nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒03‒15
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Technology Adoption and Demographic Change By Karsten Wasiluk
  2. Unemployment and the Retirement Decisions of Older Workers By Paul Marmora; Moritz Ritter
  3. Is there a retirement consumption puzzle in Japan? Evidence based on panel data on households in the agricultural sector By Hori, Masahiro; Murata, Keiko
  4. Job Search and the Age-Inequality Profile By Petra Marotzke
  5. The Effects of Medicare on Medical Expenditure Risk and Financial Strain By Silvia Helena Barcellos; Mireille Jacobson
  6. Are Smarter People Better Samaritans? Effect of Cognitive Abilities on Pro-Social Behaviors By Luis Aranda; Martin Daniel Siyaranamual
  7. Studying the Socio-Economics of Ageing using Social Accounting and Socio-Demographic Matrices. An application to Portugal. By Santos, Susana

  1. By: Karsten Wasiluk (Department of Economics, University of Konstanz, Germany)
    Abstract: This paper studies the effect of demographic change on the technology distribution of an economy and on aggregate productivity growth. In the quantitative dynamic model, firms decide on employment and the technology they use subject to an aging workforce. Firms with a higher share of elderly workers update their technology less often and prefer older technologies than firms with a younger workforce. The shorter expected worklife of elderly workers makes firms reluctant to train them for new technologies. I calibrate the model for the German economy and simulate the projected demographic change. The results indicate that labor force aging reduces the realized annual productivity growth rate by 0.28 percentage points between 2010–2025.
    Keywords: Demographic Change, TFP growth, Retirement Policies
    JEL: J11 J21 J26 O33
    Date: 2014–02–28
  2. By: Paul Marmora (Department of Economics, Temple University); Moritz Ritter (Department of Economics, Temple University)
    Abstract: This paper examines how unemployment late in workers' careers affects the timing of their retirement. Using data from the Survey of Income and Program Participation from 1996 to 2011, we document that unemployed workers permanently leave the labor force at a significantly higher rate than employed workers. This effect is stronger once workers become eligible for social security benefits and it is significantly dampened by the eligibility for unemployment insurance benefits. Unemployed workers, particularly those workers in households with below median wealth, also have a significantly higher social security uptake rate shortly after turning 62 than employed workers. We find little evidence for housing or stock market effects on the timing of retirement.
    Keywords: Older Workers, Retirement, Social Security, Unemployment
    JEL: H55 J14 J26 J64 J65
    Date: 2014–01
  3. By: Hori, Masahiro; Murata, Keiko
    Abstract: Taking advantage of annual panel data on part-time farmer households, this paper investigates whether a retirement consumption puzzle is observed in Japan. Our analysis shows that households’ expenditure does decline after the retirement of the household head and that changes in family size and in life-style/preferences cannot fully explain this decline. Unanticipated negative income shocks such as health problems appear to provide a partial explanation. However, our analysis also suggests that there are myopic households that lacked the discipline to accumulate sufficient savings for retirement.
    Keywords: Retirement, Household consumption, Life cycle/Permanent income hypothesis
    JEL: D12 E21 J26
    Date: 2014–02
  4. By: Petra Marotzke (Department of Economics, University of Konstanz, Germany)
    Abstract: In line with earlier literature, I document a U-shaped relationship between age and wage dispersion in the U.S.. To explain this outcome, I consider a life-cycle model of labor market search with strategic wage bargaining, heterogeneous firm-worker matches, and endogenous search effort. Three factors shape the age-inequality profile of wages in the model economy: the time until retirement, match heterogeneity, and the workers’ bargaining power. Young workers switch employers often and are gradually matched to better jobs, which leads to the initial reduction in the variance of log wages. Middle-aged and older workers switch employers less frequently and have a longer search history. As workers are differently successful in the labor market, the variance of match productivities rises in the second half of the working life. The calibrated model captures the U-shape of the age-inequality profile of wages in conjunction with the hump-shaped age profile of average wages, as well as employment-to-employment transitions that decrease with age.
    Keywords: Search Frictions, Wage Dispersion, Life Cycle, Wage Bargaining
    JEL: J31 J41 J64
    Date: 2014–03–04
  5. By: Silvia Helena Barcellos; Mireille Jacobson
    Abstract: We estimate the current impact of Medicare on medical expenditure risk and financial strain. At age 65, out-of-pocket expenditures drop by 33% at the mean and 53% among the top 5% of spenders. The fraction of the population with out- of-pocket medical expenditures above income drops by more than half. Medical- related financial strain, such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing out-of-pocket expenditures alone accounts for 18% of the social costs of financing Medicare. This calculation ignores the benefits of reduced financial strain and direct health improvements due to Medicare.
    JEL: I13
    Date: 2014–03
  6. By: Luis Aranda (Advanced School of Economics, University Ca' Foscari of Venice); Martin Daniel Siyaranamual (Department of Economics, Padjadjaran University)
    Abstract: This study investigates how cognitive abilities correlate with civic engagement of older Europeans (aged 50+), using waves two and three of the SHARE dataset. An instrumental variable approach is employed in an at-tempt to disentangle possible endogeneity issues arising between cognitive abilities and civic engagement. Cognitive abilities are instrumented with the number of books in the respondent's place of residence during childhood. The results advocate for the existence of a causal relationship running from cognition in old age to community engagement. Though contradicting standard theoretical predictions, this empirical finding is in line with mainline experimental results showing how participants with higher cognitive abilities tend to be less risk averse, and thus more willing to opt for a payoff-dominant action in a stag hunt game context more often.
    Keywords: Cognitive ability; civic engagement; instrumental variables;risk-aversion; we-rationality
    JEL: D03 D64 D71
    Date: 2014–05
  7. By: Santos, Susana
    Abstract: In looking for empirical evidence about the activity of countries, a proposal is made for studying (measuring and modelling) the activity of countries through the use of Social Accounting Matrices (SAMs) and Socio-Demographic Matrices (SDMs). SAMs and SDMs are presented as tools that have specific features for conducting studies in several different areas, particularly in the Socio-Economics of Ageing, as well as for supporting policy decision processes. Based on methodological principles that are derived mainly from the works of Richard Stone, emphasis is placed on the desirability of working in a matrix format, which includes not only people (SDM), but also, at the same time, activities, products, factors of production and institutions (SAM). This is considered to be a way of capturing the relevant network of linkages and the corresponding multiplier effects for the subsequent modelling of the activity of the countries studied. The exposition of this proposal is accompanied by an example applied to Portugal.
    Keywords: Social Accounting Matrix; Macroeconomic Policy; Socio-Demographic Matrices
    JEL: E61 J11
    Date: 2014–02

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