nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒11‒07
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Reforming the U.S. Social Security system accounting for employment uncertainty By Hugo Benítez-Silva; J. Ignacio García-Pérez; Sergi Jiménez-Martín
  2. Social security schemes and labor supply in the formal and informal sectors By Rodrigo Ceni
  3. Forecasting Natural Population Change: the Case of Latvia By Aleksejs Melihovs
  4. Health Spending and Public Pension: Evidence from Panel Data By Yonghong An; Kai Zhao; Rong Zhou
  5. (English) Time-use of Italians and the aging process (Italiano) L’uso del tempo degli italiani e il processo d’invecchiamento By Pietro Demurtas; Giuseppe Gesano; Frank Heins; Adele Menniti; Marcella Prosperi
  6. Offsets to compulsory superannuation: do people consciously choose their level of retirement saving? By Akshay Shanker; Sacha Vidler
  7. Health Risk Factors among the Older European Populations: Personal and Country Effects By Shoshana Neuman; Tzahi Neuman; Teresa García-Muñoz
  8. Modelling the Age Dynamics of Chronic Health Conditions: Life-Table-Consistent Transition Probabilities and their Application By Frank T. Denton; Byron G. Spencer
  9. Home care, hospitalizations, and doctor visits By Judite Gonçalves; France Weaver
  10. Tax Policy under the “Generational Election System” By Doi, Takero

  1. By: Hugo Benítez-Silva; J. Ignacio García-Pérez; Sergi Jiménez-Martín
    Abstract: The discussion about the need for Social Security reforms has recently resurfaced, and is expected to continue to be part of the political agenda in the near future. Our paper is a step in the direction of providing a framework for policy analysis that accounts for employment uncertainty, something that has been relatively overlooked in terms of its link with retirement decisions. In this context, we explicitly consider the participation decision of older individuals along with their decision to claim Social Security retirement benefits, using a sequential decision structure. We have numerically solved and simulated a benchmark model of the inter-temporal decision problem that individuals face in the United States. Our results show that the model is able to explain with great accuracy the strikingly high proportion of individuals who claim benefits exactly at the Early Retirement Age. The model is also able to replicate the declining labor force participation at older ages. Additionally, we discuss a number of policy experiments that suggest that individuals claiming and labor supply decisions are responsive to measures likely to be on the table for policy makers when considering the reforms of the U.S. Social Security system.
    Date: 2014–10
  2. By: Rodrigo Ceni (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper analyzes how changes in the social security scheme affect the participation path of workers between the formal and the informal sectors. The choice between the formal and informal sectors is completely voluntary. In this framework, individuals, depending on the retirement program and their endowment of human capital, construct their decision paths in the labor market. I use Argentinean panel data from the period 1995-2011 to estimate a structural model, and this is used to evaluate changes in the workers' behavior when the pension scheme changes. Among the main results, if the parameters are fixed as in the PAYG, there is a slight reduction in the years of the formality and the percentage of workers who achieve a full pension. Moreover, the increase of the requirement to achieve a full pension to 35 years in the formality, increases the percentage of workers in formality over 45 and the number of the years working formally but it decreases the achievement of a pension at all educational levels. The decrease of that requirement has an effect on the reduction of the years in formality even for those who are not affected directly, the high part of the distribution of the high educated. Finally, if the minimum age to achieve a pension is now 67 instead of 65, there is an important increment in the formality and the full pension achievement especially for the low educated workers.
    Keywords: informality, discrete choice, pension schemes, Argentina
    JEL: E26 J24 J26 O17
    Date: 2014–10
  3. By: Aleksejs Melihovs
    Abstract: The paper is devoted to the natural population change forecast in Latvia for the time horizon until 2030. The motivation for this paper is twofold. First, population ageing is an obvious problem for the whole EU with a tendency to worsen in the future. Second, historical population data have been revised based on the results of the last population census that took place in Latvia in 2011. This data correction could help to make a clearer vision of future tendencies in demographic indicators. However, for EU11 countries, including Latvia, the situation is more challenging. The approach developed in 2007 by Hyndman and Ullah is used for the natural population change forecasting. This approach combines functional data analysis and principal components decomposition. Although the applied approach is a technical one, it is useful for understanding what a policy maker could deal with in 15–20 years from now in the case of no-policy-change and no-population-habits-change scenario. By understanding this issue, it could be easier for the policy makers to make right decisions with a long-run perspective helping population and economy to be prepared well for the problems associated with population ageing that will accumulate in the future. The model is used to forecast mortality rate schedules separately for males and females as well as fertility rate schedules. The main findings of the paper are the following. The total period fertility rate is forecasted to increase to about 1.6 by 2030. Life expectancy at birth is projected to increase for males and females by 4 and 3.4 years respectively. Nevertheless, the natural population decrease in 19 years will reach 200 thousand including the decrease of about 190 thousand in population aged 20–64, while the old-age dependency ratio will increase to 36.5%.
    Keywords: functional approach, fertility rates, mortality rates, population forecasting
    JEL: J11 C53 C14 C32 O11 O52
    Date: 2014–10–06
  4. By: Yonghong An (Texas A&M University); Kai Zhao (University of Connecticut); Rong Zhou (University of Connecticut)
    Abstract: This paper empirically investigates the determinants of aggregate health expenditure in a panel of OECD countries from 1980-2005. We differ from most existing studies by testing some new determinants motivated by recent theoretical advances in the literature. We find that a one percentage increase in public pension payments per elderly person leads to approximately a 1=3 percentage increase in aggregate health spending, and this effect is significant and robust across a variety of model specications. A back of the envelope calculation based on this estimate suggests that the expansion of the public pension program on average accounts for approximately over one fifth of the rise in aggregate health expenditure as a share of GDP in the set of OECD countries during 1980-2005. In addition, we find that the estimated effect of GDP per capita in our model ranges from 0.66 to 0.80, which is consistent with the results from some recent studies, and thus further reinforces the finding in the literature that health care is not a luxury good. Finally, our results show that the political factors do not significantly affect aggregate health expenditure, though they have been found to be important for understanding public health spending in existing studies.
    Keywords: Aggregate Health Expenditure, Public Pension, Labor Supply
    JEL: H51 I1
    Date: 2014–09
  5. By: Pietro Demurtas; Giuseppe Gesano; Frank Heins; Adele Menniti; Marcella Prosperi
    Abstract: (English) The Italian population is ageing at a considerable pace and will continue so even more intensively in the next decades, when the more crowded generations of the baby boom of the sixties of the last century will be entering old age. The impact of this growing number of elderly is an important societal challenge, a challenge that will be taken up successfully only if Italian society will be able to capture the changes in the characteristics of the aged population, its potentials, and changed life styles. Based on some of the stereotypes regarding old age represented as life phases characterized by loneliness, lack of interest and lack of participation in social life, this contribution studies the Italian case analysing the time use pattern of the at least 60 years olds. The aim is to identify some of the factors that, in addition to age, affect the time use pattern of the elderly. The study is based on the data of the 2008-09 ISTAT Time Use Survey. The results show that population aging does not proceed in a linear fashion with calendar age and that, contrary to stereotypical representation; the elderly are not a homogeneous social category. Taking into consideration a typical day, the foremost discontinuity is linked to the exit from the labour market, while further ruptures are identified for different types of activity. For example, after age 70 the time spent in social activities and active leisure (voluntary work, religious participation, visits to family and friends, etc.) is reduced, while starting with the age group 75-79 we observe less time devoted to activities linked to family care. Age is not the only intervening factor since other variables influence the choices of the elderly regarding their daily activities: gender, the type of household in which they live, especially, the presence of a partner, as well as the level of educational attainment, the health status and the economic conditions. (Italiano) L’invecchiamento della popolazione italiana marcia a grandi passi e lo farà ancor più nel prossimo futuro, quando si presenteranno alla soglia dell’età anziana le ampie generazioni nate durante il baby-boom degli anni Sessanta del secolo scorso. L’impatto di questa parte crescente di popolazione costituisce una sfida per la nostra società, una sfida che sarà vinta solo se si sarà in grado di cogliere le modifiche intervenute nelle caratteristiche della popolazione in età avanzata, nelle sue potenzialità, nei suoi modelli di vita. A partire da alcuni degli stereotipi sull’anzianità e la vecchiaia, rappresentate come fasi della vita caratterizzate da solitudine, mancanza di interessi e scarsa partecipazione alla vita sociale, il presente contributo studia il caso italiano indagando la quotidianità degli individui di 60 anni e più. L’obiettivo è quello di individuare alcuni dei fattori che, oltre all’età, incidono sullo stile di vita della popolazione anziana. Lo studio è stato condotto sui dati dell’indagine Istat sull’Uso del Tempo 2008-09, a partire da una concettualizzazione delle attività quotidiane che distingue comportamenti più e meno attivi. I risultati evidenziano che, contrariamente alla rappresentazione stereotipata, gli anziani non costituiscono una categoria sociale al suo interno omogenea e che l’invecchiamento non procede in maniera lineare con l’età. Rispetto ad una giornata tipo, una prima evidente discontinuità si realizza con l’uscita dal mondo del lavoro, mentre ulteriori cesure possono essere identificate a seconda del tipo di attività. Ad esempio, è dopo i 70 anni che si riducono maggiormente le attività di tipo sociale e di tempo libero attivo (volontariato, partecipazione religiosa, visite a parenti e amici, etc.), mentre è nella classe di età 75-79 che si osserva un più marcato allontanamento dalle attività di cura familiare. Si evidenzia inoltre che l’età cronologica non è il solo fattore che interviene nel processo di invecchiamento e che a questa si associano il genere e il tipo di famiglia in cui vive l’anziano, il livello di istruzione, lo stato di salute e le condizioni economiche.
    Keywords: (English) Population aging; time use; daily activities; age; gender (Italiano) Invecchiamento; uso del tempo; attività quotidiane, età; genere
    Date: 2014
  6. By: Akshay Shanker; Sacha Vidler
    Abstract: Australian employers are obliged by law to make a minimum compulsory contribution as a proportion of salaries into employees’ superannuation (pension) funds. Individuals can also make voluntary contributions on top of the compulsory amount. We examine voluntary contributions amongst two groups of employees on different compulsory rates within the same fund. We ask whether individuals make voluntary superannuation contributions according to independent preferences representing how much people believe their overall savings should be. If individuals did have independent preferences, then we should expect less people to make voluntary contributions on the higher compulsory rate, and also expect reduced average voluntary contributions (across those who do and do not make voluntary contributions). We do not find evidence of either. An increase in the compulsory rate seems to be carried over totally into an increase in total contributions; either because individuals make voluntary contributions without any consideration of how much their overall savings ought to be, or because the compulsory rate influences the subjective evaluations of savings preferences (effectively anchoring bias).
    JEL: E21 D14 D91 D03
    Date: 2014–10
  7. By: Shoshana Neuman (Bar-Ilan University); Tzahi Neuman; Teresa García-Muñoz
    Abstract: It is now common to use the individual's self-assessed-health-status (SAHS), which expresses her/his holistic 'internal' view, as a measure of health. The use of SAHS is supported by numerous studies that show that SAHS is a better predictor of mortality and morbidity than medical records. The 2011 wave of the rich Survey of Health Aging and Retirement Europe (SHARE) is used for the exploration of the full spectrum of factors behind the health-status in 16 European countries, using 23,800 observations. Special emphasis is given to the examination of behavioral risk factors (smoking, alcohol consumption and obesity) – both at the individual and country levels. The main findings are: (i) the estimation of self-assessed-health-status regressions provides clear evidence of the effects of the three behavioral risk factor on the individual’s subjective rating of her/his health status, beyond and above the obvious effects of health conditions and of socio-economic personal variables; (ii) the second, more innovative, finding is related to the effects of country-specific risk factors (country-level measures of smoking, obesity, and alcohol consumption) on the subjective-health of the residents, beyond and above those of the personal characteristics. Adapting the technique presented in Oswald and Wu (2010), country effects derived from the SAHS regression are examined for correlations with a set of objective country macro measures. They include: share of smokers on a daily/regular basis; alcohol consumption (per-capita liters per year); share of obese individuals in the country. It appears that country-level smoking and obesity affect negatively aggregate country SAHS, while alcohol consumption has no effect. It is therefore not only ‘who you are’ that affects the subjective rating of health, but also ‘in which country you live’. Overall, our findings indicate that what is true for the individual is also true for the country as a whole: both individual and country-level (obesity and smoking) risk factors affect subjective-health and the two levels of behavioral risks accumulate and reinforce the subjective-health assessment. This seems to be at odds with the ‘Easterlin Paradox’ that emphasizes within country individual effects and denies cross-country effects, and suggests the economic cost-effectiveness of preventive obesity and smoking treatment.
  8. By: Frank T. Denton; Byron G. Spencer
    Abstract: Background: Surveys of chronic health conditions provide information about prevalence but not about the incidence and the process of change within the population. Objective: We show how the “age dynamics” of chronic conditions ‐‐ the probabilities of contracting the conditions at different ages, of moving from one chronic conditions state to another, and of dying ‐‐ can be inferred from prevalence data for those conditions that can be viewed as irreversible. Methods: Transition probability matrices are constructed for five‐year age groups, representing the age dynamics of health conditions for a stationary population. We illustrate the application of the matrices by simulating the age/health path of an initially healthy cohort. Results and conclusion: Surveys of chronic conditions provide valuable information about prevalence rates; we show that such surveys can be made even more valuable by allowing the calculation of the transition probabilities that define the chronic conditions age dynamic process. We report the results of simulations based on transition probabilities that we have derived, and note the general applicability of the methods.
    Keywords: chronic health conditions, transition probabilities, age dynamics
    Date: 2014–10
  9. By: Judite Gonçalves; France Weaver
    Abstract: This study estimates the effects of formal home care on hospitalizations and doctor visits. We compare the effects of medically- and non-medically-related home care and investigate heterogeneous effects by age group and informal care availability. Two-part models are estimated, using data from Switzerland. In this federal country, home care policy is decentralized into cantons (i.e. states). The endogeneity of home care is addressed by using instrumental variables, canton and time fixed effects. We instrument canton-level home care use with home care prices and education expenditures. While medically-related home care reduces length of stay below 60 days, non-medically-related home care increases stays beyond 10 days. Non-medically-related home care also reduces the number of GP visits. However, all these effects are small. Both types of home care tend to have stronger effects among the 65+ and those with informal care available in their household.
    Keywords: Home care; Hospitalizations; Doctor visits; Instrumental variables
    Date: 2014–09
  10. By: Doi, Takero
    Abstract: This chapter investigates the effects of introducing the “generational election system” proposed by Ihori and Doi (1998). The generational election system (or the election district by generation) consists of election districts divided by not only region but also generation. In industrial countries, intergenerational conflicts of interest are large at present. In particular, the older generation has more political power because of aging and fewer children. In an electoral system that consists of election districts divided only by region, conflicts of interest among regions can be dealt with in the Congress, but intergenerational conflicts are buried in each district because the opinions of older people dominate those of younger people. Therefore, this chapter analyzes the effects of introducing the generational election system using an overlapping generations model. The results of the voting equilibrium show that the preferred policy of the younger generation can be better represented in the generational election system compared with the current majoritarian system. Furthermore, the selected policy does not depend on the turnout rate of the younger generation. These results suggest that introducing the generational election system benefits both the younger and future generations.
    JEL: H20 D72 H31
    Date: 2014–09

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