nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒11‒17
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Pathways to retirement and the role of financial incentives in Sweden By Johansson, Per; Laun, Lisa; Palme, Mårten
  2. Social Security and Retirement across the OECD By Alonso Ortiz, Jorge
  3. Pension Enhancements and the Retention of Public Employees By Cory Koedel; P. Brett Xiang
  4. Population aging, migration spillovers, and the decline in interstate migration By Karahan, Fatih; Rhee, Serena
  5. Immigration as a Policy Instrument in an Economy with an Aging Population: A Longer-Run Perspective By Frank T. Denton; Byron G. Spencer
  6. Collective versus Individual Pension Schemes: a Welfare-Theoretical Perspective By Ed Westerhout; Jan Bonenkamp; Peter Broer
  7. Income Receipt and Mortality – Evidence from Swedish Public Sector Employees By Andersson, Elvira; Lundborg, Petter; Vikström, Johan
  8. Intergenerational Cooperation: an Experimental Study on Beliefs By Kulesz, Micaela M.; Dittrich, Dennis A. V.
  9. Does Fiscal Consolidation Really Get You Down? Evidence from Suicide Mortality By Antonakakis, Nikolaos; Collins, Alan
  10. Estimating sign-dependent societal preferences for quality of life By Attema, Arthur; Brouwer, Werner; l'Haridon, Olivier; Pinto, Jose Luis
  11. Home Hours in the United States and Europe By Fang, Lei; Cara, McDaniel
  12. Skills and Jobs in the Internet Economy By OECD
  13. Assessing the role of ageing, feminising and better-educated workforces on TFP growth By Andrea ARIU; Vincent VANDENBERGHE

  1. By: Johansson, Per (IFAU - Institute for Evaluation of Labour Market and Education Policy); Laun, Lisa (IFAU - Institute for Evaluation of Labour Market and Education Policy); Palme, Mårten (Department of Economics, Stockholm University)
    Abstract: We study how economic incentives affect labor force exit through different income security programs, old-age pensions as well as income taxes in Sweden. We use the option value for staying in the labor force as a measure of economic incentives and estimate an econometric model for the choice of leaving the labor market. Besides old-age pension, we focus on the Disability Insurance (DI), which is the most important exit path before age 65. By simulating the effect of different probabilities to be admitted DI we show how changes in the stringency of DI admittance affects labor supply among older workers through economic incentives.
    Keywords: Disability Insurance; option value; labor market exit; labor supply
    JEL: H55 J14 J26
    Date: 2014–08–25
  2. By: Alonso Ortiz, Jorge
    Abstract: Employment to population ratios differ markedly across Organization for Economic Cooperation and Development (OECD) countries, especially for people aged over 55 years. In addition, social security features differ markedly across the OECD, particularly with respect to features such as generosity, entitlement ages, and implicit taxes on social security benefits. This study postulates that differences in social security features explain many differences in employment to population ratios at older ages. This conjecture is assessed quantitatively with a life cycle general equilibrium model of retirement. At ages 60–64 years, the correlation between the simulations of this study׳s model and observed data is 0.67. Generosity and implicit taxes are key features to explain the cross-country variation, whereas entitlement age is not.
    Keywords: Social security; Retirement; Idiosyncratic labor income risk
    JEL: E24 H53 J14 J26
    Date: 2014–10–01
  3. By: Cory Koedel (Department of Economics, University of Missouri-Columbia); P. Brett Xiang
    Abstract: We use data on workers in the largest public-sector occupation in the United States – teaching – to examine the effect of pension enhancements on employee retention. Specifically, we study a 1999 enhancement to the pension formula for public school teachers in St. Louis that discretely and dramatically increased their incentives to remain in covered employment. The St. Louis enhancement is substantively similar to enhancements that occurred in other state and municipal pension plans across the United States in the late 1990s and early 2000s. To identify the effect of the enhancement on teacher retention, we leverage the fact that the strength of the incentive increase varied across the workforce depending on how far teachers were from retirement eligibility when it was enacted. The retention incentives for late-career teachers were increased the most by the enhancement but their behavioral response was modest. A cost-benefit analysis indicates that the pension enhancement was not a cost-effective way to improve employee retention
    Keywords: public pensions, pension enhancements, municipal pensions, teacher retention
    JEL: H75 J33 I22
    Date: 2014–10–14
  4. By: Karahan, Fatih (Federal Reserve Bank of New York); Rhee, Serena
    Abstract: Interstate migration in the United States has declined by 50 percent since the mid-1980s. This paper studies the role of the aging population in this long-run decline. We argue that demographic changes trigger a general equilibrium effect in the labor market, which affects the migration rate of all workers. We document that an increase in the share of middle-aged workers (those ages 40 to 60) in the working-age population in one state causes a large fall in the migration rate of all workers in that state, regardless of their age. To understand this finding, we develop an equilibrium search model of many locations populated by workers whose moving costs differ. Firms prefer hiring local workers with high moving costs as they command lower wages due to their lower outside option. An increase in the share of middle-aged workers causes firms to recruit more from the local labor market instead of hiring from other locations, which increases the local job-finding rate and reduces everyone’s migration rate (“migration spilloversâ€). Our model reproduces remarkably well several cross-sectional facts between population flows and the age structure of the labor force. Our quantitative analysis suggests that population aging accounts for about half of the observed decline, of which 75 percent is attributable to the general equilibrium effect.
    Keywords: interstate migration; labor mobility; population aging
    JEL: D83 J11 J24 J61 R12 R23
    Date: 2014–11–01
  5. By: Frank T. Denton; Byron G. Spencer
    Abstract: Population aging is a problem common to many countries: an increasing proportion of retired people, a decreasing proportion of working age, and resultant downward pressure on national product per capita. We explore longer-run aspects of immigration as a policy instrument in this context. We consider, by simulation, the importance of immigrant age distribution, proportion of child immigrants, productivity growth as an offset to aging, possible higher fertility, increased life expectancy, and greater labour force participation among older people. Our laboratory for exploration is a mythical country Alpha with a simple economy and realistic characteristics of an aging population.
    Date: 2014–10
  6. By: Ed Westerhout; Jan Bonenkamp; Peter Broer
    Abstract: This paper explores the welfare effects of a number of collective pension contracts, distinguishing between the two welfare effects. We find that collective schemes can be either superior or inferior to individual schemes. Collective pension contracts allow for intergenerational risk sharing with the unborn. They therefore imply a higher level of social welfare than individual accounts. Collective pension contracts also imply a sub- optimal allocation of consumption across time periods and states of nature however. Hence, collective pension contracts also reduce social welfare. This paper explores the welfare effects of a number of collective pension contracts, distinguishing between the two welfare effects. We find that collective schemes can be either superior or inferior to individual schemes.
    JEL: H55
    Date: 2014–10
  7. By: Andersson, Elvira (Department of Economics, Lund University); Lundborg, Petter (Department of Economics, Lund University); Vikström, Johan (IFAU)
    Abstract: In this paper, we study the short-run effect of salary receipt on mortality among Swedish public sector employees. By using data on variation in paydays across work-places, we completely control for mortality patterns related to, for example, public holidays and other special days or events coinciding with paydays and for general within-month and within-week mortality patterns. We find a dramatic increase in mortality on the day salaries arrive. The increase is especially pronounced for younger workers and for deaths due to activity-related causes such as heart conditions and strokes. Additionally, the effect is entirely driven by an increase in mortality among low income individuals, who are more likely to experience liquidity constraints. All things considered, our results suggest that an increase in general economic activity on salary receipt is an important cause of the excess mortality.
    Keywords: Income; Mortality; Health; Consumption; Liquidity constraints; Permanent income hypothesis
    JEL: D91 H31 H55 I10 I12 I38
    Date: 2014–08–10
  8. By: Kulesz, Micaela M.; Dittrich, Dennis A. V.
    Abstract: We report on an experiment in which subjects older than 55 years old and subjects younger than 26 years old play repeatedly 4 versions of the centipede game. For each game we define four treatments that allow us to study cooperation and belief formation of these two age groups. We find that beliefs about the others' age group shape the outcome: while seniors are cooperative and generous with juniors when they incur lower opportunity costs, for juniors it is when playing with seniors that they learn the way to the theoretical solution by smoothly decreasing their cooperation levels.
    Keywords: Centipede Game, Age differences, Decision Making, Beliefs, Social Preferences.
    JEL: C9
    Date: 2014–04
  9. By: Antonakakis, Nikolaos; Collins, Alan
    Abstract: While linkages between some macroeconomic phenomena (e.g. unemployment, GDP growth) and suicide rates in some countries have been explored, only one study, hitherto, has established a causal relationship between fiscal consolidation and suicide, albeit in a single country. This study examines the impact of budget consolidation on suicide mortality across all Eurozone peripheral economies, while controlling for various economic and socio-demographic differences. The impact of fiscal adjustments is found to be gender, age and time specific. In particular, fiscal consolidation has short-, medium- and long-run suicide increasing effects on the male population between 65 and 89 years of age. A one percentage point reduction in government spending is associated with an 1.39%, 2.35% and 2.64% increase in the short-, medium- and long-run, respectively, of male suicides rates between 65 and 89 years of age in the Eurozone periphery. These results are highly robust to alternative measures of fiscal consolidation. Unemployment benefits and substantial employment protection legislation seem to mitigate some of the negative effects of fiscal consolidation on suicide mortality. Plausible explanations for these impacts are provided and policy implications drawn.
    Keywords: Fiscal consolidation, Suicide, Eurozone periphery, Government policy, Labour market institutions
    JEL: C33 H30 H51 H55 H62 I18 I31
    Date: 2014–09–11
  10. By: Attema, Arthur; Brouwer, Werner; l'Haridon, Olivier; Pinto, Jose Luis
    Abstract: This paper is the first to apply prospect theory to societal health-related decision making. In particular, we allow for utility curvature, equity weighting, sign-dependence, and loss aversion in choices concerning quality of life of other people. We find substantial inequity aversion, both for gains and losses, which can be attributed to both diminishing marginal utility and differential weighting of better-off and worse-off. There are also clear framing effects, which violate expected utility. Moreover, we observe loss aversion, indicating that respondents give more weight to one group’s loss than another group’s gain of the same absolute magnitude. We also elicited some information on the effect of the age of the studied group. The amount of inequity aversion is to some extent influenced by the age of the considered patients. In particular, more inequity aversion is observed for gains of older people than gains of younger people.
    Keywords: equity weighting, loss aversion, prospect theory, QALYs
    JEL: D63 I10
    Date: 2014–09–02
  11. By: Fang, Lei (Federal Reserve Bank of Atlanta); Cara, McDaniel (Peking University)
    Abstract: Using data from the Multinational Time Use Study, this paper documents the trends and levels of time allocation, with a focus on home hours, for a relatively large set of industrialized countries during the past 50 years. Three patterns emerge. First, home hours have decreased in both the United States and European countries. Second, female time allocation contributes more to the cross-country difference in both the trends and the levels of market hours and home hours per person. Third, time allocations between the United States and Europe are more similar for the prime-age group than for the young and old groups.
    Keywords: time use; home hours; sex; age
    JEL: D13 J22
    Date: 2014–06–01
  12. By: OECD
    Abstract: Both generic and specialised ICT skills are becoming an important requirement for employment across the economy as the Internet becomes more engrained in work processes, but a significant part of the population lacks the basic skills necessary to function in this new environment. This paper examines the impact of the Internet on the labour market in this context. For example, between 7% and 27% of adults have no experience in using computers or lack the most elementary computer skills, such as the ability to use a mouse. In addition, the groups with the least ICT skills tend to be among the demographic groups at the most risk of losing jobs. Data also highlight a potential skills mismatch among those with the strongest ICT skills (youth) and those who actually use them at work (prime age and older adults).
    Date: 2014–10–24
  13. By: Andrea ARIU (McDonough School of Business, Georgetown University, USA); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper uses Belgian firm-level data, covering the 1998-2006 period, to assess the impact on TFP growth of key labour force structural changes: ageing, feminisation and rise of educational attainment. Based on a Hellerstein-Neumark analytical framework, our work shows that an ageing workforce negatively affects TFP growth, whereas its feminisation and its tendency to be better educated do not have any independent positive or negative impact. Therefore, the TFP slowdown induced by the ageing process is neither gender biased nor counterbalanced by the rising educational attainment of the workforce. These findings are robust to many additional treatments applied to the data, and controlling for the different sources of endogeneity. Quantitatively, ageing workforces may have accounted for a -4.5 percentage points loss in terms of cumulative TFP growth over the 1991-2013 period. Projections suggest that this number could reach -7 percentage points by the mid-2020s. This pattern is not so much dictated by Belgium’s demography, but rather its commitment to attain an overall employment rate of 75% by 2020. The latter almost inevitably implies almost doubling the current employment rate of individuals aged 55-64.
    Keywords: TFP growth, Ageing, Feminisation, Rising Educational Attainment, Firm-Level Analysis
    Date: 2014–09–30

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