nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒02‒16
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Harsh occupations, life expectancy and social security By Pierre Pestieau; Maria Racionero
  2. The Decline of the Self-Employment Rate in Australia By Atalay, Kadir; Kim, Woo-Yung; Whelan, Stephen
  3. How to Provide and Pay for Long-Term Care of an Aging Population is an International Concern By Marsha Gold
  4. Long-Run Effects of Childhood Shocks on Health in Late Adulthood: Evidence from the Survey of Health, Ageing, and Retirement in Europe By Nicole Halmdienst; Rudolf Winter-Ebmer
  5. Learning and Wellbeing Trajectories Among Older Adults in England By Andrew Jenkins; Tarek Mostafa
  6. The Dutch Labour Market: Preparing for the Future By Mathijs Gerritsen; Jens Høj
  7. Ageing and productivity By Bloom, David E.; Sousa-Poza, Alfonso
  8. When Elders Rule:Is Gerontocracy Harmful for Growth? By Vincenzo Atella; Lorenzo Carbonari
  9. Unemployment and Mortality: Evidence from the PSID By Halliday, Timothy J.
  10. Trends in Homeownership by Age and Household Income: Factors Associated with the Decision to Own, 1981 to 2006 By Brown, W. Mark<br /> Lafrance, Amelie
  11. An OLG model of global imbalances By Sara Eugeni
  12. Health Care Reform and Long-Term Care in the Netherlands By Erik Schut; Stéphane Sorbe; Jens Høj
  13. Enhancing the Inclusiveness of the Labour Market in Belgium By Jens Høj
  14. Improving Understanding of the Social Security OASDI Trust Fund By Schmult, Brian

  1. By: Pierre Pestieau; Maria Racionero
    Abstract: Should special pension provisions be offered to workers in harsh occupations? We address this question in an optimal tax setting where individuals differ in longevity and occupation. Longevity is private information but workers in harsh occupations have on average shorter lifes than workers in safe occupations. We adopt a weighted utilitarian social objective to partially redress the implicit redistribution from short- to long-lived individuals that the unweighted utilitarian objective entails. We show that there is a case for differentiating the social security policy by occupation. We also show that short-lived workers are induced to overconsume when young and to retire early in order to prevent mimicking by long-lived ones. This is achieved by taxing, often quite heavily, the savings and the earnings from prolonging activity of short-lived individuals.
    Keywords: longevity, retirement, harsh occcupations, tagging
    JEL: H21 H55
    Date: 2013–01
  2. By: Atalay, Kadir; Kim, Woo-Yung; Whelan, Stephen
    Abstract: This paper using the Australian panel data(HILDA) investigates the declining trend of self-employment rate in Australia, a pattern observed in a number of other developed countries in the 2000s. We focus on the entry into and the exit from self-employment, treating males and females separately. Our results show that the self-employment rate has declined in Australia because older workers, especially older female workers, remained longer in paid-employment. This finding indicates that although the self-employment rate of older workers is higher than that of younger workers, the gap has decreased in recent years so that the average self-employment rate has declined. In addition, we provide some evidence that industry and institutional changes, such as reforms in tax and pension systems, may have contributed to an increase in the labour force participation of older females, which may explain why the decline of self-employment has been severe for this group.
    Keywords: Retirement; Older Workers; Self Employment
    Date: 2013–02
  3. By: Marsha Gold
    Keywords: Long-Term Care, Aging Population, International, Health; commentary
    JEL: I
    Date: 2013–01–30
  4. By: Nicole Halmdienst (Department of Economics, University of Linz, Austria); Rudolf Winter-Ebmer
    Abstract: In this paper we address the long-run effects of childhood shocks on health in late adulthood. Applying a life-course approach and data from SHARE we estimate direct and indirect effects of shocks like relocation, dispossession, or hunger on health outcomes after age fifty. Having lived in a children’s home, in a foster family, or having suffered a period of hunger turn out to be the most detrimental. Using a finite mixture model, which allows to classify the associations between shocks and later health into a-priori unknown groups, we show that some adverse shocks have opposite effects for specific groups.
    Keywords: Early life experience, health, Europe
    JEL: J1 I12 J13
    Date: 2013–01
  5. By: Andrew Jenkins (Department of Quantitative Social Science, Institute of Education, University of London); Tarek Mostafa (Department of Quantitative Social Science, Institute of Education, University of London)
    Abstract: In an ageing society such as the UK, there is much interest in factors which can contribute to the wellbeing of older adults. It is not implausible to suppose that participation in learning could have beneficial effects, yet research on the wider benefits of learning has tended to focus on young people or those in mid-life and there is currently little evidence on the impact of learning on the wellbeing of older adults. Insofar as evidence does exist, most of it is qualitative, and while of much value and interest, it is based on very small, and possibly not very representative, samples of the older population. This research aimed to provide new, quantitative evidence drawing on a large, nationally representative sample, on the effects of participation in learning on the wellbeing of older adults. Our study used data from the English Longitudinal Study of Ageing (ELSA), a continuing, longitudinal survey of older adults which is representative of people aged 50 years and above living in private households in England. To measure wellbeing we used the CASP-19 instrument, a subjective wellbeing measure which was designed specifically for older adults and is available at all waves of the ELSA survey. ELSA respondents were asked about four types of learning activity: obtaining qualifications; attendance at formal education/training courses; membership of education, music or arts groups or evening classes; membership of sports clubs, gym and exercise classes. A range of regression techniques were used to analyse the relationship between learning and wellbeing. Multiple regression models were applied to data from ELSA wave 4. To take account of unobservable factors which might influence wellbeing we applied multiple regression to the change score between two waves of the survey and fitted fixed effects panel regressions to four waves of ELSA data. Learning was associated with higher wellbeing after controlling for a range of other factors. We found strong evidence that more informal types of learning were associated with higher wellbeing. There was also some evidence that obtaining qualifications was linked to higher wellbeing but no evidence that formal education/training courses were associated with higher wellbeing.
    Keywords: : Older adults, lifelong learning, wellbeing, benefits of learning, ELSA.
    JEL: I21 J14 J24
    Date: 2013–01–31
  6. By: Mathijs Gerritsen; Jens Høj
    Abstract: The well performing labour market has delivered low unemployment and relatively stable wage developments. However, it is divided into a small flexible segment and a large more rigid segment, where the adjustment burden of external shocks falls disproportionally on the first group. At the same time, labour utilisation is relatively low, despite a relatively high overall participation rate, due to a high frequency of part-time employment, a low effective retirement age and a high use of disability benefits. Looking ahead, it is unlikely that the organisation of the labour market will allow the economy to continue reaping fully the benefits of globalisation. That would require a labour market that facilitates the allocation of increasingly scarce labour resources to their best use and mobilises underutilised labour resources to counter the ageing related contraction of the labour force.). This Working Paper relates to the 2012 OECD Economic Survey of the Netherlands (<P>Le marché du travail néerlandais : Préparer l'avenir<BR>Le bon fonctionnement du marché du travail a permis de maintenir un faible niveau de chômage et des évolutions salariales relativement stables. Cependant, ce marché est divisé en un grand segment assez rigide et un petit segment flexible, sur lequel pèse de façon disproportionnée la charge de l'ajustement en cas de chocs extérieurs. En outre, l'utilisation de la main-d'oeuvre est faible, malgré un taux d'activité global relativement élevé, en raison de la grande fréquence de l'emploi à temps partiel, d'un faible âge effectif de départ à la retraite et d'un recours important aux prestations d'invalidité. À terme, il est peu probable que l'organisation du marché du travail permettra à l'économie de continuer à tirer pleinement parti de la mondialisation. Il faudrait pour cela un marché du travail qui facilite la réallocation des ressources de main-d'oeuvre de plus en plus rares vers leur meilleure utilisation et mobilise les ressources de main-d'oeuvre sous-utilisées pour contrer la contraction de la population active liée au vieillissement. Ce document de travail se rapporte à l'Étude économique des Pays-Bas de 2012 (
    Keywords: globalisation, labour market policies, severance pay, labour market, wage formation, allocation of the labour supply, marché du travail, politique du marché du travail, mondialisation, formation des salaires, répartition de l'offre de travail, indemnités de départ
    JEL: J08 J3 J62 J65
    Date: 2013–01–14
  7. By: Bloom, David E.; Sousa-Poza, Alfonso
    Abstract: --
    JEL: E24 E32 J31
    Date: 2013
  8. By: Vincenzo Atella (University of Rome "Tor Vergata"); Lorenzo Carbonari (University of Rome "Tor Vergata")
    Abstract: We study the relationship between gerontocracy and aggregate economic performance in a simple theoretical model where growth is driven by human capital accumulation and productive government spending (investments in ICT). We show that gerontocratic élites display the tendency to underinvest in public education and productive government services, thus being harmful for growth. In absence of intergenerational altruism, the damage caused by gerontocracy is mainly due to the lack of long-term delayed return on investments, originated by the shorter life horizon of the elder ruling class. An empirical analysis is carried out to test theoretical predictions across different countries and different economic sectors. The econometric results confirm our main hypotheses.
    Keywords: Gerontocracy, Economic Growth and Aggregate Productivity, Education, ICT.
    JEL: J1 O4
    Date: 2013–02–08
  9. By: Halliday, Timothy J. (University of Hawaii at Manoa)
    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 and industry fixed effects, we show that poor local labor market conditions are associated with higher mortality risk for working-aged men. In particular, we show that a one percentage point increase in the unemployment rate increases their mortality hazard by 6%. 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.
    Keywords: recessions, mortality, health, aggregation
    JEL: I0 I12 J1
    Date: 2013–01
  10. By: Brown, W. Mark<br /> Lafrance, Amelie
    Abstract: This paper examines why rates of homeownership have been increasing amongst young higher-income households, but declining among young lower-income households. For the period from 1981 to 2006, household data from the Census of Population, supplemented with information from the Survey of Financial Security, are employed to model the decision to own across the income distribution. The model assesses whether housing market conditions (e.g., the cost of renting versus owning), the financial condition of households (e.g., whether the household has sufficient wealth to make a standard down payment), and demographic factors (e.g., changing family composition) account for these diverging trends in housing demand.
    Keywords: Income, pensions, spending and wealth, Families, households and housing, Household assets, debts and wealth, Household characteristics, Housing and dwelling characteristics
    Date: 2013–01–29
  11. By: Sara Eugeni
    Abstract: In this paper, we investigate the relationship between East Asian countries’ high propensity to save and global imbalances in a two-country OLG model with production. The absence of pay-as-you-go pension systems can rationalize the saving behavior of emerging economies and capital outflows to the United States. The model predicts that the country with no pay-as-you-go system can run a trade surplus only as long as the long-run growth rate of the economy is higher than the real interest rate (capital overaccumulation case). The low real interest rates in the US is evidence in favor of the hypothesis that there is a “global saving glut†in the world economy. The model can also explain why the US current account deteriorated gradually and only in the late 1990s, although the net foreign asset position had already turned negative in the early 1980s. Finally, this analysis implies that the introduction of a pay-as-you-go system in China would have the effect of reducing the imbalances.
    Keywords: global imbalances, capital flows, current account dynamics, OLG model, pay-as-you-go-system
    JEL: F21 F33 F34 F41
    Date: 2013–02
  12. By: Erik Schut; Stéphane Sorbe; Jens Høj
    Abstract: The Netherlands, as other OECD countries, faces the challenge of providing high quality health and long-term care services to an ageing population in a cost-efficient manner. In the health care sector, reforms have aimed at introducing more competition. Despite major changes and some positive effects, the reforms run the risk of getting stuck in the middle between a centralised system of state-controlled supply and prices and a decentralised system based on regulated competition, providing insufficient incentives for provision of quality services and expenditure control. The main challenges are to complete the transition to regulated competition in health care provision, to strengthen the role of health insurers as purchasing agents and to secure cost containment in an increasingly demand-driven health care sector. In 2012, reforms expanded the role of the market in the hospital sector and reinforced budget controls. Both measures are not consistent and may jeopardize both objectives. More competitive markets require, at least, provision of good quality information, appropriate financing and better efficiency incentives. In view of population ageing, current policies mean that the cost of long-term care is set to more than double over the coming decades. Insufficient incentives for cost-efficient purchasing of long-term care should be addressed. However, the government?s plan to transfer long-term care purchasing to health insurers is unpromising unless additional measures ensure that insurers bear the associated financial risks. In addition, home care should be further encouraged at the expense of institutional care, while screening and targeting should be improved. This Working Paper relates to the 2012 OECD Economic Survey of the Netherlands (<P>Réforme des soins de santé et soins de longue durée aux Pays-Bas<BR>Les Pays-Bas, comme les autres pays de l?OCDE, sont confrontés à la difficulté de fournir, au meilleur coût, des services de santé et des soins de longue durée de haute qualité à une population vieillissante. Dans le secteur de la santé, des réformes ont déjà été mises en oeuvre en vue d?intensifier la concurrence. Malgré des changements majeurs et certains effets positifs, les réformes risquent de s?enliser, prises en étau entre un système centralisé d?offre et de prix contrôlés par l?État et un système décentralisé fondé sur une concurrence réglementée, n?incitant pas suffisamment à fournir des services de qualité et à maîtriser les dépenses. Les principales difficultés consistent à mener à bien la transition vers un régime de concurrence réglementée dans la prestation de soins de santé, à renforcer le rôle des assureurs en tant qu'agents acheteurs et à assurer la maîtrise des coûts dans un secteur de la santé qui obéit de plus en plus à la demande. En 2012, les réformes ont accru le rôle du marché dans le secteur hospitalier et renforcé les contrôles budgétaires. Ces deux mesures ne sont pas compatibles et risquent de compromettre la réalisation des deux objectifs. Des marchés plus concurrentiels requièrent, au minimum, une information de bonne qualité, un financement approprié et des incitations plus fortes à l?efficience. Compte tenu du vieillissement de la population, les politiques actuelles feront plus que doubler le coût des soins de longue durée au cours des décennies à venir. Il faudrait inciter davantage à l?achat de soins de longue durée efficaces par rapport à leur coût. Cependant, le plan du gouvernement consistant à transférer l?achat de soins de longue durée aux assureurs est voué à l?échec en l?absence de mesures supplémentaires faisant supporter à ces derniers les risques financiers correspondants. Il faudrait en outre encourager les soins à domicile aux dépens des soins en établissement, tout en améliorant le filtrage et la fixation d?objectifs. Ce document de travail se rapporte à l?Étude économique des Pays-Bas de 2012 (
    Keywords: Netherlands, long-term care, health care reforms, health insurance, hospitals, regulated competition, Pays-Bas, soins de longue durée, réforme des systèmes de santé, assurance santé, hôpitaux, concurrence réglementée
    JEL: H51 I11 I18
    Date: 2013–01–11
  13. By: Jens Høj
    Abstract: The global crisis led to a smaller increase in the unemployment rate than in most other OECD countries as employment has been sustained through intensive use of reduced working time schemes. These schemes have mostly benefited workers with permanent contracts while the higher unemployment mostly affected workers with weaker labour market attachment. A main challenge for policy makers is therefore to avoid that the increase in labour market segmentation between insiders and outsiders that would hurt the most vulnerable. Over the medium term, labour market policies need to respond to the ageing of the labour force, which implies that an increasing number of workers with permanent contracts will retire. Thus, policies must focus on enabling the current labour market outsiders to get a stronger foothold on the labour market as well as to mobilize under-utilised labour resources. The wage determination system has allowed wages to increase faster than the main competitors and faster than productivity, leading to a gradual loss of cost competitiveness. Minimum wages are high by international standards, hampering entry to the labour market for many low-skilled workers. Unemployment benefits are relatively generous, and particularly for long-term unemployed. A complicated tax-benefit system has created high effective marginal tax rates and numerous labour market traps. This Working Paper relates to the 2011 OECD Economic Survey of Belgium (<P>Pour un marché du travail plus inclusif en Belgique<BR>La crise mondiale a entraîné une progression du chômage moindre que dans la plupart des autres pays de l’OCDE car l’emploi est resté soutenu du fait du recours intensif à des dispositifs de réduction du temps de travail. Ces dispositifs ont bénéficié essentiellement aux travailleurs titulaires de contrats permanents tandis que la hausse du chômage a principalement touché les travailleurs dont les liens avec le marché du travail étaient plus distendus. L’un des principaux défis pour les responsables des politiques publiques est donc d’éviter que la segmentation accrue du marché du travail entre travailleurs intégrés et travailleurs exclus frappe les plus vulnérables. A moyen terme, les politiques du marché du travail doivent s’adapter au problème du vieillissement de la main d’oeuvre qui impliquera le départ à la retraite d’un nombre croissant de travailleurs titulaires de contrats permanents. Les politiques publiques doivent donc s’attacher à permettre aux travailleurs aujourd’hui exclus du marché du travail de s’y implanter plus fermement mais aussi à mobiliser les ressources en main d’oeuvre sous-utilisées. Le mécanisme de fixation des salaires leur a permis d’augmenter plus vite que ceux des principaux concurrents et plus vite que la productivité, ce qui a abouti à une perte progressive de compétitivité-coûts. Les salaires minimums sont élevés comparés aux standards internationaux, ce qui est un frein à l’entrée sur le marché du travail d’un grand nombre de travailleurs peu qualifiés. L’indemnisation du chômage est relativement généreuse, en particulier pour les chômeurs de longue durée. Une fiscalité et un régime de prestations complexes ont généré des taux d’imposition effectifs marginaux élevés et de nombreux pièges sur le marché du travail. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Belgique 2011 (
    Keywords: labour supply and demand, unemployment benefits, wage formation, ageing of the labour force, labour market traps, formation des salaires, vieillissement de la main-d'oeuvre, allocations de chômage, pièges du marché du travail, offre de travail et demande
    JEL: J11 J2 J31 J64 J65
    Date: 2013–01–15
  14. By: Schmult, Brian
    Abstract: This paper argues that the Social Security OASDI Trust Fund is widely misunderstood by the public, thereby corrupting the debate on how to handle future scheduled benefits, and increasing the risk of program changes that would not be accepted if people understood how the program functions. The Trust Fund is a fiscal nullity but appears to be regarded by many as essential, hence the public debate is about how to ``fix'' it, rather than about the moral question of {\it whether} to fund scheduled benefits, which are clearly affordable. This misunderstanding indicates the need for a shift in emphasis in public descriptions of the program. For this, this paper lays out a set of data, arguments and analogies that are asserted to be accurate representations of the OASDI program and Trust Fund operation, and which are proposed as tools for public education. Finally, this paper argues that an important step in shifting public debate is to re-institute full recourse to Treasury funding for any payroll tax shortfall, which will force the public debate back to benefit levels and revenue sources.
    Keywords: Social Security; Trust Fund; OASDI
    JEL: H55 H60
    Date: 2012–12–24

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