nep-age New Economics Papers
on Economics of Ageing
Issue of 2013‒11‒29
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Population Ageing, Retirement Age Extension and Economic Growth in China A Dynamic General Equilibrium Analysis By Xiujian Peng; Yinhua Mai
  2. The Side Effect of Pension Reforms on Training: Evidence from Italy By Brunello, Giorgio; Comi, Simona
  3. Macroeconomic Determinants of Retirement Timing By Gorodnichenko, Yuriy; Song, Jae; Stolyarov, Dmitriy
  4. Capital- and Labor-Saving Technical Change in an Aging Economy By Andreas Irmen
  5. Successful aging: a cross-national study of subjective well-being later in life By Julia Zelikova
  6. Doubling Up: A Gift or a Shame? Multigenerational Households and Parental Depression of Older Europeans By Luis Aranda
  7. Age and productivity. Human Capital Accumulation and Depreciation By Anna Ruzik-Sierdzinska; Claudia Villosio; Michele Belloni; Maciej Lis; Monika Potoczna
  8. Evaluating pay-as-you-go social security systems By Andreas Bachmann; Kaspar Wüthrich
  9. Solving for the Retirement Age in a Continuous-time Model with Endogenous Labor Supply By Emin Gahramanov; Xueli Tang
  10. The Impact of Institutional and Socio-Ecological Drivers on Activity at Older Ages By Maciej Lis; Agnieszka Kamińska; Aart-Jan Riekhoff; Izabela Styczynska
  11. To Own or Not to Own? Household Portfolios, Demographics and Institutions in a Cross-National Perspective By Sierminska, Eva; Doorley, Karina

  1. By: Xiujian Peng; Yinhua Mai
    Abstract: China is experiencing rapid population ageing with the proportion of the population aged 65 and above projected to increase almost threefold between 2010 and 2050. The growth of the working age population is expected to stop approximately in 2015 and to turn strongly negative. China's low retirement age compounds the ageing problem. One means to mitigate the negative effects of shrinking labour force on economic growth is to stimulate labour force participation among the current working age population. Raising the official retirement age is one strategy to encourage labour force participation. This paper first investigates the effects of population ageing on labour force participation rates and, thus, on labour supply over the period of 2010-2030. It then estimates the effects of retirement age extension schemes on the size of the labour force. Thirdly, applying dynamic computable general equilibrium (CGE) modelling, it examines the effects of retirement age extension schemes on China's economic growth. It finds that raising the retirement age increases effective labour input, real GDP, capital stock, household real consumption and exports. The main results are that retirement age extension is likely to boost China's economic growth and that both urban and rural sectors will benefit from the extension.
    Keywords: population ageing, retirement age extension, economic growth, CGE model
    JEL: J11 J26 C68
    Date: 2013–08
  2. By: Brunello, Giorgio (University of Padova); Comi, Simona (University of Milan Bicocca)
    Abstract: Due to pension reforms, minimum retirement age increased substantially in Italy between the second part of the 1990s and the early 2000s. We compare the training participation of pre- and post - reform cohorts of private sector employees and estimate that adding one year to minimum retirement age increases training incidence by 6.9 to 10.7 percent, depending on the empirical specification. We find that policies that increase the residual working horizon are effective in increasing training participation by senior workers, and that traditional training policies that aim at reducing training costs by providing subsidies are ineffective.
    Keywords: pension reforms, training, Italy
    JEL: J24 J26
    Date: 2013–11
  3. By: Gorodnichenko, Yuriy (University of California, Berkeley); Song, Jae (U.S. Social Security Administration); Stolyarov, Dmitriy (University of Michigan)
    Abstract: We analyze lifetime earnings histories of white males during 1960-2010 and categorize the labor force status of every worker as either working full-time, partially retired or fully retired. We find that the fraction of partially retired workers has risen dramatically (from virtually 0 to 15 percent for 60-62 year olds), and that the duration of partial retirement spells has been steadily increasing. We estimate the response of retirement timing to variations in unemployment rate, inflation and housing prices. Flows into both full and partial retirement increase significantly when the unemployment rate rises. Workers around normal retirement age are especially sensitive to variations in the unemployment rate. Workers who are partially retired show a differential response to a high unemployment rate: younger workers increase their partial retirement spell, while older workers accelerate their transition to full retirement. We also find that high inflation discourages full-time work and encourages partial and full retirement. Housing prices do not have a significant impact on retirement timing.
    Keywords: retirement, business cycles
    JEL: E24 H55 J26
    Date: 2013–11
  4. By: Andreas Irmen (CREA, University of Luxembourg)
    Abstract: Does population aging and the associated increase in the old-age dependency ratio affect economic growth ? The answer is given in a novel analytical framework that allows for population aging to affect endogenous capital- and labor-saving technical change. The short-run analysis reveals that population aging induces more labor- and less capital-saving technical change as it increases the relative scarcity of labor with respect to capital. Due to external contemporaneous knowledge spill-overs across innovating firms induced technical change has a first-order effect on current aggregate income. In the long-run capitalsaving technical progress vanishes, and the economy’s growth rate reflects only labor-saving technical change. However, the mere possibility of capital-saving technical change is shown to imply that the economy’s steady-state growth rate becomes independent of its age structure: neither a higher life-expectancy nor a decline in fertility affects economic growth in the long run.
    Keywords: Demographic Transition, Capital Accumulation, Direction of Technical Change
    JEL: D91 D92 O33 O41
    Date: 2013
  5. By: Julia Zelikova (National Research University Higher School of Economics (St. Petersburg), Laboratory for Comparative Social Research, the fellow researcher)
    Abstract: This paper aims to identify and analyze the life course and contextual factors that influence the subjective well-being (SWB) of individuals over 60 years of age. Our research is based on the results of the 5th wave of the World Value Survey. We have investigated the level of SWB for older people at both the individual and country level. The results of our research demonstrate that the strongest predictors of SWB later in life are satisfaction with one’s financial state, health, and a sense of control, meaning the belief that individuals are in control of their lives. Besides this, the important factors of SWB for older people are the ability to establish and maintain friendly relations with other people, such as family members and friends, and to invest their own resources in positive emotions and important relationships for themselves. Older people from ex-communist countries have the lowest level of SWB. Older people from English-speaking countries, such as the United States, Canada, New Zealand, and the United Kingdom, have, by contrast, the highest level of SWB. These results suggest that the degree of modernization influences SWB levels very strongly. For older people, the country in which they live, the level of democracy, GDP per capita, freedom, and tolerance are very important. In contemporary society, the later period of life is a time for self-realization, new activities, new leisure, and new emotions. If society understands the needs of older people and provides opportunities for their realization, society can overcome the challenges caused by population aging. Only then can we discuss the concept of ‘successful aging’
    Keywords: Aging, multiple regression models, cross-cultural analysis, values, self-expression values, modernization.
    JEL: A13
    Date: 2013
  6. By: Luis Aranda (Department of Economics, University Of Venice Cà Foscari)
    Abstract: The Great Recession has brought along a rearrangement of living patterns both in the U.S. and in Europe. This study seeks to identify the consequences of the “doubling up” of two or more generations of adults into the same household. In particular, a difference-in-difference (DID) propensity score matching approach is employed to target the causal effect of a change in geographical closeness of respondents and their children —either moving together (doubling up) or apart (splitting up)— on the well-being of the older generation, proxied by their depression score. We find that, although heterogeneous across European regions, in no case does doubling up pose a negative effect to the quality of life of older Europeans. The opposite is true for central and southern Europe, where a double up seems to be followed by a significant reduction in the depression level of the older generation. Our results highlight that, although a negative connotation has usually been attached to multigenerational living arrangements in the post-WWII era, its benefits are evident and, in a time marked by increasing demographic aging, can lead to significant improvements in the quality of life of older Europeans.
    Keywords: Doubling up; Depression; Aging; Difference-in-differences; Matching estimator
    JEL: J14 I31
    Date: 2013
  7. By: Anna Ruzik-Sierdzinska; Claudia Villosio; Michele Belloni; Maciej Lis; Monika Potoczna
    Abstract: This NEUJOBS research report focuses on links between age, productivity and lifelong learning. Various data sources (EU-SILC, LFS, Structure of Earnings Survey, SHARE, ELSA, SHARELIFE) and methodological approaches were used in this report. Our analysis identifies clusters of countries with common characteristics of age-earnings profiles (for certain groups of employees) and allows for an explanation of those differences. Some differences can be attributed to the share of sectors, education types, and occupations in country-specific employment. Others are due to labour market institutions and the (dis)incentives to work at older ages provided by social security systems. Additionally, the dynamics of earnings after age 50 differ less between educational and occupational groups than at earlier ages. We show that the dynamics of average wages are strongly influenced by the timing of entering and leaving labour market. An estimation of the impact of LLL on productivity (measured by earnings) at older ages shows that for employees aged 50+, participation in training increases wages in the short-term.
    Keywords: Productivity, Age-Earning Profiles, Lifelong Learning
    JEL: J24 J31
    Date: 2013–10
  8. By: Andreas Bachmann; Kaspar Wüthrich
    Abstract: This paper proposes a new method for welfare analysis of unfunded social security systems. Based on an overlapping generations model with endogenous labor supply, we derive a formula for the evaluation of existing pay-as-you-go social security systems that depends on impulse response functions and projected growth rates only. We propose an implementation strategy based on reduced form estimates of a VAR model that is valid under weak assumptions about the deep structure of the model. Our method is related to the sufficient statistic approach (Chetty, 2009). For the current system in the United States, we find that a transitory increase in the payroll tax rate along with higher pension benefits leads to a welfare increase mainly due to welfare gains of today's retirees. A scenario analysis demonstrates the robustness of this result.
    Keywords: unfunded social security system; sufficient statistic; overlapping generations; reduced form VAR
    JEL: E62 H55
    Date: 2013–11
  9. By: Emin Gahramanov; Xueli Tang
    Abstract: This paper studies a continuous-time life-cycle model with a consumption-leisure choice made by a finitely-lived agent with a random lifetime. We explicitly account for the leisure constraint in the corresponding constrained optimal control problem with a commonly postulated solution structure, and provide a complete analytic solution of the problem. By solving both the constrained and unconstrained control formulations, we demonstrate the inaccuracy of the latter formulation (where an unconstrained leisure path gets truncated once it exceeds the time endowment limit) can indeed be significant. For cases when the subjective discount rate is quite close to or exceeds the interest rate, the optimal control path would not be consistent with the structure of the optimal solution so commonly postulated in applied studies.
    Keywords: Constrained control; Pontryagin’s Maximum Principle; Life-cycle consumption and labor- leisure
    JEL: D91 C02 C61 J22 J26
    Date: 2013–11–13
  10. By: Maciej Lis; Agnieszka Kamińska; Aart-Jan Riekhoff; Izabela Styczynska
    Abstract: We present an insight of the socio-economic drivers of economic and noneconomic activity of persons 50+ as well their ability to adopt to SET. Not only the labour market participation, but also social engagement, beliefs, education, religious activities and housework are studied. With the use of European Social Survey data we investigate the general level of the activity among people aged 50+ in Europe as well as the relation between various aspects of activity and general labour market performance. We obtain mixed results on the concomitance of non-market and labour-market activities. We also check the role of personal traits as well as pull and push factors on prematurely leaving labour market in European countries. The differences among countries in terms of the results are confronted with the institutional characteristics of the countries. Finally, selected case studies of successful activation policies are presented.
    Keywords: Productivity, Age-Earning Profiles, Lifelong Learning
    JEL: J24 J31
    Date: 2013–10
  11. By: Sierminska, Eva (CEPS/INSTEAD); Doorley, Karina (IZA)
    Abstract: Using harmonized wealth data and a novel decomposition approach, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the U.S. and Canada. We find that younger households' participation decisions in assets are more responsive to income than older households. Family structure plays a significant role in explaining cross-country differences for both cohorts. Examining institutional differences, we find that in more financially developed and economically open countries, households are less likely to own housing but more likely to be in debt. Typical mortgage characteristics and mathematical literacy are also correlated with debt participation across countries. These findings have important implications for policy setting during times of financial unease for the young, as well as for the future in helping secure adequate income for the elderly. Our results show that there is scope for policies which promote asset participation for young households and debt participation, where there is a need for consumpation smoothing, for older households.
    Keywords: wealth portfolios, decomposition, institutions, demographics
    JEL: G11 G21 J10
    Date: 2013–11

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