nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒01‒07
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Recent Evolution of Retirement Patterns in Canada By Pierre-Carl Michaud; Philip Merrigan; Pierre Lefebvre
  2. Fostering job search among older workers: the case for pension reform By J. Ignacio García Pérez; Alfonso R. Sánchez Mártin
  3. The Effects of Employment Uncertainty and Wealth Shocks on the Labor Supply and Claiming Behavior of Older American Workers By Hugo Benítez Silva; J. Ignacio García Pérez; Sergi Jiménez Mártin
  4. The Nexus of Social Security Benefits, Health, and Wealth at Death By James M. Poterba; Steven F. Venti; David A. Wise
  5. On the Socio-Economic Determinants of Frailty: Findings from Panel and Retrospective Data from SHARE By Nicolas Sirven
  6. Pension wealth and household savings in Europe: Evidence from SHARELIFE By Santen, Peter van; Angelini, Viola; Alessie, Rob
  7. Social Spending and Income Redistribution in Argentina During the 2000s: the Rising Role of Noncontributory Pensions. Extended Version By Nora Lustig; Carola Pessino
  8. Happier and less isolated: internet use in old age By Lelkes, Orsolya
  9. Implications of global budget payment system on nursing home costs By Laura Di Giorgio; Massimo Filippini; Giuliano Masiero
  10. Impacts of an Ageing Society on Macroeconomics and Income Inequality: The Case of Germany since the 1980s By Jürgen Faik
  11. Medicaid insurance in old age By Mariacristina De Nardi; Eric French; John Bailey Jones
  12. The Effects of Disability Insurance: Evidence From Social Security's Disabled-Widow Program By Perry Singleton
  13. Littératie financière et préparation à la retraite au Québec et dans le reste du Canada By Pierre-Carl Michaud; Thomas Lalime
  14. Longevity, pollution and growth By Natacha Raffin; Thomas Seegmuller

  1. By: Pierre-Carl Michaud; Philip Merrigan; Pierre Lefebvre
    Abstract: Using data from three waves of the General Social Survey on retirement and older workers (1994, 2002 and 2007), we document the evolution of retirement patterns over the last three decades. We combined the analysis of retirement ages of actual retirees with data on expected retirement ages of current workers to create a longer perspective on changes in retirement behaviour in Canada. We also investigate trends in work after retirement. Our findings are in line with findings from other countries. There is an upward trend in retirement ages which likely started around year 2000 for cohorts born after 1945. This trend contrasts with the slow decline in retirement ages observed prior to the end of the millennium. While the downward trend was likely due to factors such as the offering of early retirement programs in private firms, the upward trend is likely to be caused by a wider variety of sources, including better health, less pervasive defined benefit pensions and in general less generous pensions. <P>
    Keywords: retirement, pensions, Canada,
    JEL: J26
    Date: 2012–12–01
  2. By: J. Ignacio García Pérez (Department of Economics, Universidad Pablo de Olavide); Alfonso R. Sánchez Mártin (Department of Economics, Universidad Pablo de Olavide)
    Abstract: The job search demands made upon older unemployed workers in developed economies have traditionally been very relaxed. This has recently changed in some European countries (eg, Germany and Finland), as part of an effort to increase the labor force participation of older workers. Is this new approach appropriate? There is some disagreement among academics about the optimality of this new policy stance. We contribute to this debate by exploring the consequences of institutional reform in Spain, a country with a high rate of unemployment and a tolerant attitude toward the use of unemployment benefits as early retirement income. We develop an applied model of job-search and retirement behavior; calibrate it to the specificities of the Spanish case and successfully verify its empirical validity. We use the model to explore the effects of a change in the pension rules to link early retirement penalties to the age when an individual stops paying contributions. This reform removes the incentives to remain unemployed without searching, encouraging individuals to either retire or actively engage in job seeking. It results in welfare losses, especially for those workers that respond by changing behavior; yet the reform also raises enough extra resources whereby the public authorities may more than compensate all the affected workers.
    Keywords: unemployment, retirement, pension reform, search models.
    JEL: J64 J68 J26
    Date: 2012–12
  3. By: Hugo Benítez Silva (Economics Department, SUNY at Stony Brook); J. Ignacio García Pérez (Department of Economics, Universidad Pablo de Olavide); Sergi Jiménez Mártin (Department of Economics, Universidat Pompeu Fabra)
    Abstract: Unemployment rates in developed countries have recently reached levels not seen in a generation, and workers of all ages are facing increasing probabilities of losing their jobs and considerable losses in accumulated assets. These events have increased the reliance that most (older) workers have on public social insurance programs, exactly at a time that public finances are suffering from a large drop in contributions. Using administrative and household level data we empirically characterize a Life- Cycle model of retirement and claiming decisions in terms of the employment, wage, health, and mortality uncertainty faced by individuals. We analyze the role of three intertwined factors in the recent evolution of work and retirement benefits claiming behavior in the United States; namely, higher unemployment uncertainty, higher unemployment benefits, and wealth shocks. We find that higher employment uncertainty reduces work and increases early claiming, while higher unemployment benefits mildly reduce work and reduce claiming at early ages. Finally, wealth shocks increase both early claiming and work. When all these factors are combined, the final outcome is a mild decline in labor supply and little variation in early claiming.
    Keywords: Employment uncertainty, wealth shocks, retirement, labor supply, life-cycle models.
    JEL: J14 J26 J65
    Date: 2012–12
  4. By: James M. Poterba; Steven F. Venti; David A. Wise
    Abstract: Social Security benefits are the most important component of the income of a large fraction of older Americans. A significant fraction of persons approach the end of life with few financial assets and no home equity, relying almost entirely on Social Security benefits for support. Whether persons reach late-life with positive non-annuity wealth depends importantly on health, which is quite persistent over the life-time. Persons in poor health in old age have a higher-than-average probability of having experienced low earnings while in the labor force, which puts them at greater risk of having low Social Security benefits in retirement. While the progressivity of the Social Security benefit formula provides a safety net to support low-wage workers in retirement, a noticeable fraction of persons, especially those in single-person households, still have income below the poverty level in their last years of life. Many of these individuals have few assets to draw on to supplement their income, and are in poor health. In general, low assets and low income in old age are strongly related to poor health. We explore this nexus and describe the relationship between Social Security benefits and the exhaustion of non-annuity assets near the end of life. We examine the relationship between the drawdown of assets between the first year an individual is observed in the AHEAD data (1995) and the last year that individual is observed before death, and that individual's health, Social Security benefits, and other annuity benefits. We conclude that Social Security and defined benefit pension benefits are strongly “protective” of non-annuity assets, with a negative relationship between these income flows and the likelihood of exhausting non-annuity assets. We also find that poor health is an important determinant of the drawdown of non-annuity wealth.
    JEL: H55 I14
    Date: 2012–12
  5. By: Nicolas Sirven (IRDES Institute for research and information in health economics)
    Abstract: Recent studies on the demand for long-term care emphasised the role of frailty as a specific precursor of disability besides chronic diseases. Frailty is defined as vulnerable health status resulting from the reduction of individuals’ reserve capacity. This medical concept is brought here in an economic framework in order to investigate the role social policies may play in preventing disability or maintaining life quality of people in a disablement process. Using four waves of panel data from the Survey on Health, Ageing, and Retirement in Europe (SHARE), a frailty index is created as a count measure for five physiologic criteria (Fried model) for respondents aged 50+ in 10 European countries, between 2004 and 2011. The longitudinal dimension is explored in two ways. First, differences in frailty dynamics over a seven-year-time period are analysed through variables that are relevant for social policy (income maintenance, housing adaptation, and prevention of social isolation) in a panel model for count data with fixed effects. Second, the individual fixed effects are decomposed by means of a random effects model with Mundlak specification. SHARE additional retrospective data on life history (SHARELIFE) are then used to investigate differences in frailty levels. The results reveal the presence of various sources of social inequalities over the life-course. Social Protection Systems thus appear to play a major role in accompanying, preventing or reducing the frailty process. Several policy implications are suggested.
    Keywords: Demand for health, Long-term care, Income maintenance, Health prevention, Panel models for count data, Mundlak device.
    JEL: I12 J14 C23
    Date: 2012–12
  6. By: Santen, Peter van; Angelini, Viola; Alessie, Rob (Groningen University)
    Abstract: We use recently collected retrospective survey data to estimate the displacement effect of pension wealth on household savings. The third wave of the Survey of Health, Ageing and Retirement in Europe, SHARELIFE, collects information on the entire job history of the respondent, a feature missing in most previous studies. We show that addressing measurement error problems is crucial to estimate the displacement effect when using survey data. We find that each euro of pension wealth is associated with a 47 (61) cent decline in non?pension wealth using robust (median) regression. In the presence of biases from measurement errors and omitted (unobserved)variables, we estimate a lower bound to the true offset between 17% and 30%, significantly different from zero. Instrumental variables regression estimates, although less precise, suggest full displacement.
    Date: 2012
  7. By: Nora Lustig (Tulane University and Center for Global Development and Inter-American Dialogue); Carola Pessino (Department of Economics at the Universidad del CEMA, Argentina and Center for Global Development, Washington, DC)
    Abstract: Between 2003 and 2009, Argentina’s social spending as a share of GDP increased by 7.6 percentage points. Marginal benefit incidence analysis for 2003, 2006, and 2009 suggests that the contribution of cash transfers to the reduction of disposable income inequality and poverty rose markedly between 2006 and 2009 primarily due to the launching of a noncontributory pension program – the pension moratorium – in 2004. Noncontributory pensions as a share of GDP rose by 2.2 percentage points between 2003 and 2009 and entailed a redistribution of income to the poor, and from the formal sector pensioners with above minimum pensions to the beneficiaries of the pension moratorium. The redistributive impact of the expansion of public spending on education and health was also sizeable and equalizing, but to a lesser degree. An assessment of fiscal funding sources puts the sustainability of the redistributive policies into question, unless nonsocial spending is significantly cut.
    Keywords: social spending, benefit incidence, inequality, poverty, Argentina.
    JEL: D31 H22 I38
    Date: 2012–11
  8. By: Lelkes, Orsolya
    Abstract: This paper explores the impact of internet use in old age on social isolation and on subjective well-being. Does internet use make older people less or more lonely? Does it crowd out face-to-face contacts or enhance them? We found that social isolation is lower among internet users aged 65 or over. Using a European multi-country cross-sectional dataset with over 11000 observations, we found that those who use the internet regularly have a lower chance of being isolated, more so for those who use the internet every day, controlling for personal characteristics such as income, marital status, gender and health condition. Thus, personal social meetings and virtual contacts are complementary, rather than substituting for each other. Internet use may be a useful way of reducing social isolation. We also found a positive relationship between regular internet use and self-reported life satisfaction, all else being equal. Our findings were robust in alternative specifications as well.
    Keywords: Social isolation; loneliness; internet use; old age; happiness
    JEL: I31 Z13
    Date: 2012–10
  9. By: Laura Di Giorgio (Institute of Economics, University of Lugano); Massimo Filippini (Institute of Economics, University of Lugano; ETH, Zurich, Switzerland); Giuliano Masiero (University of Bergamo, Italy; Institute of Economics, University of Lugano, Switzerland)
    Abstract: Pressure on health care systems due to the increasing expenditures of the elderly population is pushing policy makers to adopt new regulation and payment schemes for nursing home services. We sketch a simple theoretical model to predict the behavior of nursing homes under different payment schemes. We then investigate the implications of prospective payments on nursing home costs using a panel of 41 homes in Southern Switzerland observed over a 12-years period (1999-2010). To evaluate the impact of the recent policy change - from retrospective to prospective payment - we employ a fixed effects model with a time trend that is allowed to change after the policy reform. We find evidence that the new payment system reduces costs for nursing home care, ceteris paribus.
    Keywords: nursing homes, prospective payment, quality of care, policy change
    JEL: C23 I18 J33
    Date: 2012–11
  10. By: Jürgen Faik
    Abstract: The discussion paper is concerned with the interplay between demography and macroeconomics on one hand and macroeconomics and income inequality on the other hand. For this purpose, several estimation equations are derived by econometric methods (on the empirical basis of the 1984-2010 German Socio-Economic Panel (SOEP) waves). In concrete terms, the macroeconomic variables inflation, economic growth, and unemployment are at first connected with the German demographic ageing; afterwards, these connections are used to produce a nexus between German income inequality and the stated macroeconomic variables (additionally to the exogenous effects of ageing). For the empirical periods examined (1983-2009), there have been a) a (slightly) negative influence of demographic ageing on the inflation rate, b) a (weak) positive effect of ageing on the level – not on the increases (reductions) – of economic growth rates, and c) a somewhat stronger positive impact of demographic ageing on unemployment rates. While the measured income inequality is upwards directly (exogenously) driven by demographic ageing, the mechanisms through the different macroeconomic channels are more difficile: Inflation is positively and unemployment negatively correlated with income inequality, and regarding economic growth a (slightly) concave effect upon income inequality has been observed. All these findings imply that demographic ageing, ceteris paribus and by tendency, diminishes income inequality via inflation and unemployment rate, which is also valid for economic growth (within the empirically relevant value range for the German demographic ageing). But on balance, there is an overcompensating direct, exogenous impact of demographic ageing on inequality in the model used in this paper, and this causes tendencies towards a remarkable increase of German income inequality until 2060. These tendencies are more pronounced in the forecast variant in which a strongly ageing population is assumed.
    Keywords: Demographic Ageing, Macroeconomics, Personal Income Distribution, Inequality
    JEL: D30 D31 D60
    Date: 2012
  11. By: Mariacristina De Nardi; Eric French; John Bailey Jones
    Abstract: Medicaid was primarily designed to protect and insure the poor against medical shocks. Yet, poorer people tend to live shorter lifespans and incur lower medical expenses before death than richer people. Taking these and other important dimensions of heterogeneity into account, and carefully modeling key institutional aspects, we estimate a structural model of savings and endogenous medical expenses to assess the costs and benefits of Medicaid for single retirees. ; We show that even higher-income retirees benefit from Medicaid, if they live long enough for their resources to be depleted by medical expenses. We also find that all retirees value Medicaid insurance coverage highly, compared to the value of the Medicaid transfers that they actually receive on average.
    Date: 2012
  12. By: Perry Singleton (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020)
    Abstract: This study measures the effect of disability insurance on labor supply and health insurance coverage. The effect is identified by a policy in 1990 that increased the generosity of Social Security’s disabled-widow program. Using data from the Current Population Survey, the results suggest that, in this context, disability benefits led to a one-to-one decline in labor force participation, employment, and private insurance coverage. The results imply that the demand for disability benefits may not reflect a latent demand for public health insurance. Key Words: disability insurance, health insurance, labor force participation, Social Security, widows JEL No. H55, J20
    Date: 2012–10
  13. By: Pierre-Carl Michaud; Thomas Lalime
    Abstract: Dans cet article, nous démontrons, en utilisant des données de l’Enquête canadienne sur les capacités financières, que le Québec tire de l’arrière par rapport au reste du Canada non seulement en termes de niveau de littératie financière et d’éducation financière, mais aussi en termes d’épargne et de préparation à la retraite. Nous analysons la possibilité que ces différences soient expliquées par des différences socioéconomiques et explorons la possibilité que des spécificités institutionnelles telles que la prépondérance des régimes de retraite d’employeur à prestations déterminées au Québec puisse expliquer ces différences.
    Keywords: , Littératie financière, préparation à la retraite, épargne
    JEL: D12 D14 H31
    Date: 2012–12–01
  14. By: Natacha Raffin (University Paris Ouest Nanterre la Défense, EconomiX and Climate Economics Chair.); Thomas Seegmuller (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS.)
    Abstract: We analyze the interplay between longevity, pollution and growth. We develop an OLG model where longevity, pollution and growth are endogenous. The authorities may provide two types of public services, public health and environmental maintenance, that participate to increase agents’ life expectancy and to sustain growth in the long term. We show that global dynamics might be featured by a high growth rate equilibrium, associated with longer life expectancy and a environmental poverty trap. We examine changes in public policies: increasing public intervention on health or environmental maintenance display opposite effects on global dynamics, i.e. on the size of the trap and on the level of the stable balanced growth path. On the contrary, each type of public policy induces a negative leverage on the long run rate of growth.
    Keywords: Life expectancy; Pollution; Health; Growth.
    JEL: I15 O44 Q56
    Date: 2012–10–30

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