nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒03‒02
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Employment Duration and Shifts into Retirement in the EU By Ted Aranki; Corrado Macchiarelli
  2. Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark By Chetty, Raj; Friedman, John N.; Leth-Peterson, Soren; Nielsen, Torben Heien; Olsen, Tore
  3. Optimal Degree Of Funding Of Public Sector Pension Plans By Meijdam, A.C.; Ponds, E.H.M.
  4. Determinants of equity pension plan flows By Martí Ballester, Carmen Pilar
  5. Ageing and Productivity: Introduction By Bloom, David E.; Sousa-Poza, Alfonso
  6. Identifying Drivers for the Accumulation of Household Financial Wealth By Maria Belén Zinni
  7. A new look at the discouragement and the added worker hypotheses : applying a trend-cycle decomposition to unemployment By Fuchs, Johann; Weber, Enzo

  1. By: Ted Aranki; Corrado Macchiarelli
    Abstract: The decision to cease working is traditionally influenced by a wide set of socio-economic and environmental variables. In this paper, we study transitions out of work for 26 EU countries over the period 2004-2009 in order to investigate the determinants of retirement based on the Eurostat Survey on Income and Living Conditions (EU-SILC). Applying standard survivor analysis tools to describe exits into retirement, we do not find any significant differences in the patterns into retirement between the average euro area and EU non-euro area countries. Moreover, we find that shifts into retirement have increased during the onset of the 2009 economic and financial crisis. Income, together with flexible working arrangements, is found to be important as regards early retirement decisions, compared to retiring beyond the legal retirement age. Finally, we show that institutional measures (such as, state/health benefits, minimum retirement age) could not be sufficient alone if individuals withdraw earlier from the labour market due to a weakening of their health. Especially, these latter results are of importance for structural and macroeconomic policy, for instance, in increasing the employment of both people and hours worked against the background of population ageing.
    Keywords: Retirement, ageing population, hazard model, duration analysis, EU countries
    JEL: J14 J26 C41
    Date: 2013–02
  2. By: Chetty, Raj (Harvard University); Friedman, John N. (Harvard University); Leth-Peterson, Soren (University of Copenhagen); Nielsen, Torben Heien (Danish National Centre for Social Research); Olsen, Tore (University of Copenhagen)
    Abstract: Do retirement savings policies--such as tax subsidies or employer-provided pension plans--increase total saving for retirement or simply induce shifting across accounts? We revisit this classic question using 45 million observations on wealth for the population of Denmark. We find that a policy's impact on wealth accumulation depends on whether it changes savings rates by active or passive choice. Tax subsidies, which rely upon individuals to take an action to raise savings, have small impacts on total wealth. We estimate that each $1 of tax expenditure on subsidies increases total saving by 1 cent. In contrast, policies that raise retirement contributions if individuals take no action--such as automatic employer contributions to retirement accounts--increase wealth accumulation substantially. Price subsidies only affect the behavior of active savers who respond to incentives, whereas automatic contributions increase the savings of passive individuals who do not reoptimize. We estimate that approximately 85% of individuals are passive savers. The 15% of active savers who respond to price subsidies do so primarily by shifting assets across accounts rather than reducing consumption. These individuals are also more likely to offset changes in automatic contributions and have higher wealth-income ratios. We conclude that automatic contributions are more effective at increasing savings rates than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowd-out conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement.
    Date: 2013–01
  3. By: Meijdam, A.C.; Ponds, E.H.M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract This paper explores the optimal degree of funding of public sector pension plans. It is assumed that a benevolent social planner decides on the contribution of current taxpayers to the funding of public sector pensions next period, weighing the interests of current and future tax payers. Two elements play a role in the optimal funding decision: the optimal-portfolio choice (i.e. the tradeoff between the expected excess return and the additional risk of funding vis-à-vis pay-as-you-go) and intergenerational redistribution (i.e. whether the current generation of tax payers is willing and capable to prefund the pension obligations of current public sector workers or shifts the burden to future generations via a pay-as-you-go scheme). The optimal degree of funding appears to vary over time, depending not only on the relative weight given to the current generation, risk aversion, and the distribution of financial risk and human capital risk, but also on the actual state of the economy, i.e. on wage income, funding in the past and the realization of the excess return on this funding.
    Keywords: public sector pension plans;funding;implicit debt;portfolio approach
    JEL: H55 H75
    Date: 2013
  4. By: Martí Ballester, Carmen Pilar
    Abstract: The aim of this study is to analyze investor response to different measures of pension plan performance. To do this, we implement a fixed effects panel data methodology corrected by heteroskedasticity, serial correlation and cross-sectional dependence, as proposed by Vogelsang (Heteroskedasticity, autocorrelation, and spatial correlation robust inference in linear panel models with fixed-effects, 2011). The results obtained show that investors make their decision to invest in a specific pension plan depending on past returns and the type of management company administering the plan. However, participants do not react to risk measures, which may be because they consider all plans making up the equity category to entail the same risk. --
    Keywords: return,Jensen's Alpha,pension plan flows,panel data models
    JEL: C23 G23
    Date: 2013
  5. By: Bloom, David E. (Harvard University); Sousa-Poza, Alfonso (University of Hohenheim)
    Abstract: Population ageing will be the dominant feature of the world's demographic landscape in the coming decades, raising concerns about labor productivity and about economic outcomes at both the individual, enterprise, and macro levels. The articles in this special issue of Labour Economics define and address key issues with respect to the interplay of ageing, workforce productivity, and economic performance. Taken as a whole, the articles dispel some of the concerns, sharpen our understanding of others, and highlight behavioural changes, business practice adaptations, and public policy reforms that can offset the economic effects of population ageing.
    Keywords: ageing, productivity
    JEL: J11 J14 J18
    Date: 2013–02
  6. By: Maria Belén Zinni (University of Rome "Tor Vergata")
    Abstract: Household financial assets and liabilities display considerable variation across countries and over time. This article investigates empirically the role of some of the key Life Cycle Model variables and other relevant factors behind household financial wealth disparities using data from 40 countries over the period 1995-2009. To the author's knowledge, it uses the largest macroeconomic dataset on household financial assets and liabilities assembled to date. The results are in line with the aggregative implications of the Life Cycle Model in that the wealth-to-income ratio decreases with income per capita growth and increases with the expected length of retirement. The study also presents empirical evidence for the role of financial and demographic developments on the accumulation of financial assets and liabilities by the household sector.
    Keywords: Household sector balance sheets, financial wealth, household assets, household liabilities,financial development
    JEL: E01 E21
    Date: 2013–02–13
  7. By: Fuchs, Johann (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: Using German data this study applies an unobserved-components approach to disentangle the unemployment rate into a (stochastic) trend and a cyclical part and to estimate the influence of these components on labor participation. The persistent trend component of unemployment, which triggers permanent reactions of the workers, is likely connected to a structural discouragement effect. The cyclical component, which reflects more fluctuant changes, can be linked to a shorter-term added worker effect. By splitting up the participation effect of changes in the unemployment rate our analysis differs profoundly from previous studies that present the net of both or only a single effect. For the total working population both a discouragement and an added worker effect were identified. In detailed analyses we find that the former was relevant for older workers, whereas the latter especially concerns prime aged and younger females. As many OECD countries are facing an ageing population as well as rising importance of women in the labor market, these age- and gender-specific results might be of particular interest.
    Keywords: Arbeitslosenquote, Konjunkturzyklus, Erwerbsbeteiligung, Erwerbsverhalten, Beschäftigungseffekte, Persistenz, stille Reserve, Erwerbsquote, Erwerbsbevölkerung, geschlechtsspezifische Faktoren, altersspezifische Faktoren
    JEL: C32 E24 J21
    Date: 2013–02–12

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