nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒05‒17
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Life Cycle Model with Recursive Utility: New insights on pension and life insurance contracts By Aase, Knut K.
  2. Can an Ageing Scotland Afford Independence? By Dr Katerina Lisenkova
  3. Bequests and Heterogeneity in Retirement Wealth By Mariacristina De Nardi; Fang Yang
  4. Reassessing the differential impact of grandmothers and grandfathers : The Old AgeProgram in Nepal By Yunrong Li; Ricardo Mora
  5. The impact of a permanent Income shock on the situation of women in the household: the case of a pension reform in Argentina By Inés Berniell; Dolores de la Mata; Matilde P. Machado
  6. Envelhecimento Populacional, Gratuidades no Transporte Público e Seus Efeitos Sobre as Tarifas na Região Metropolitana de São Paulo By Rafael Henrique Moraes Pereira; Carlos Henrique Ribeiro de Carvalho; Pedro Herculano G. Ferreira de Souza; Ana Amelia Camarano

  1. By: Aase, Knut K. (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: For the conventional model with additive and separable expected utility, risk aversion and intertemporal elasticity of substitution in consumption sometimes play conflicting roles, in particular in life insurance and pensions. We propose to use recursive utility in the life cycle model, where we use the stochastic maximum principle to find the optimal solutions. This is a robust method which, among other things, do not require the Markov property. Optimal pension and life insurance contracts with these preferences involve consumption smoothing, not present in similar contracts using the conventional model. The model explains why aggregate consumption in society can be as smooth as implied by data, and at the same time be consistent with the relatively large, observed growth rate. Our analysis can also explain the prevalence of the two most common pension plans, defined benefit and defined contribution.
    Keywords: The life cycle model; recursive utility; optimal pension insurance; optimal life insurance; defined benefit; defined contribution; equity premium puzzle; the stochastic maximum principle
    JEL: D91
    Date: 2014–05–14
  2. By: Dr Katerina Lisenkova
    Abstract: In the light of the current Scottish independence debate, much attention is being paid to whether Scotland and the rest of the UK (RUK) will be better off after the separation. Fiscal challenges are often quoted as a strong argument against independence. Demographic processes play an important role in determining future economic growth via their impact on labour market, saving behaviour and government budget. One of the arguments that have been raised during the debate is that Scotland is in a worse demographic situation than RUK, and independence will make it harder for it to provide for its ageing population. In 2012, the old-age dependency ratio1 (OADR) in Scotland and RUK was the same at 29%. However, in the future the Scottish population is projected to age more rapidly, and by 2037 OADR in Scotland will reach 48%, while in RUK 45%2. However, by 2050 OADR in two regions will converge again.
    Date: 2013–12
  3. By: Mariacristina De Nardi; Fang Yang
    Abstract: Households hold vastly heterogenous amounts of wealth when they reach retirement, and differences in lifetime earnings explain only part of this variation. This paper studies the role of intergenerational transmission of ability, voluntary bequest motives, and the recipiency of accidental and intended bequests (both in terms of timing and size), in generating wealth dispersion at retirement, in the context of a rich quantitative model. Modeling voluntary bequests, and realistically calibrating them, not only generates more wealth dispersion at retirement and reduces the correlation between retirement wealth and lifetime income, but also generates a skewed bequest distribution that is close to the one in the observed data.
    JEL: E21 J14
    Date: 2014–04
  4. By: Yunrong Li; Ricardo Mora
    Abstract: We study the effects on infant mortality of the introduction in 1995 of a non-contributoryuniversal pension scheme in Nepal known as the Old age Allowance Program. We use crosssectionaldata from the 1996 and 2001 Nepal Demographic and Health Surveys. Following astandard diff-in-diffs approach, we find positive and significant effects on survival rates for thepresence in the same household of a female beneficiary while negative and sometimes significanteffects for the presence of a male beneficiary. When we conduct pre-treatment common trendtests, we find that we cannot reject it for the case of the female beneficiaries but we stronglyreject it for the case of male beneficiaries. Following Mora and Reggio (2012), we then propose amore flexible model and identification strategy and find that there are no differences in the femaleand the male beneficiary effects. We interpret these results as suggestive that cross-sectionalanalysis may bias downwards the estimates of the effect of grandfathers because of genderdifferences in endogenous household formation.
    Keywords: Infant mortality, difference-in-differences, gender differences
    Date: 2014–04
  5. By: Inés Berniell; Dolores de la Mata; Matilde P. Machado
    Abstract: Abstract: Transfers to women may a?ect their bargaining power within the household and consequently their well-being. We analyze the e?ects of the 2004/2005 pension reform in Argentina, that resulted in an unexpected and substantial increase in permanent income for around 1.8 million women, on outcomes arguably related to women’s bargaining power within the household. We estimate the e?ects of the reform in the probability of divorce/separation, the distribution of household chores, and the probability of women being the head of the household, using a Di?erence-in-Di?erences approach. Our results show that despite the low divorce probability among seniors, transfers to senior women have substantial e?ects on their situation in the household. More speci?cally, we ?nd that the reform had statistically signi?cant e?ects on the probability of divorce/separation increasing it by 1.8 ? 2.7 percentage points implying an increase of around 18 ? 19% on the divorce/separation rate of 60 ? 65 year old women. Moreover, the probability of being the head of the household also increased by 2.8?3.3 percentage points representing an increase of 7?19% in the probability amongst women of 60 ? 65 years of age. In the case of married women, the probability of being the head of the household increased by 1.3 ? 1.5 percentage points, which represents an increase of 20 ? 22%. Results show that the distribution of household chores within the couples was also a?ected by the reform. More precisely, the probability that the wife is the only person in charge of the housework decreased by 5 percentage points, an 11% decrease. The participation of husbands in housework, however, did not change signi?cantly.
    Keywords: Intra-household bargaining power, marital disruption, divorce, non-contributorypensions, pensions, public transfers, intra-household decision allocation, household chores, collectivemodels, senior women
    JEL: J12 J16 J26 H55
    Date: 2013–11–04
  6. By: Rafael Henrique Moraes Pereira; Carlos Henrique Ribeiro de Carvalho; Pedro Herculano G. Ferreira de Souza; Ana Amelia Camarano
    Abstract: A concessão de benefícios tarifários para determinados segmentos de passageiros do transporte público urbano no Brasil é altamente vinculada ao seu perfil etário – idosos, crianças e estudantes. Em geral, estes benefícios tarifários são financiados por subsídios cruzados, sendo o custo deles incorporado ao valor pago pelas passagens dos demais usuários. Tomando como estudo de caso a Região Metropolitana de São Paulo (RMSP), este trabalho analisa em que medida a perspectiva de envelhecimento populacional em curso na região poderá afetar o valor da tarifa cobrada no seu sistema de transporte público. As análises são feitas a partir de dados da Pesquisa Origem-Destino (OD) realizada em 2007 na RMSP e de projeções demográficas elaboradas pelo Instituto Brasileiro de Geografia e Estatística (IBGE) e pela Fundação Sistema Estadual de Análise de Dados (Seade) para 2020, 2030 e 2050. Considerando os diferentes cenários de projeção populacional, utiliza-se a técnica de padronização direta para simular as mudanças esperadas na composição das viagens do sistema de transporte, em termos de passageiros pagantes e não pagantes. Os resultados indicam que, no curto prazo (2020), o envelhecimento populacional estimado para ocorrer na RMSP teria um efeito relativamente modesto sobre o número total e a composição etária das viagens realizadas no transporte público da região. No médio e longo prazos, contudo, o aumento previsto na proporção de passageiros com gratuidades poderia ocasionar um aumento no sobrepreço da tarifa com uma elevação de seu valor em cerca de 10% e 20%, caso seja mantido este mecanismo de subsídios cruzados. Students, children under 4 years old and people aged 65 and over in Brazil are entitled to partial or full discount on urban trips using public transport systems. These discounts are not covered by public funding, but rather by the other service users who pay full-fare.In this study, we estimate the effects population aging in Brazil will have on public transport fares in the next four decades. We focus on the case of São Paulo Metropolitan Area (MA), the largest MA in the country. This paper is based on data from the Household Travel Survey conducted in São Paulo in 2007 and official population projections for São Paulo and Brazil for the years 2020, 2030 and 2050. Considering these different projection scenarios, we apply age-standardization methods to simulate the expected changes in the composition of public transport trips in terms of paying and non-paying passengers. According to our findings, the transformation in the age structure of São Paulo’s population in the short run (2020) should have little effect on public transport trips, both in terms of total number of trips and age composition. If the current cross-subsidies scheme is maintained over the medium and long term (2030 and 2050), though, we find that the increasing share of non-paying passengers could led to an increase in full-price fare by about 10% and 20%.
    Date: 2014–05

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