nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒08‒09
eight papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Cognitive functioning and retirement in Europe By Laura Bianchini; Margherita Borella
  2. Assessing the sustainability of pension reforms in Europe: a pension wealth approach By Grech, Aaron George
  3. Income Tax and retirement Schemes By Philippe Choné; Guy Laroque
  4. Workforce Aging and the Labour Market Opportunities of Youth: Evidence from Canada By Sundip Dhanjal, Tammy Schirle
  5. How Much Should People Save? By Alicia H. Munnell; Anthony Webb; Wenliang Hou
  6. Social security and the interactions between aggregate and idiosyncratic risk By Harenberg, Daniel; Ludwig, Alexander
  7. Age-Specific Labour Market Effects of Employment Protection - A numerical approach By Stefan Boeters
  8. Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands By Rob Euwals; Anja Deelen

  1. By: Laura Bianchini (University of Torino & CeRP, Collegio Carlo Alberto); Margherita Borella (University of Torino, CeRP, Collegio Carlo Albero & NetSpar)
    Abstract: We investigate the effect of retirement on cognitive functioning using the Survey on Health, Ageing and Retirement in Europe (SHARE). The availability of a panel dataset allows to use a fixed effect estimator which is crucial to estimate the effect of individual transitions into retirement on our memory measure, word recall. Our main finding is that, conditional on the memory average age path of the typical individual, time spent in retirement has a positive effect on word recall. College educated or highly skilled workers benefit more than average from retirement, as do those individuals who declare to spend time reading books.
    Keywords: cognitive functioning, retirement, panel estimation
    JEL: I12 J24 J26
    Date: 2014–01
  2. By: Grech, Aaron George
    Abstract: In this lecture, I will try to start answering the question of whether the pension reforms enacted in Europe since the 1990s will prove to be sustainable. This broad question has embedded in it both theoretical and empirical sub-questions. On the theoretical side, I will need to see how best to measure pension adequacy, while also assessing the feasibility of evaluating jointly pension adequacy and financial sustainability. Once this is tackled, I will be assessing the possible impact of reforms on the capacity of pension systems to achieve their goals and the impact on the constraints they face. This should help understand better any sources of possible pressures that could undermine the sustainability of pension reforms.
    Keywords: Social Security and Public Pensions; Retirement; Poverty; Retirement Policies
    JEL: H55 I38 J26
    Date: 2014–07
  3. By: Philippe Choné (CREST); Guy Laroque (Sciences-Po and UCL)
    Abstract: This article aims at understanding the interplay between pension schemes and tax instruments. The model features extensive labor supply in a stationary environment with overlapping generations and perfect financial markets. Compared with the reference case of a pure taxation economy, we find that taxes become more redistributive when the pension instrument is available, while pensions provide incentives to work
    Date: 2014–03
  4. By: Sundip Dhanjal, Tammy Schirle (Wilfrid Laurier University)
    Abstract: In this study, we investigate whether an aging workforce affects the job opportunities of youth. Provincial data from the 1976-2013 Labour Force Surveys and a fixed-effects model is used to estimate the effect of the share of the adult male labour force that is aged 55 to 69 on the employment and unemployment rates of men aged 25 to 29. We estimate effects on other labour market outcomes including wages and school enrolment, and other samples of younger men and women. There is no evidence to suggest that a growing share of older workers negatively affects the decisions or outcomes of youth in the labour market. To the contrary, there is weak evidence to suggest an aging population has a positive effect on the labour market outcomes of youth.
    Keywords: Population aging, employment, unemployment, youth
    JEL: J11 J21
    Date: 2014–06–01
  5. By: Alicia H. Munnell; Anthony Webb; Wenliang Hou
    Abstract: The brief’s key findings are: *The National Retirement Risk Index framework is used to address how much working-age households need to save for retirement. *A typical household should get a third of its retirement income from a savings plan, with the low income needing one quarter and the high income one half. *A typical household needs to save about 15 percent of earnings, with the low income requiring less and the high income more. *For those with a savings shortfall, the necessary savings hike is much more feasible for younger households than for older households. *Starting to save early and retiring late dramatically reduce a household’s required saving rate.
    Date: 2014–07
  6. By: Harenberg, Daniel; Ludwig, Alexander
    Abstract: We ask whether a PAYG-financed social security system is welfare improving in an economy with idiosyncratic and aggregate risk. We argue that interactions between the two risks are important for this question. One is a direct interaction in the form of a countercyclical variance of idiosyncratic income risk. The other indirectly emerges over a household's life-cycle because retirement savings contain the history of idiosyncratic and aggregate shocks. We show that this leads to risk interactions, even when risks are statistically independent. In our quantitative analysis, we find that introducing social security with a contribution rate of two percent leads to welfare gains of 2.2% of lifetime consumption in expectation, despite substantial crowding out of capital. This welfare gain stands in contrast to the welfare losses documented in the previous literature, which studies one risk in isolation. We show that jointly modeling both risks is crucial: 60% of the welfare benefits from insurance result from the interactions of risks. --
    Keywords: social security,idiosyncratic risk,aggregate risk,welfare
    JEL: C68 E27 E62 G12 H55
    Date: 2014
  7. By: Stefan Boeters
    Abstract: The particular situation of the youngest and oldest individuals on the labour market motivates age-specific labour market analysis. One topical case is employment protection for older workers. The effect of employment protection on the total number of jobs is ambiguous. The positive effect of lower job destruction is counteracted by the negative effect of lower job creation. This ambiguity carries over to the more specific case of age-related employment protection. Numerical analysis can be illuminating when countervailing effects produce an ambiguity. In this paper, I present a numerical model based on the theoretical set-up of Chéron, Hairault and Langot (2011). Simulations performed with the model highlight age-specific effects of general employment protection measures and effects of measures targeted at particular age-groups on workers outside the target group. Firing taxes and hiring subsidies have age-specific consequences because employment and unemployment rates vary over the lifecycle. Positive effects of employment protection for the target group can be outweighed by negative effects for other workers.
    JEL: J64 J63 J21
    Date: 2014–07
  8. By: Rob Euwals; Anja Deelen
    Abstract: In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006 – 2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.
    JEL: C23 J14 J31
    Date: 2014–07

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