Diego State University); Laura Juarez (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: We estimate the crowding out of private transfers caused by 70 y Más, a public assistance program for the rural elderly in Mexico for whom private support is an important source of income. Using data from the Mexican Income and Expenditure Survey and a triple differences approach, we find that the program partially crowds out private giftsby reducing the probability of receiving domestic remittances. As a result, the non-labor income of the program beneficiaries increases by 30 percent less than the expected increase in government transfers resulting from the program. Therefore, reduced domestic transfers dampen the effect of the program and, thus, the public transfer originally targeted to the elderly ends up partially benefiting their donors within Mexico, but not those abroad.
    Keywords: Old-age governemnt transfers, crwoding-out, remittances, Mexico
    JEL: H2 H3 H5 I3
    Date: 2012
  13. By: Tatiana Blinova; Svetlana Bylina
    Abstract: The objective of this paper is to make an empirical analysis and econometric evaluation of determinants of mortality for population of the able-bodied age in Russian regions. The model that was evaluated included five groups of factors (economic, social, ecological, demographic and behavioral). Results of the empirical analysis are presented to show that statistically relevant indicators are the characteristics of the region, way of life of the people and investments in the health care. Taxonomy of the regions of the Russian Federation is made according to basic classes of causes of death of the population of the able-bodied age that is developed by employing hierarchical cluster analysis and the SPSS statistical processing software. The results of the study show that the regional structure of mortality among the population of the able-bodied age is governed by specific characteristics of the region. The relationship between the ecological adversity and high mortality from neoplasm is revealed. The hypothesis that anti-social behavior affects the level of mortality from external causes is confirmed. It is argued that increased investments in the public health service and promotion of the healthy way of life can help reduce the mortality among the able-bodied population from cardiovascular diseases. The regression equations are evaluated by using the data openly presented by the Federal State Statistics Service on the website of Rosstat. The study of the nosological profile of mortality among the able-bodied population by Russian regions allowed identify the territorial features of the structure of causes of death, which can be used when developing regional strategies for reducing mortality among the population of the able-bodied age.
    Date: 2012–10
  14. By: Hutengs, Oliver; Stadtmann, Georg
    Abstract: We estimate Okun coefficients for five different age cohorts for several Eurozone countries. We find a stable pattern for all countries: The relationship between business-cycle fluctuations and the unemployment rate is the strongest for the youngest cohort and gets smaller for the elderly cohorts. --
    Keywords: Okun's law,labor market,youth unemployment
    JEL: E24 F50 C23
    Date: 2012
  15. By: Klaus Prettner; Timo Trimborn
    Abstract: In recent decades, most industrialized countries experienced declining population growth rates caused by declining fertility and associated with rising life expectancy. We analyze the effect of continuing demographic change on medium- and long-run economic growth by setting forth an R&D-based growth model including an analytically tractable demographic structure. Our results show that, in response to demographic change, technological progress and economic growth accelerate in the medium run but slow down in the long run. Numerical investigation reveals that the time period during which technological progress and economic growth are faster than without demographic change can be very long. Since the theoretical predictions for the medium run are consistent with the negative association between population growth and economic growth found in the empirical literature, the present framework can reconcile R&D-based growth theory with the available empirical evidence.
    Keywords: demographic change, technological progress, economic growth, semiendogenous growth theory, transitional dynamics
    JEL: J11 O30 O41
    Date: 2012–09–04
  16. By: Holger Strulik; Katharina Werner
    Abstract: We set up a simple overlapping generation model that allows us to distinguish between life expectancy and active life expectancy. We show that individuals optimally adjust to a longer active life by educating more and, if the labor supply elasticity is high enough, by supplying less labor. When calibrated to US data the model explains the historical evolution of increasing education and declining labor supply (of cohorts born 1850-1950) as an optimal response to increasing active life expectancy. We integrate the theory into a unified growth model and reestablish increasing life expectancy as an engine of long-run economic development.
    Keywords: longevity, active life expectancy, education, hours worked, economic growth
    JEL: E20 I25 J22 O10 O40
    Date: 2012–09–18
  17. By: Jan Rouwendal; Marcus de Graaf
    Abstract: This paper studies the demand for mortgage debt in the Netherlands. Currently the size of this debt exceeds that of GDP, which makes is interesting to look at its determinants. We argue that the absence of a downpayment constraint is important and focus on two other issue. The first is the impact of the prolonged boom in house prices in the period 1985-2005, which makes it interesting to investigate how much of this increase in housing wealth has been ‘cashed’ by households. The second is the elderly home equity puzzle,’ or the habit of elderly people to leave their housing wealth untouched when aging. Recent analyses for the US have suggested that this behavior may be caused by the combination of a strong precautionary savings motive and a high risk of large health care costs. However, in the Netherlands long term care is publicly financed, which makes this explanation unlikely to be valid. It is therefore interesting to see if Dutch households liquefy substantial parts of their housing wealth by increasing the size of the mortgage loan.
    Date: 2012–10
  18. By: Barrett, Alan (Trinity College Dublin); Mosca, Irene (Trinity College Dublin)
    Abstract: Between 2009 and 2011, fieldwork was undertaken for the first wave of the Irish Longitudinal Study on Ageing (TILDA). Extension information was collected on about 8,500 people aged 50 and over and living in Ireland, covering topics such as economic circumstances and health. One of the features of Ireland's older population is the remarkably high proportion of returned migrants, that is, former emigrants who have returned to live in Ireland. According to the TILDA data over 20 per cent of Ireland's over 50s are returned migrants. This group represents a sub-population who is likely to have faced specific challenges over the life-course and who may now have specific circumstances and needs. The group also provides an opportunity to explore the impacts of migration through the generally under-utilised approach of comparing stayers and returners. In this paper, the authors report on work which has been undertaken on return migrants using the TILDA data. This work has revealed higher rates of childhood abuse victimhood among the returned migrants, higher rates of alcohol problems among some of them and higher rates of social isolation. The work can inform the design of social policy within Ireland. It can also add to the international literature on the impacts of migration over the life-course.
    Keywords: return migrants, older adults, social isolation, child abuse, alcoholism
    JEL: J14 J15
    Date: 2012–09
  19. By: FUJII Mayu; OSHIO Takashi; SHIMIZUTANI Satoshi
    Abstract: Using panel data from two surveys in Japan and Europe, we examine the comparability of the self-rated health (SRH) of the middle-aged and elderly across Japan and the European countries and the survey periods. We find that a person's own health is evaluated on different standards (thresholds) across the different countries and survey waves. When evaluated on common thresholds, the Japanese elderly are found to be healthier than their counterparts in the European countries. At the individual level, reporting biases leading to discrepancies between the changes in individuals' SRH and their actual health over the survey waves are associated with age, education, and country of residence.
    Date: 2012–10

This nep-age issue is ©2012 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.