nep-age New Economics Papers
on Economics of Ageing
Issue of 2012‒12‒10
five papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Dutch pension system reform – A step closer to the ideal system?. By Broeders, D.; Ponds, E.H.M.
  2. Who’s afraid of good governance? State fiscal crises, public pension underfunding, and the resistance to governance reform By Thomas J. Fitzpatrick; Amy B. Monahan
  3. The Homeownership Rate among the Elderly and the Life Cycle Hypothesis:European Evidence Using Individual and Household Data By Joaquín Alegre Martín; Llorenç Pou Garcias
  4. GINI DP 55: Struggle for Life: Social Assistance Benefits, 1992-2009 By Mechelen, N. (Natascha) van; Sarah Marchal
  5. The Employment Status of the Elderly in Sri Lanka: Patterns and Determinants By Senanayaka, Tharaka Sameera; Kumara, Ajantha Sisira

  1. By: Broeders, D.; Ponds, E.H.M. (Tilburg University)
    Date: 2012
  2. By: Thomas J. Fitzpatrick; Amy B. Monahan
    Abstract: Much attention has been paid to the significant underfunding of many state and local employee pension plans, as well as efforts by states and cities to alleviate that underfunding by modifying the benefits provided to workers. Yet relatively little attention has been paid to the systemic causes of such financial distress—such as chronic underfunding that shifts financial burdens to future taxpayers, and governance rules that may reduce the likelihood that a plan’s trustees will make optimal investment decisions. This article presents the results of a qualitative study of the funding and governance provisions of twelve public pension plans that are a mix of state and local plans of various funding levels. We find that none of the plans in our study satisfy the best practices that have been established by expert panels, but also that the strength of a plan’s governance provisions does not appear correlated with a plan’s financial health. Our most important finding is that, regardless of the content of a plan’s governance provisions, such provisions are almost never effectively enforced. This lack of enforcement, we theorize, has a significant, detrimental impact on plan funding and governance. If neither plan participants nor state taxpayers are able to effectively monitor and challenge a state’s inadequate funding or improper investment decisions, public plans are very likely to remain underfunded. We conclude by offering several possible reform options to address the monitoring and enforcement problems made clear by our study: automatic benefi t haircuts, automatic tax increases, a low-risk investment requirement, and market monitoring through the use of modified pension obligation bonds.
    Keywords: State finance ; Social security ; Public policy
    Date: 2012
  3. By: Joaquín Alegre Martín (Universitat de les Illes Balears); Llorenç Pou Garcias (Universitat de les Illes Balears)
    Abstract: One of the central predictions of the Life Cycle Hypothesis is that individuals run down their wealth during retirement. Although housing wealth is the largest component of total household wealth in most countries, empirical evidence supporting the decumulation hypothesis is mixed. In this paper we examine the housing tenure decision by the aged with microdata at both a household and individual level. The results, based on data from the European Community Household Panel for thirteen European countries, show that for nearly all countries (except for Germany and Denmark), the homeownership rate among the elderly does not decline with age, rejecting the Life Cycle Hypothesis. The results are robust to the (household or individual) level at which the data is analysed. The estimates also show a significant cohort effect for most European countries, so that the later the year of birth, the higher the homeownership rate.
    Keywords: homeownership rate, the elderly, age-cohort effects, Life Cycle Hypothesis.
    JEL: D12 D91 R21
    Date: 2012
  4. By: Mechelen, N. (Natascha) van; Sarah Marchal (CSB , University of Antwerp)
    Abstract: This paper looks at the level of the minimum income guarantees for able-bodied persons at working age and assesses benefit trends since the 1990s. Our dataset comprises 25 EU countries (EU27 except Cyprus and Malta), 3 American States (Nebraska, New Jersey and Texas) and Norway. The degree of welfare erosion is measured by three indicators: real benefit trends, benefit trends relative to the development of average wages and benefit trends relative to changes in median equivalent income. We therefore assess net disposable income of families relying on social assistance, taking account of the impact of i.a. child benefits and housing allowances. A central question in this paper is the extent to which trends in social assistance benefit packages are linked to the statutory mechanism that is being used to adjust benefit levels. It appears that most legal systems are quite insufficient to keep benefit levels in line with the general living standard. The broad picture that emerges is indeed one of eroding benefit levels relative to the general living standard, although the trend is less uniformly negative from 2001 onwards. In the 1990s we see the comparative level of welfare of social assistance recipients decline almost everywhere. In many countries social assistance payments have continued to decrease relative to average wages after 2001, although less uniformly so. In the countries where benefits did keep pace with average wages or median equivalent income, this was generally because governments (consciously) increased benefits over and above the evolution of the average living standard, either by a one-time reform, or through subsequent ad hoc raises.
    Date: 2012–07
  5. By: Senanayaka, Tharaka Sameera; Kumara, Ajantha Sisira
    Abstract: By using the Sri Lanka Household Income and Expenditure Surveys in 2002, 2006/2007, and 2009/2010, this paper examines patterns and determinants of employment status of the Sri Lankan elderly. The study employs multinomial logit model to realize the research objectives. The results of the study reveal that more than 50 percent of the Sri Lankan elderly are currently inactive, yet five percent of the oldest elderly and 18 percent of the elderly with bad health conditions are engaged in labor market activities. The results further demonstrate that younger male elderly, who are married and living in female-headed households are more likely to be employed than to be inactive. The receipts of remittances, social security payments, and bad health conditions reduce the probability of being employed. At present, ethnicity does not play a significant role in determining employment status of the Sri Lankan elderly.
    Keywords: Elderly, Employment Status, Sri Lanka
    JEL: J14 J11
    Date: 2012–11–28

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