nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒10‒22
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Reverse mortgage loans: a quantitative analysis By Nakajima, Makoto; Telyukova, Irina A.
  2. Is there a retirement consumption puzzle in Japan? Evidence based on panel data on households in the agricultural sector By HORI Masahiro; MURATA Keiko
  3. Reducing the High Rate of Poverty Among the Elderly in Korea By Randall S. Jones; Satoshi Urasawa
  4. Optimal Life Cycle Unemployment Insurance By Claudio Michelacci; Hernan Ruffo
  5. Can PBGC Save Multiemployer Plans? The brief’s key findings are: * Participants in multiemployer pension plans have their benefits insured by the Pension Benefit Guaranty Corporation (PBGC). * However, the PBGC’s guaranteed benefit levels are very low compared to single employer plans. * Of greater concern, the PBGC’s insurance fund for multiemployer plans is projected to be exhausted within the next 10 years. * One idea is to head off plan insolvencies through “partitions” that transfer some costs to the PBGC, but little support exists for hiking premiums to cover the costs. * The bottom line is that the PBGC, as currently structured, will not be able to stave off plan insolvencies or fully protect workers in plans that become insolvent. By Alicia H. Munnell; Jean-Pierre Aubry
  6. Concentration in survival times and longevity: The log-scale-location family of failure time models By Chiara Gigliarano; Ugofilippo Basellini; Marco Bonetti
  7. Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk By Daniel Harenberg; Alexander Ludwig

  1. By: Nakajima, Makoto (Federal Reserve Bank of Philadelphia); Telyukova, Irina A. (University of California–San Diego)
    Abstract: Supersedes Working Paper 13-27. Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. Despite growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, the authors analyze reverse mortgages in a calibrated life-cycle model of retirement. The average welfare gain from RMLs is $885 per homeowner. The authors’ model implies that low-income, low-wealth, and poor-health households benefit the most, consistent with empirical evidence. Bequest motives, nursing-home-move risk, house price risk, and loan costs all contribute to the low take-up. The Great Recession may lead to increased RML demand, by up to 30% for the lowest-income and oldest households.
    Keywords: Reverse Mortgage; Mortgage; Housing; Retirement; Home Equity Conversion Mortgage; HECM
    JEL: D91 E21 G21 J14
    Date: 2014–09–08
  2. By: HORI Masahiro; MURATA Keiko
    Abstract: Taking advantage of annual panel data on farm households collected by the Statistical Survey on Farm Management and Economy, this paper investigates whether a retirement consumption puzzle can be observed in Japan and, given that this is the case, what the reasons are. Our long-run panel data allow us to examine the behavior of households whose head actually retired during the observation period. Our analysis shows that households’ expenditure does decline after the retirement of the household head. What is more, changes in family size or other demographic factors appear to only marginally account for the expenditure decline upon retirement. Changes in life-style/preferences after retirement also do not appear to fully explain the expenditure decline, since the decline in expenditure is strongly correlated with the magnitude of the decline in income. Further, we find that the expenditure decline is larger for households with smaller net financial assets, which implies that part of the income-expenditure correlation around retirement is probably due to unanticipated negative income shocks. However, our analysis also implies that the consumption decline at retirement in Japan cannot be explained completely without the presence of myopic households or households that lacked discipline, which contradicts the assumptions of the LC/PIH.
    Date: 2014–02
  3. By: Randall S. Jones; Satoshi Urasawa
    Abstract: One-half of Korea's population aged 65 and over lives in relative poverty, nearly four times higher than the OECD average of 13%. Elderly poverty is thus an urgent social problem. The immediate priority is to target the Basic Old-Age Pension on the lowest-income elderly to ensure that they escape from absolute poverty. The Basic Livelihood Security Programme should be used to top up the income of poor elderly by further relaxing eligibility requirements. In addition, reforms are needed to develop an effective three-pillar system of retirement income based on the National Pension Scheme (NPS), company pensions and individual savings. Making the NPS more effective in reducing elderly poverty requires expanding its coverage, focusing on improved compliance among non-regular and self-employed workers, lengthening average contribution periods and maintaining the NPS replacement at around 50%, keeping it close to the OECD average. The increase in the contribution rate should begin as soon as possible, as delays would only make the necessary increase larger. This Working Paper relates to the 2014 OECD Economic Survey of Korea ( Réduire le taux de pauvreté élevé des personnes âgées en Corée La moitié de la population âgée de 65 ans et plus est en situation de pauvreté relative, ce qui est près de quatre fois plus élevé que la moyenne de 13 % constatée à l’échelle de l'OCDE. La pauvreté chez les personnes âgées constitue donc un problème de société urgent. La priorité immédiate est de cibler le minimum vieillesse sur les personnes âgées les plus démunies, pour éviter qu’elles ne tombent dans la pauvreté absolue. Le Programme de garantie du minimum de subsistance doit servir à compléter le revenu des personnes âgées pauvres en assouplissant davantage les conditions d'admissibilité. En outre, des réformes sont nécessaires pour mettre en place un régime de retraite à trois piliers : régime national de retraite (RNR), retraites d’entreprise et épargne individuelle. Pour rendre le RNR plus efficace dans la réduction de la pauvreté des personnes âgées, il faut étendre sa couverture, en se concentrant sur l'amélioration de la conformité chez les travailleurs non réguliers et indépendants, l’allongement de la période de cotisation moyenne et le maintien du taux de remplacement du RNR autour de 50 %, proche de la moyenne OCDE. L'augmentation du taux de cotisation devrait débuter le plus tôt possible, tout retard entraînant nécessairement une hausse plus importante. Ce Document de travail a trait à l’Étude économique de l’OCDE de la Corée, 2014 (
    Keywords: National Pension Scheme, company pensions, National Pension Fund, basic old-age pension, replacement rate, population ageing, retirement allowance, individual pension accounts, Basic Livelihood Security Programme, elderly poverty, occupational pensions, pauvreté chez les plus âgés, Programme de garantie du minimum de subsistance, Fonds national de retraite, épargne, vieillissement de la population, taux de remplacement, régime national de retraite, minimum vieillesse, retraites d’entreprise, indemnité de retraite
    JEL: H55 J26
    Date: 2014–09–16
  4. By: Claudio Michelacci (EIEF and CEPR); Hernan Ruffo (UTDT)
    Abstract: We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers.
    Date: 2014
  5. By: Alicia H. Munnell; Jean-Pierre Aubry
    Date: 2014–09
  6. By: Chiara Gigliarano; Ugofilippo Basellini; Marco Bonetti
    Abstract: Evidence suggests that the significantly higher life expectancy levels witnessed over the past centuries are associated with a lower concentration of survival times, both cross-country and over time. The purpose of this work is to study the relationships that exist among models for the evolution of survival distributions, longevity measures, and concentration. We first study relationships between concentration and cohort longevity through empirical comparisons. We then propose a family of survival models that can be used to capture such trends in longevity and concentration across survival distributions.
    Keywords: Survival analysis; Longevity; Gini index; Life tables.
    Date: 2014–09
  7. By: Daniel Harenberg (ETH Zurich, Switzerland); Alexander Ludwig (CMR & FiFo, University of Cologne)
    Abstract: When markets are incomplete, social security can partially insure against idiosyncratic and aggregate risks. We incorporate both risks into an analytically tractable model with two overlapping generations and demonstrate that they interact over the life-cycle. The interactions appear even though the two risks are orthogonal and they amplify the welfare consequences of introducing social security. On the one hand, the interactions increase the welfare benefits from insurance. On the other hand, they can in- or decrease the welfare costs from crowding out of capital formation. This ambiguous effect on crowding out means that the net effect of these two channels is positive, hence the interactions of risks increase the total welfare benefits of social security.
    Keywords: social security; idiosyncratic risk; aggregate risk; welfare; insurance; crowding out
    JEL: C68 E27 E62 G12 H55
    Date: 2014–09

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