nep-age New Economics Papers
on Economics of Ageing
Issue of 2014‒12‒19
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Early Retirement at 63: Fair Compensation or Pension Giveaway? By Anika Rasner
  2. Pension and the Family By Komura, Mizuki; Ogawa, Hikaru
  3. Pensions and fertility: back to the roots - The introduction of Bismarck's pension scheme and the European fertility decline By Fenge, Robert; Scheubel, Beatrice
  4. Social security in an analytically tractable overlapping generations model with aggregate and idiosyncratic risk By Harenberg, Daniel; Ludwig, Alexander
  5. Who Loses Most? The Impact of Taxes and Transfers on Retirement Incomes By Finn Poschmann; Matthias Alexandre Laurin
  6. Health Risk Factors among the Older European Populations: Personal and Country Effects By García-Muñoz, Teresa; Neuman, Shoshana; Neuman, Tzahi
  7. Financing Elderly Care Service Subsidies horizontally differentiated duopoly By Masaya Yasuoka
  8. Do Required Minimum Distributions Matter? The Effect of the 2009 Holiday On Retirement Plan Distributions By Jeffrey R. Brown; James Poterba; David Richardson
  9. Labour Market Matters - August 2014 By Tran, Vivian
  10. Migration and Welfare State: Why is America Different from Europe? By Assaf Razin; Efraim Sadka
  11. The Impact of Health Insurance on Stockholding: A Regression Discontinuity Approach By Dimitris Christelis; Dimitris Georgarakos; Anna Sanz-de-Galdeano
  12. Demografischer Wandel und Industrie-Qualifikationsrahmen Logistik By Abidi, Hella; Klumpp, Matthias
  13. Income Inequality, Redistribution and their Effect on Inequality in Longevity By Plümper, Thomas; Neumayer, Eric
  14. Long-Term Care Insurance and Carers' Labor Supply: A Structural Model By Johannes Geyer; Thorben Korfhage

  1. By: Anika Rasner
    Abstract: After Easter, Germany's new labor and social affairs minister Andrea Nahles will be presenting the grand coalition's first major reform proposal for parliamentary debate: a bill to improve the benefits provided under the statutory pension system. A centerpiece of the reform package is early retirement on a full pension at 63 for those who have been paying into the state pension system for a long period of time. In defense of the proposal, Nahles has launched an information campaign emphasizing that "It's not a giveaway; it's earned." Critics, however, call early retirement at 63 a costly political gift to favored groups of voters with dubious social policy value, and warn that it could unleash a new wave of early retirement. In their view, the reform could undermine recent successes in securing the long-term financial sustainability of the pension system and in gradually extending working life.
    Date: 2014
  2. By: Komura, Mizuki (Nagoya University); Ogawa, Hikaru (Nagoya University)
    Abstract: The effects of pension policies on fertility have been examined in the overlapping generations (OLG) model of unitary household in which no heterogeneity exists between the wife and the husband. This paper departs from the OLG model and focuses on the marital bargaining arising from the heterogeneity in a couple in a non-unitary model. Specifically, this paper examines how the pension policy affects the endogenous fertility of a bargaining couple who have different lifespans. The analysis finds out a new channel of pension policy on fertility decisions: an increase in pension size affects fertility not only via the changes in current and future income, but through a change in marital bargaining power. This channel leads a plausible argument that an increase in a pay-as-you-go (PAYG) pension further accelerates a decline in fertility through the empowerment of women.
    Keywords: pension, fertility, longevity, marital bargaining
    JEL: H55 J12 J13
    Date: 2014–09
  3. By: Fenge, Robert; Scheubel, Beatrice
    Abstract: Fertility has long been declining in industrialised countries and the existence of public pension systems is considered as one of the causes. This paper provides detailed evidence based on historical data on the mechanism by which a public pension system depresses fertility. Our theoretical framework highlights that the effect of a public pension system on fertility works via the impact of contributions in such a system on disposable income as well as via the impact on future disposable income that is related to the internal rate of return of the pension system. Drawing on a unique historical data set which allows us to measure these variables at a jurisdictional level for a time when comprehensive social security was introduced, we estimate the effects predicted by the model. We find that beyond the traditional determinants of the first demographic transition, a lower internal rate of return of the pension system is associated with a higher birth rate. This result is robust to including the traditional determinants of the first demographic transition as controls as well as to other policy changes at the time. JEL Classification: C21, H31, H53, H55, J13, J18, J26, N33
    Keywords: fertility, first demographic transition, historical data, public pension, social security hypothesis, transition theory
    Date: 2014–09
  4. By: Harenberg, Daniel; Ludwig, Alexander
    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
  5. By: Finn Poschmann; Matthias Alexandre Laurin
    Abstract: Low income seniors face extremely heavy tax burdens across Canada, according to a new C.D. Howe Institute report. In “Who Loses Most? The Impact of Taxes and Transfers on Retirement Incomes,” authors Finn Poschmann and Alexandre Laurin show that seniors can be hit hard by taxes and benefit clawbacks in retirement.
    Keywords: Fiscal Policy and Tax Competitiveness, Retirement, Seniors
    JEL: H21 H24
    Date: 2014–11
  6. By: García-Muñoz, Teresa (Universidad de Granada); Neuman, Shoshana (Bar-Ilan University); Neuman, Tzahi (Hebrew University, Jerusalem)
    Abstract: It is now common to use the individual's self-assessed-health-status (SAHS) 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, focusing on behavioral risk factors (smoking, alcohol consumption and obesity) – both at the individual and country levels. The main findings are: (i) SAHS regressions provide clear evidence of the significant effects of the three behavioral risk factors on the individual's SAHS, beyond and above 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, controlling for 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': both individual and country-level risk factors affect subjective-health and the two levels of behavioral risks accumulate and reinforce the subjective-health assessment. This suggests the economic cost-effectiveness of preventive obesity and smoking treatment and seems to be at odds with the 'Easterlin Paradox' that emphasizes within country individual effects and denies cross-country effects.
    Keywords: self-assessed-health-status, smoking, obesity, alcohol consumption, Europe, SHARE
    JEL: I1 J1 Z1
    Date: 2014–10
  7. By: Masaya Yasuoka (School of Economics, Kwansei Gakuin University)
    Abstract: This paper presents consideration of how a subsidy for the elderly care services should be financed in terms of income growth and social welfare. An increase in the tax burden for older people and firm with a decrease in the tax burden for young people can raise the income growth rate. However, the policy to decrease the unemployment to increase tax revenue by virtue of an increase in labor input can raise the income growth rate if the unemployment rate is low. Even if these tax systems increase the income growth rate, social welfare can not always be pulled up because an increase in the tax burden for older people worsens the welfare of older people.
    Keywords: Elderly care services, Tax system, Endogenous growth
    JEL: H51 H21 J14
    Date: 2014–10
  8. By: Jeffrey R. Brown; James Poterba; David Richardson
    Abstract: This paper investigates how the 2009 one-time suspension of the Required Minimum Distribution (RMD) rules associated with qualified retirement plans affected plan distributions at TIAA-CREF, a large retirement services provider. Using panel data on retirement plan participants at TIAA-CREF, we find that roughly one third of those who were affected by minimum distribution rules discontinued their distributions in 2009. The results also show relatively small differences in the suspension probability between those who had 2008 distributions equal to the RMD amount, and might be classified as facing a binding RMD constraint, and those who were taking distributions in excess of the RMD amount before the distribution holiday. The probability of suspension declines substantially with age and rises modestly with economic resources. We find that individuals taking monthly distributions are less likely to suspend distributions than those taking annual distributions, particularly at higher wealth levels. This pattern is consistent with those who choose monthly distributions being more likely to use their distributions to finance consumption. We supplement these results based on administrative record data on retirement plan participants with survey evidence on participant attitudes that affected decisions about suspending distributions. Our findings provide guidance on the revenue consequences of changing RMD rules and offer insights about the role of various behavioral considerations, such as inertia, in modeling distribution behavior.
    JEL: H2 J14 J26
    Date: 2014–09
  9. By: Tran, Vivian
    Abstract: Canada’s population has been aging steadily for several decades. In 1976, the median age of men in the population was only 27.2 years, but by 2013, had risen to 39.4 years. The trend reflects both an increase in the life expectancy of Canadians at birth and also the impact of the aging baby boom generation. While youth have historically experienced higher unemployment rates than older workers, the post-recession reality of a workforce still dominated by the baby boom generation – some of whom have delayed retirement due to uncertain economic conditions left behind from the most recent recession – has created concern that older workers are filling jobs that would otherwise have been held by youth. Whereas some countries have attempted to address this concern with policy initiatives providing older workers with incentives to retire early (such as the Job Release Scheme (JRS) of the 1970s and 80s in the United Kingdom), such policy proposals are often criticized as lacking a theoretical foundation – given the fact that older workers and youth are generally not perfect substitutes for one another. A study entitled “Workforce Aging and the Labour Market Opportunities of Youth: Evidence from Canada†(CLSRN Working Paper no. 139) by CLSRN affiliates Sundip Dhanjal and Tammy Schirle (both of Wilfrid Laurier University) estimates the effect of workforce aging on youth unemployment, employment, wages and school enrolment. The study finds no evidence to suggest youth labour market outcomes would improve if fewer older individuals were active in the labour market – and instead find some evidence that an aging workforce could have positive implications for young workers. While high school shootings make up a relatively small percentage of teenage murders, their negative impact on student psyche can be lasting and damaging. Extremely violent incidents could be a distraction from learning, and fear and the perception of an unsafe learning environment could impede students from being open to new opportunities that are essential to learning and, even more problematically, students may avoid attending school. Violent incidents can affect the allocation of teaching time. These factors could influence students’ cognitive performance and behavioral outcomes. Apart from the emotional and psychological trauma inflicted by school shootings, what impacts do these events have on academic performance of students who survive these events and return to school? A CLSRN study entitled “The Effect of High School Shootings on Schools and Student Performance†(CLSRN Working Paper no. 136) by Louis-Philippe Beland (Louisiana State University) and Dongwoo Kim (University of Illinois at Urbana-Champaign) find that school shootings significantly decrease the enrollment of students in grade 9 (high-school entrance grade), and test scores in Math and English
    Keywords: Population aging, Employment, Unemployment, Youth, Shootings, Student performance, Education
    JEL: J11 J21 I29 J13 K4
    Date: 2014–08–28
  10. By: Assaf Razin; Efraim Sadka
    Abstract: Over the years, there emerged two key policy differences between Europe and America, both welfare and migration-states. The former has more generous welfare state and more liberal migration policies than the latter. In this paper we attempt to provide a political-economy explanation for these key differences, based on the degree of coordination among member states of the economic union, and the different levels of population aging.
    JEL: F2 H23 H87
    Date: 2014–09
  11. By: Dimitris Christelis (CSEF, CFS and CEPAR); Dimitris Georgarakos (Goethe University Frankfurt, CFS and University of Leicester); Anna Sanz-de-Galdeano (University of Alicante and IZA)
    Abstract: Using data from the US Health and Retirement Study, we study the causal effect of increased health insurance coverage through Medicare and the associated reduction in health-related background risk on financial risk-taking. Given the onset of Medicare at age 65, we identify our effect of interest using a regression discontinuity approach. We find that getting Medicare coverage induces stockholding for those with at least some college education, but not for their less-educated counterparts. Hence, our results indicate that a reduction in background risk induces financial risk-taking in individuals for whom informational and pecuniary stock market participation costs are relatively low.
    Keywords: Health Insurance, Medicare, Stockholding, Regression Discontinuity, Household Finance
    JEL: D14 I13 G11
    Date: 2014–11–11
  12. By: Abidi, Hella; Klumpp, Matthias
    Abstract: The purpose of this research is to investige the impact of the demographic change on the logistics industry in Germany. In order to explore this with a better understanding of the impacts of demographic change on the overall competence situation in Germany, a simulation based on a competence survey from 2012 with 1,068 logistics employees is used. This shows the effects of aging working-age cohorts on the competence allocation in the German logistics workforce - but quite huge impacts on the total available knowledge pool mainly due to the decrease of available people within the total workforce. Furthermore we use the Industry Qualification Framework (IQF) Logistics as an instrument to mitigate the ensuing lack of employability in the German and European logistics industry. These results shall inspire further research and hands-on strategic management concepts to tackle questions of lifelong learning as well as migration and integration in the German logistics workforce.
    Date: 2014
  13. By: Plümper, Thomas (University of Essex); Neumayer, Eric (London School of Economics)
    Abstract: Objectives. We examined the effects of market income inequality (income inequality before taxes and transfers) and income redistribution via taxes and transfers on inequality in longevity. Methods. Life tables were used to compute Gini coefficients of longevity inequality for all individuals and for individuals that survived at least to the age of ten. Longevity inequality was regressed on market income inequality and income redistribution controlling for a range of potential confounders in a cross-sectional time-series sample of up to 29 predominantly Western developed countries and up to 37 years. Results. Income inequality before taxes and transfers had a positive effect on inequality in the number of years lived, while income redistribution (the difference between market income inequality and income inequality after taxes and transfers have been accounted for) had a negative effect on longevity inequality. Conclusions. Governments can reduce inequality in the number of years lived not only via public health policies, but also via their influence on market income inequality and the redistribution of incomes from the relatively rich to the relatively poor.
    Keywords: London School of Economics
    Date: 2014
  14. By: Johannes Geyer; Thorben Korfhage
    Abstract: In Germany, individuals in need of long-term care receive support through benefits of the long-term care insurance. A central goal of the insurance is to support informal care provided by family members. Care recipients can choose between benefits in kind (formal home care services) and benefits in cash. From a budgetary perspective family care is a cost-saving alternative to formal home care and to stationary nursing care. However, the opportunity costs resulting from reduced labor supply of the carer are often overlooked. We focus on the labor supply decision of family carers and the incentives set by the long-term care insurance. We estimate a structural model of labor supply and the choice of benefits of family carers. We find that benefits in kind have small positive effects on labor supply. Labor supply elasticities of cash benefits are larger and negative. If both types of benefits increase, negative labor supply effects are offset to a large extent.
    Keywords: labor supply, long-term care, long-term care insurance, structural model
    JEL: J22 H31 I13
    Date: 2014

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