nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒08‒23
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Stability of Preference against Aging and Health Shocks: A comparison between Japan and the United States By HASHIMOTO Hideki; ICHIMURA Hidehiko; SHIMIZUTANI Satoshi
  2. Employment duration and shifts into retirement in the EU By Aranki, Ted; Macchiarelli, Corrado
  3. Health-Related Life Cycle Risks and Public Insurance By Daniel Kemptner
  4. The Main Challenge of Our Times: A Population Growing Younger By Marcel Boyer; Sebastien Boyer
  5. On Financing Retirement with an Aging Population By Edward Prescott; Ellen McGrattan
  6. The effect of firms' partial retirement policies on the labour market outcomes of their employees By Huber, Martin; Lechner, Michael; Wunsch, Conny
  7. How Do the Changing Labor Supply Behavior and Marriage Patterns of Women Affect Social Security Replacement Rates? By April Yanyuan Wu; Nadia S. Karamcheva; Alicia H. Munnell; Patrick Purcell
  8. Responding to Key Well-being Challenges in Austria By Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
  9. Social Security Contributions and Employment Structure: A microeconometric analysis focused on firm characteristics By KOBAYASHI Yohei; KUME Koichi; OIKAWA Keita; SONE Tetsuro

  1. By: HASHIMOTO Hideki; ICHIMURA Hidehiko; SHIMIZUTANI Satoshi
    Abstract: This study explores stability of preference against aging and health shocks. Contrary to a vast amount of literature assuming that risk attitude is unchanged over time, we utilize JSTAR (Japanese Study of Aging and Retirement), which provides longitudinal data on the middle aged and elderly comparable with the Health and Retirement Study (HRS)/English Longitudinal Study of Ageing (ELSA)/Survey of Health, Ageing and Retirement in Europe (SHARE), to examine how aging and past health experiences systematically affect risk attitude. We find that while there is empirical evidence that aging gradually causes individuals to be more risk averse, health shocks do not seem to affect risk preference systematically.
    Date: 2013–08
  2. By: Aranki, Ted; Macchiarelli, Corrado
    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. JEL Classification: J14, J26, C41
    Keywords: ageing population, Cox regressions, duration analysis, EU countries, hazard model, Retirement
    Date: 2013–02
  3. By: Daniel Kemptner
    Abstract: This paper proposes a dynamic life cycle model of health risks, employment, early retirement, and wealth accumulation in order to analyze the health-related risks of consumption and old age poverty. In particular, the model includes a health process, the interaction between health and employment risks, and an explicit modeling of the German public insurance schemes. I rely on a dynamic programming discrete choice framework and estimate the model using data from the German Socio-Economic Panel. I quantify the health-related life cycle risks by simulating scenarios where health shocks do or do not occur at different points in the life cycle for individuals with differing endowments. Moreover, a policy simulation investigates minimum pension benefits as an insurance against old age poverty. While such a reform raises a concern about an increase in abuse of the early retirement option, the simulations indicate that a means test mitigates the moral hazard problem substantially.
    Keywords: Dynamic programming, discrete choice, health, employment, early retirement, consumption, tax and transfer system
    JEL: C61 I14 J22 J26
    Date: 2013
  4. By: Marcel Boyer (CIRANO, Université de Montréal); Sebastien Boyer (Collège Jean-de Brébeuf)
    Abstract: The real demographic challenge for Canadian policymakers is adapting to a population growing “younger,” after taking increased life expectancies into account, says a report released today by the C.D. Howe Institute. In “The Main Challenge of Our Times: A Population Growing Younger,” authors Marcel Boyer and Sébastien Boyer propose an alternative approach to population aging, which measures years to live instead of years since birth. Since 1950, Canadian life expectancy, on average, has increased. For example, a 65-year-old in 2010 had the same life expectancy as a 59.5 year-old in 1950. “Canadians are experiencing increases in longevity and are willing to work longer than previous cohorts,” said Marcel Boyer. “Public policy should aim to provide Canadians with the instruments to better manage retirement decisions.”
    Keywords: Economic Growth and Innovation
    JEL: J11 J18 J24 J38 J62
  5. By: Edward Prescott (Federal Reserve Bank of Minneapolis); Ellen McGrattan (Federal Reserve Bank of Minneapolis)
    Abstract: A problem facing the United States is financing retirement consumption as its population ages. Policy analysts increasingly advocate savings-for-retirement systems, but are concerned with insufficient savings opportunities with limited government debt. This concern is unwarranted. First, there is more productive capital than commonly assumed in macroeconomic modeling. Second, if the policy reform subsumes the elimination of capital income taxes, then the value of business equity increases relative to the capital stock. Phasing in a switch from the current U.S. system to a savings-for-retirement system without capital income taxes increases welfare of all current and future cohorts.
    Date: 2013
  6. By: Huber, Martin; Lechner, Michael; Wunsch, Conny
    Abstract: In this paper, we assess the impact of firms introducing part-time work schemes for gradual labour market exit of elderly workers on their employees’ labour market outcomes. The analysis is based on unique linked employer-employee data that combine high-quality survey and administrative data. Our results suggest that partial or gradual retirement options offered by firms are an important tool to alleviate the negative effects of low labour market attachment of elderly workers in ageing societies. When combined with financial incentives to hire unemployed or young jobseekers as replacement, they seem to be particularly beneficial, especially when labour market conditions are difficult. Under such circumstances, they can even have positive spill-over effects on younger workers. Firms should thus be encouraged to offer such schemes.
    Keywords: part-time work, elderly employees, treatment effects, matching
    JEL: J14 J26 C21
    Date: 2013–08
  7. By: April Yanyuan Wu; Nadia S. Karamcheva; Alicia H. Munnell; Patrick Purcell
    Abstract: This paper seeks to determine the impact of the changing lives of women – increased labor force participation/earnings and reduced marriage rates – on Social Security replacement rates. First, our estimates, based on the Health and Retirement Study and Modeling Income in the Near Term, show that Social Security replacement rates have dropped sharply at both the household- and individual-level, and the decline will continue for future retirees. Our second finding is that this aggregate change masks a complex relationship between replacement rates and the marital status and income levels of individuals. The decline in replacement rates over time is largest for married couples with husbands whose earnings are in the top tercile. Decomposing the reasons for the overall decline shows that increases in the labor supply and earnings of women explain more than one-third of the change. In contrast, the impact of changing marital patterns is relatively small. Much of the remaining explanation rests with the increased Full Retirement Age and changing claiming behaviors.
    Date: 2013–07
  8. By: Rauf Gönenç; Oliver Röhn; Christian Beer; Andreas Wörgötter
    Abstract: Important challenges for the future of Austrian well-being arise from demographic and environmental trends. The ageing of the population calls for a fair balance between life-time pension contributions and entitlements, drawing on the recent pension reform. Such progress will allow Austrians to make more informed choices between the length of their work and contribution periods and retirement length and income according to their preferences, without threatening fiscal sustainability. With female labour force participation rising, family policies should help reconcile equality of opportunity within families by promoting the availability, affordability and quality of support services. A growing share of immigrant groups with low human capital calls for remedial policies to preserve social cohesion. Environmental pressures arise from urban sprawl and the strong expansion of road transport. Turning around these trends will require more appropriate pricing of the externalities and better regional development policies to foster denser settlements that are well connected to public transport. This entails a need to strengthen coordination between different government layers and better integration of regional development with transport and housing policies. This Working Paper relates to the 2013 OECD Economic Survey of Austria (<P>Bien-être en Autriche : les grands défis<BR>Le bien-être des Autrichiens va se heurter à l’avenir à des défis importants liés aux tendances démographiques et environnementales. Le vieillissement de la population nécessite un juste équilibre entre les cotisations et les droits à pension, sur la base de la réforme récente du régime de retraite. Ces progrès vont permettre aux Autrichiens de faire des choix plus éclairés entre la durée de leur vie active et de leurs cotisations et celle de leur retraite ainsi que leurs revenus en fonction de leurs préférences, sans pour autant peser sur la viabilité des finances publiques. Face à l’augmentation du taux d’activité des femmes, les politiques familiales devraient contribuer à l’égalité des chances au sein des familles et favoriser des services de soutien accessibles, abordables et efficaces. La proportion grandissante des groupes immigrés ayant un faible niveau de capital humain exige la mise en place de mesures correctives afin de préserver la cohésion sociale. Les pressions pesant sur l’environnement sont causées par l’étalement urbain et l’expansion rapide du transport routier. Pour contrer ces évolutions, il faudra mettre en place une tarification plus appropriée des externalités et de meilleures politiques de développement régional afin de promouvoir des habitats plus denses et bien desservis par les transports publics. Il faut pour cela renforcer la coordination entre les différents niveaux d’administration et mieux intégrer les politiques de développement régional, de transport et de logement. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Autriche, 2013 ( -2013.htm).
    Keywords: ageing, environment, transport, Austria, immigration, well-being, urban sprawl, family, environnement, transport, vieillissement, Autriche, immigration, démographie, bien-être, étalement urbain, famille
    JEL: D60 J10 O52 Q50
    Date: 2013–08–05
  9. By: KOBAYASHI Yohei; KUME Koichi; OIKAWA Keita; SONE Tetsuro
    Abstract: Against the background of the country's aging population, this paper empirically estimates the effect of the social security burden on the employment level and structure in Japan, using firm-level microdata matched with social security insurance data. In particular, we use dynamic panel data methods to estimate labor demand functions and thereby evaluate the degree to which social security contributions influence corporate labor demand. We specifically examine the impact of firm characteristics such as the presence of labor unions and the intensity of competition in the product market. Our empirical results indicate that social security contributions do not have a statistically significant impact on employment. However, companies that face harsh competition in their product and labor markets tend to substitute non-regular workers for regular ones in response to an increase in social security contribution rates.
    Date: 2013–08

This nep-age issue is ©2013 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.