nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒03‒30
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Employment Duration and Shifts into Retirement in the EU By Ted Aranki & Corrado Macchiarelli
  2. Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects By Gopi Shah Goda; Damon Jones; Colleen Flaherty Manchester
  3. Financial Education and Choice in State Public Pension Systems By Julie Agnew; Joshua Hurwitz
  4. Rethinking Elderly Poverty: Time for a Health Inclusive Poverty Measure? By Sanders Korenman; Dahlia Remler
  5. Job Polarization in Aging Economies By Eva Moreno - Galbis; Thepthida Sopraseuth
  6. The effect of age and time to death on health care expenditures: the Italian experience By Vincenzo Atella; Valentina Conti

  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.
    Date: 2013–02–12
  2. By: Gopi Shah Goda; Damon Jones; Colleen Flaherty Manchester
    Abstract: Employer-provided pension plans may affect employee mobility both through an “incentive effect,” where the bundle of benefit characteristics such as vesting rules, pension wealth accrual, risk, and liquidity affect turnover directly, and a “selection effect,” where employees with different underlying mobility tendencies select across plans or across firms with different types of plans. In this paper, we quantify the role of selection by exploiting a natural experiment at a single employer in which an employee’s probability of transitioning from a defined benefit (DB) to a defined contribution (DC) pension plan was exogenously affected by default rules. Using regression discontinuity as well as differences-in-regression-discontinuities (DRD) methods, we find evidence that employees with higher mobility tendencies self-select into the DC plan. Our results suggest that selection likely contributes to the observed positive relationship between the transition from DB to DC plans and employee mobility in settings where employees sort into plans or employers. Counter to conventional wisdom, we find a negative direct effect of the DC plan on turnover relative to the DB plan, which underscores the multi-dimensional difference between these plans.
    JEL: H0 J26 J32
    Date: 2013–03
  3. By: Julie Agnew; Joshua Hurwitz
    Abstract: As more and more public pension systems are shifting away from a defined benefit only framework, the complexity of the financial decisions facing public employees is increasing. This raises some concerns about the financial literacy of participants and their ability to make informed decisions. While surveys addressing financial education in private plans are available, little is known about what types of education and advice are offered in public plans. This paper fills this gap by presenting new results from the first National Public Pension Plan Financial Education Survey. The paper focuses specifically on primary defined contribution and hybrid plans. The results indicate that some form of education or advice is offered by every surveyed plan and that the sponsoring entity is actively involved in the development of the programs. However, it appears that legal uncertainties related to advice and education may be a problem for a few plans. In addition, more rigorous evaluation methods to test programs are needed. The paper concludes with suggestions for areas of future research.
    JEL: D14 G11 H75 J26
    Date: 2013–03
  4. By: Sanders Korenman; Dahlia Remler
    Abstract: Census’s Supplemental Poverty Measure (SPM) nearly doubles the elderly poverty rate compared to the “Official” Poverty Measure (OPM), a result of the SPM subtraction of medical out-of-pocket (MOOP) expenditures from income. Neither the SPM nor OPM counts health benefits or assets as resources. Validation studies suggest that subtracting MOOP from resources worsens a poverty measure’s predictive validity and excluding assets exacerbates this bias, since assets fund MOOP. The SPM is based on a 1995 NAS report that recommended a health-exclusive poverty measure, despite considering it, conceptually, a “second best” to a Health-Inclusive Poverty Measure (HIPM). We analyze the reasons for the NAS recommendation and argue that constructing a HIPM is now feasible if we conceptualize health needs as a need for health insurance, and if plans with non-risk-rated premiums and caps on MOOP are universally available, a condition largely met by the Affordable Care Act and Medicare Advantage Plans. We describe four HIPM variants and present analyses that suggest the SPM treatment of MOOP results in a less valid measure of elderly poverty and an overstatement of the elderly poverty rate (by up to 5.5 percentage points or 50 percent). Many elderly classified as poor by the SPM’s unlimited MOOP deduction are not poorly insured persons with incomes near the poverty line, but well-insured persons with incomes well above the poverty line.
    JEL: I32
    Date: 2013–03
  5. By: Eva Moreno - Galbis; Thepthida Sopraseuth (GRANEM (University of Angers); THEMA, Universite de Cergy-Pontoise)
    Abstract: This paper extends on French data a previous finding on US data: employment growth has been more important in the lower and upper tail of the job quality distribution. The originality of the paper is to argue that the diffusion of ICT cannot explain alone the polarization at the lower tail of the distribution. However, when combined with population aging, our framework predicts a progressive concentration of employment in the service sector (bottom tail of the job quality distribution). This results from a purely demand shift, since, as revealed by our estimations goods and services are complementary for seniors. The decrease in the relative price of goods induced by ICT diffusion is thus associated with an increased demand for services if the proportion of seniors is increasing.
    Keywords: Job Polarization, Occupational Structure, Aging
    JEL: J14 J21 J24 O33
    Date: 2013
  6. By: Vincenzo Atella (University of Rome "Tor Vergata"); Valentina Conti (University of Rome "Tor Vergata")
    Abstract: There exists a large body of literature, mainly based on hospital costs, showing that time to death is by far a better predictor of health spending than age. In this paper, we investigate if this finding holds true also in presence of outpatient costs (drugs, diagnostic tests and specialist visits). To accomplish this task we use data from the Health Search-SiSSI dataset, a large unbalanced panel of Italian patients that collects detailed information on patient clinical records and costs. Our results show that age is a strong driver of outpatient costs in Italy. In particular, we find that age produces a 500% increase in health costs from age 40 to 80, while proximity to death rises costs only by about 30%. Our advice for policy makers is then to use disaggregated models to better disentangle the role that age and time to death may have on different components of health expenditure.
    Keywords: ageing, time to death, outpatient health care expenditure, cost of dying
    JEL: J14 I12
    Date: 2013–03–08

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