nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒01‒10
five papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Non-Contributory Pensions By Sebastian Galiani; Paul Gertler; Rosangela Bando
  2. Achieving Fiscal Balance in Japan By Tomoaki Yamada; Sagiri Kitao; Selahattin Imrohoroglu
  3. The Fiscal Stress Arising from State and Local Retiree Health Obligations By Byron Lutz; Louise Sheiner
  4. Aging and Deflation from a Fiscal Perspective By Hideki Konishi; Kozo Ueda
  5. Monitoring and Assessment Framework for the European Innovation Partnership on Active and Healthy Ageing (MAFEIP) – Interim Report on the defined process indicators By Fabienne Abadie; Maria Lluch; Ramon Sabes-Figuera; Bernarda Zamora

  1. By: Sebastian Galiani; Paul Gertler; Rosangela Bando
    Abstract: The creation of non-contributory pension schemes is becoming increasingly common as countries struggle to reduce poverty. Drawing on data from Mexico’s Adultos Mayores Program (Older Adults Program) – a cash transfer scheme aimed at rural adults over 70 years of age – we evaluate the effects of this program on the well-being of the beneficiary population. Exploiting a quasi-experimental design whereby the program relies on exogenous geographical and age cutoffs to identify its target group, we find that the mental health of elderly adults in the program is significantly improved, as their score on the Geriatric Depression Scale decreases by 12%. We also find that the proportion of treated individuals doing paid work is reduced by 20%, with most of these people switching from their former activities to work in family businesses; treated households show higher levels of consumption expenditures (on average, an increase of 23%). Very importantly, we also rule out significant anticipation effects that might have been associated with the program transfers. Thus, overall, we find that non-contributory pension schemes target to the poor in developing countries can improve the well-being of poor older adults without having any indirect impact (through potential anticipation effects) on the earnings or savings of future program participants.
    JEL: H2 H3 I0
    Date: 2014–01
  2. By: Tomoaki Yamada (Meiji University); Sagiri Kitao (Hunter College); Selahattin Imrohoroglu (University of Southern California)
    Abstract: In this paper we build a micro-data based, large-scale overlapping generations model for Japan in which individuals differ in age, gender, employment status, income, and asset holdings, and incorporate the Japanese pension rules in detail. We estimate age-consumption and age-earnings profiles from the Family Income and Expenditure Survey data, assume complete markets and use these to generate tax revenues and transfer payments for government accounts. We calibrate the model so that it produces the main macroeconomic indicators for 2010. Using existing pension law and fiscal parameters and the medium variants of fertility and survival probability projections, we produce predicted time paths for the ratio JGBs and the pension fund.
    Date: 2013
  3. By: Byron Lutz; Louise Sheiner
    Abstract: A major factor weighing down the long-term finances of state and local governments is the obligation to fund retiree benefits. While state and local government pension obligations have been analyzed in great detail, much less attention has been paid to the costs of the other major retiree benefit provided by these governments: retiree health insurance. The first portion of the paper uses the information contained in the annual actuarial reports for public retiree health plans to reverse engineer the cash flows underlying the liabilities given in the report. Obtaining the cash flows allows us to construct liability estimates which are consistent across governments in terms of the discount rate, actuarial method and assumptions concerning medical cost inflation and mortality. We find that the total unfunded accrued liability of state and local governments for the provision of retiree health care exceeds $1 trillion, or about ⅓ of total state and local government revenue. Relative to pension obligations discounted at the same rate, we find that unfunded retiree health care liabilities are ½ the size of unfunded pension obligations. We also find that using assumptions concerning the growth in health care costs that are arguably more realistic than those employed by most states actually reduces the size of the liability in most cases. Pushing in the opposite direction, we find that using plausibly more realistic mortality assumptions increases the size of liability. The second portion of the paper places retiree health care obligations into context by examining the budget pressures associated with retiree health on a continuing, largely pay-as-you go basis. We find that much of the projected increase in retiree health obligations as a share of revenue is the result of health care cost growth. On average, states could put their retiree health obligations into long-run fiscal balance by contributing an additional ¾ percent of total revenue toward the benefit each year. There is, however, wide variation across the states, with the majority of states requiring little in the way of additional financing, but some states requiring a significantly larger increase.
    JEL: H0 H53 H72 H75
    Date: 2014–01
  4. By: Hideki Konishi (School of Political Science and Economics, Waseda University (; Kozo Ueda (School of Political Science and Economics, Waseda University (
    Abstract: Negative correlations between inflation and demographic aging have been observed across developed nations recently. To understand the phenomenon from a political economy perspective, we embed the fiscal theory of the price level into an overlapping-generations model. We suppose that short-lived governments successively choose income tax rates and bond issues, considering political influence from existing generations and the expected policy responses of future governments. Our analysis reveals that the effects of aging depend on its causes; aging is deflationary when caused by an unexpected increase in longevity, but is inflationary when caused by a decline in the birth rate. Our analysis also sheds new light on the traditional debate about the burden of national debt. Because of price adjustment, the accumulation of government debt imposes no burden on future generations.
    Keywords: Deflation, Fiscal theory of the price level, Population aging, Redistribution across
    JEL: D72 E30 E62 E63 H60
    Date: 2013–12
  5. By: Fabienne Abadie (European Commission – JRC - IPTS); Maria Lluch (European Commission – JRC - IPTS); Ramon Sabes-Figuera (European Commission – JRC - IPTS); Bernarda Zamora (European Commission – JRC - IPTS)
    Abstract: This report aims to provide a list of process indicators that will allow monitoring the EIP on AHA process over the period 2012-2020. It also presents main highlights from the baseline data in graphical format, based on the tables provided in Annex I. The latter show the indicators computed from the baseline, i.e. data from the 234 EIP on AHA commitments submitted to the EC in June 2012 through the First Invitation for Commitment. The analysis of the data collected through the 2013 Monitoring Survey and that submitted by participants through the Second Invitation for Commitment in April 2013 will be presented in the next updates of this report. Adding the respective data sets to the analysis will allow us to take into account the enlargement of the EIP on AHA to new regions/ countries and stakeholders and measure progress in general. Although the data presented in this report only refers to the 2012 baseline dataset, the selection of process indicators presented in section 2 has been based on the analysis of both the 2012 baseline data and the 2013 Monitoring Survey data which is why there are references to both datasets. The rationale behind this is the need for the process indicators to be as inclusive as possible so as to allow monitoring and comparing the evolution of the EIP on AHA not only for the 2012-2020 period but also between the baseline (the First Invitation for Commitment), the Monitoring Survey and the Second Invitation for Commitment. Last but not least this report also identifies first gaps related to the baseline data and issues that had to be resolved or decisions to be taken when processing the data.
    Keywords: EIP, Active and Healthy Ageing, EIP on AHA, indicators, monitoring, framework
    JEL: I11 I18 O33 O38
    Date: 2013–12

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