nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒01‒26
sixteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Effectiveness of Government Intervention to Promote Elderly Employment: Evidence from Elderly Employment Stabilization Law By Ayako Kondo; Hitoshi Shigeoka
  2. Population Aging and Growth: the Effect of PAYG Pension Reform By Ken Tabata
  3. Does Retirement Make you Happy? a Simulaneous Equations Approach By Raquel Fonseca; Arie Kapteyn; Jinkook Lee; Gema Zamarro
  4. Where are the retirement savings of self-employed? An analysis of 'unconventional' retirement accounts By Mauro Mastrogiacomo; Rob Alessie
  5. Will They Take the Money and Work? An Empirical Analysis of People’s Willingness to Delay Claiming Social Security Benefits for a Lump Sum By Raimond Maurer; Olivia S. Mitchell; Ralph Rogalla; Tatjana Schimetschek
  6. Optimal pay-as-you-go social security when retirement is endogenous and labor productivity depreciates By Miyazaki, Koichi
  7. Are Current Tax and Spending Regimes Sustainable in Developing Asia? By Lee, Sang-Hyop; Mason, Andrew
  8. Pensions, Education, and Growth: A Positive Analysis By Tetsuo Ono; Yuki Uchida
  9. Bequests and Informal Long-Term Care: Evidence from the HRS Exit Interviews By Max Groneck; Frederic Krehl
  10. Benefit Incidence of Public Transfers: Evidence from the People’s Republic of China By Ke, Shen; Lee, Sang-Hyop
  11. Turbulence and the Employment Experience of Older Workers By Etienne Lalé
  12. The Effect of Medicare Eligibility on Spousal Insurance Coverage By Marcus Dillender; Karen Mulligan
  13. Long-Run Determinants of Intergenerational Transfers By John Karl Scholz; Ananth Seshadri; Kamil Sicinski
  14. The Implications of Differential Trends in Mortality for Social Security Policy By John Bound; Arline Geronimus; Javier Rodriguez; Timothy Waidmann
  15. Patronage Politics and the Development of the Welfare State: Confederate Pensions in the American South By Shari Eli; Laura Salisbury
  16. Une analyse économique de propositions visant à bonifier la couverture du risque de longévité By David Boisclair; Jean-Yves Duclos; Steeve Marchand; Pierre-Carl Michaud

  1. By: Ayako Kondo; Hitoshi Shigeoka
    Abstract: Since the pension eligibility age started to rise in 2001, there had been a gap between the eligibility age for full pension benefits and the prevailing retirement age in Japan. To fill the gap, the government of Japan revised the Elderly Employment Stabilization Law (EESL): starting from 2006, employers are legally obliged to introduce a system to continue employment up to the pension eligibility age. This paper examines the effect of this legal enforcement on elderly men¡¯s labor supply and employment status, by comparing the affected cohorts and cohorts a few years older than them. We find that the EESL revision actually increases the employment rate of men in the affected cohorts in their early 60s, and the effect is larger for employees of the large firms. Also, the increase in elderly workers who stay in the same employer does not replace elderly workers who switch employers, suggesting that the revised EESL does not hinder elderly worker¡¯s mobility.
    Date: 2013–10
  2. By: Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how pay-as-you-go (PAYG) pension reform from a defined-benefit scheme to a defined-contribution scheme affects economic growth in an overlapping generations model with endogenous growth. We show that in economies in which the old-age dependency ratio is relatively high and the size of pension benefits under a defined-benefit scheme is relatively large, PAYG pension reform from a defined-benefit scheme to a defined-contribution scheme mitigates the negative growth effect of population aging caused by a decline in the population growth rate or an increase in life expectancy.
    Keywords: Population aging, PAYG pensions, Defined-benefit schemes, Definedcontribution schemes
    JEL: D91 H55 O41
    Date: 2015–01
  3. By: Raquel Fonseca; Arie Kapteyn; Jinkook Lee; Gema Zamarro
    Abstract: Continued improvements in life expectancy and fiscal insolvency of public pensions have led to an increase in pension entitlement ages in several countries, but its consequences for subjective well-being are largely unknown. Financial consequences of retirement complicate the estimation of effects of retirement on subjective well-being as financial circumstances may influence subjective well-being, and therefore, the effects of retirement are likely to be confounded by the change in income. At the same time, unobservable determinants of income are probably related with unobservable determinants of subjective wellbeing, making income possibly endogenous if used as control in subjective wellbeing regressions. To address these issues, we estimate a simultaneous model of retirement, income, and subjective well-being while accounting for time effects and unobserved individual effects. Public pension arrangements (replacement rates, eligibility ru les for early and full retirement) serve as instrumental variables. We use data from HRS and SHARE for the period 2004-2010. We find that depressive symptoms are negatively related to retirement while life satisfaction is positively related. Remarkably, i ncome does not seem to have a significant effect on depression or life satisfaction. This is in contrast with the correlations in the raw data that show significant relations between income and depression and life satisfaction. This suggests that accounting for the endogeneity of income in equations explaining depression or life satisfaction is important.
    Keywords: Well-being, retirement, institutions, simultaneous equation approach
    JEL: I3 J26
    Date: 2014
  4. By: Mauro Mastrogiacomo; Rob Alessie
    Abstract: Survey data show that many respondents save for retirement in unconventional retirement accounts, such as investments in real estate. In countries where retirement savings are not mandatory for self-employed, representatives of this group often report this as an argument against making retirement savings compulsory. Our study shows that self-employed retirement savings are low and below individually pre-stated saving intentions, even though this group has generally no occupational pension. We also study the relation between the importance of a broad spectrum of saving motives, such as saving for retirement, and saving behavior. We show that finding the retirement motive important does not directly translate in additional retirement savings, both for self-employed and employees. The (median) annuity stream generated by conventional and unconventional accounts from age 67 is small; most savings are residual and are not being put aside for a specific motive.
    Keywords: retirement savings; precautionary savings; factor analysis; saving goals
    JEL: D12 D91 E21
    Date: 2015–01
  5. By: Raimond Maurer (Goethe University of Frankfurt); Olivia S. Mitchell (The Wharton School of the University of Pennsylvania); Ralph Rogalla (Goethe University of Frankfurt); Tatjana Schimetschek (Goethe University of Frankfurt)
    Abstract: This paper investigates whether exchanging the Social Security delayed retirement credit, currently paid as an increase in lifetime annuity benefits, for a lump sum would induce later claiming and additional work. We show that people would voluntarily claim about half a year later if the lump sum were paid for claiming any time after the Early Retirement Age, and about two-thirds of a year later if the lump sum were paid only for those claiming after their Full Retirement Age. Overall, people will work one-third to one-half of the additional months, compared to the status quo. Those who would currently claim at the youngest ages are likely to be most responsive to the offer of a lump sum benefit
    Date: 2014–09
  6. By: Miyazaki, Koichi
    Abstract: This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, the paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an allocation that maximizes welfare when a social planner distributes resources and forces an old agent to work and retire as she wants. The second-best allocation is an allocation that maximizes welfare when she can use only pay-as-you-go social security in a decentralized economy. The paper finds a range of an old agent's labor productivity such that the first-best allocation is achieved in the decentralized economy. This differs from the finding in Michel and Pestieau (2013) that the first-best allocation cannot be achieved in the decentralized economy.
    Keywords: Overlapping-generations model, pay-as-you-go social security, endogenous retirement, depreciation of labor productivity, first-best allocation, second-best allocation
    JEL: D91 H21 H55 J26
    Date: 2014–12–12
  7. By: Lee, Sang-Hyop (University of Hawaii at Manoa); Mason, Andrew (University of Hawaii at Manoa)
    Abstract: Changes in population age structure matter for public finances because the beneficiaries of public programs are primarily children and the elderly. This paper projects government spending on education, health care, and social protection in developing Asia up to 2050 using the National Transfer Accounts data set, United Nations’ population projections, and other long-range projections for real gross domestic product (GDP) to estimate likely fiscal burdens as a result of demographic changes and economic growth. The share of GDP devoted to public spending on health care and social protection will increase as demographic change and economic growth are mutually reinforcing. On the contrary, the share devoted to public spending on education will decline in Asia and the Pacific as a decline in fertility and the share of the school-age population dominates the increase in per capita benefits. The magnitude and the pattern by program, however, vary substantially as demographic change, growth, and the current level of public spending are quite different across economies. Social spending in the Republic of Korea; the People’s Republic of China; and Taipei,China is projected to more than double as a share of GDP by 2050, while it will be more modest in other areas of Asia and the Pacific.
    Keywords: fiscal projection; population aging; social welfare expenditure
    JEL: H51 H53 H68 J11
    Date: 2014–11–01
  8. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping generations model to capture the nature of the competition between generations regarding two redistribution policies, public education and public pensions. In addition, we investigate the effects of population aging on these policies and economic growth from a political economy viewpoint. We show that two aging factors, longevity and the political power of the old, have op- posite effects on redistribution policies and economic growth. The relative strength between the two factors is negative for pensions, but hump-shaped patterns appear for public education and economic growth.
    Keywords: economic growth; population aging; public education; public pen-sions
    JEL: D78 E24 H55
    Date: 2014–12
  9. By: Max Groneck; Frederic Krehl
    Abstract: Informal care of children for their frail elderly parents may induce parents to compensate their children for their help. To test this hypothesis, we use the Exit Interview from the Health and Retirement Study. Our results show that caregiving has a significant positive impact on the incidence and the amount of received bequests both at the extensive and intensive margin of help. Three pieces of evidence suggest exchange motives rather than altruism to be the main source for this outcome. First, financially more well off children are more likely to receive an inheritance. Second, we find that a positive impact of help on bequest requires a written will as a contract between the parent and the helping child. Third, our results are even more pronounced when employing a fixed effects model to control for family altruism.
    Keywords: Intergenerational Transfers, Strategic Bequest Motive, Informal Long-term care, Altruism
    JEL: D13 D19 J14
    Date: 2014–12–22
  10. By: Ke, Shen (Demographic Research Institute, Fudan University); Lee, Sang-Hyop (Center for Korean Studies, University of Hawaii at Manoa)
    Abstract: Benefit incidence analyses provide important insights into problems facing any government struggling to deliver essential and equitable social services. Utilizing the framework of the National Transfer Accounts Project, this paper analyzes the benefit incidence of public transfers across generations and socioeconomic groups in the People’s Republic of China in 2009. Public education transfers were equally distributed by residence, gender, and income groups at the primary and secondary levels but favored city dwellers, females, and the wealthy at the tertiary level. Public health-care programs tended to equally target the young and middle-aged from different socioeconomic groups but tilted toward urban dwellers, males, and higher income groups at older ages. Public pension spending strongly favored high-income groups, with rural residents, females, and lower income groups receiving greatly reduced benefits. Our results also indicate that total public spending favored elderly people as spending per person 65 years and older was twice that per child younger than 19. In the next 10 or 20 years, the government should endeavor to improve and strengthen public support systems. In addition to this effort, the currently fragmented health insurance system and pension system should move toward a unified system to reduce inequalities in benefit incidence across socioeconomic groups.
    Keywords: benefit incidence; public transfers; the People’s Republic of China
    JEL: E62 H53 O15
    Date: 2014–11–01
  11. By: Etienne Lalé
    Abstract: This paper studies the secular employment experience of older workers on both sides of the Atlantic, using a common framework to characterize changes in the macro-economy. We embed Ljungqvist and Sargent (1998, 2008)’s turbulence story into a general equilibrium environment with an operative labor supply margin. The model can jointly explain (i) the fall in (male) labor force participation in the United States, (ii) the similar but more pronounced decline in Europe along with rising unemployment rates and (iii) the concentration of these adverse employment outcomes on older workers. We use this framework to discuss the labor market effects of early retirement benefits. These benefits generate significant incentives to retire earlier, which in turn raises tax pressure and discourages job creation. We find that these effects are more pronounced in a turbulent economic environment, and especially so under stringent employment protection legislation.
    Keywords: Job-Search, Turbulence, European Unemployment, Labor Force Participation.
    JEL: E24 J21 J64
    Date: 2015–01
  12. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research); Karen Mulligan
    Abstract: A majority of married couples in the United States take advantage of the fact that employers often provide health insurance coverage to spouses. When the older spouses become eligible for Medicare, however, many of them can no longer provide their younger spouses with coverage. In this paper, we study how spousal eligibility for Medicare affects the health insurance and health care access of the younger spouse. We find spousal eligibility for Medicare results in the younger spouse having worse insurance coverage and reduced access to health care services.
    Keywords: Health Insurance, Medicare, Individual Market, Marriage, Employer Benefits, ACA
    JEL: I13 J3
    Date: 2015–01
  13. By: John Karl Scholz (University of Wisconsin-Madison); Ananth Seshadri (University of Wisconsin-Madison); Kamil Sicinski (University of Wisconsin-Madison)
    Abstract: Understanding whether the elderly are saving adequately is fundamental to understanding whether elderly households are able to maintain reasonable living standards. One factor that affects wealth accumulation is the extent to which parents need to support children and the extent to which children need to support parents. The presence of Social Security may affect intergenerational transfers, but the extent to which it ‘crowds out’ transfers from parents to children is controversial. The ideal dataset to analyze these issues would have detailed information on two or three generations and measures of long range outcomes of parents and their children. The Wisconsin Longitudinal Study (WLS) offers a possibility to analyze the impact of transfer patterns on wealth accumulation. We look at transfers over a long time period, informed by different theories of transfer behavior, as well as how cognitive skills and other attributes earlier in the life-cycle influence transfer and saving behavior later on in life. Long-term transfers are less equally distributed across siblings than short-term transfers, and the sum of transfers and inheritances is less equally distributed than transfers and inheritances alone. Transfers from parents-in-law are positive but statistically insignificantly correlated with the amount of transfers received from one’s own parents. Inter-vivos transfers from parents are not affected by transfers from parents-in-law. We find a strong positive association between the incidence of giving to own children and having received a gift from own parents, conditional on income and net worth.
    Date: 2014–09
  14. By: John Bound (University of Michigan); Arline Geronimus (University of Michigan); Javier Rodriguez (University of Michigan); Timothy Waidmann (Urban Institute)
    Abstract: While increased life expectancy in the U.S. has been used as justification for raising the Social Security retirement ages, independent researchers have reported that life expectancy declined in recent decades for white women with less than a high school education. However, there has been a dramatic rise in educational attainment in the U.S. over the 20th century suggesting a more adversely selected population with low levels of education. Using data from the National Vital Statistics System and the U.S. Census from 1990-2010, we examine the robustness of earlier findings to several modifications in the assumptions and methodology employed. We categorize education in terms of relative rank in the overall distribution, rather than by credentials or years of education, and estimate trends in mortality for the bottom quartile. We also consider race and gender specific changes in the distribution of life expectancy. We found no evidence that survival probabilities declined for the bottom quartile of educational attainment. Nor did distributional analyses find any subgroup experienced absolute declines in survival probabilities. We conclude that recent dramatic and highly publicized estimates of worsening mortality rates among non-Hispanic whites who did not graduate from high school are highly sensitive to alternative approaches to asking the fundamental questions implied. However, it does appear that low SES groups are not sharing equally in improving mortality conditions, which raises concerns about the differential impacts of policies that would raise retirement ages uniformly in response to average increases in life expectancy.
    Date: 2014–10
  15. By: Shari Eli; Laura Salisbury
    Abstract: Beginning in the 1880s, southern states introduced pensions for Confederate veterans and widows. They continued to expand these programs through the 1920s, while states outside the region were introducing cash transfer programs for workers, poor mothers, and the elderly. Using legislative documents, application records for Confederate pensions, and county-level census and electoral data, we argue that political considerations guided the enactment and distribution of these pensions. We show that Confederate pensions programs were introduced and funded during years in which Democratic gubernatorial candidates were threatened at the ballot box. Moreover, we offer evidence that pensions were disbursed to counties in which these candidates had lost ground to candidates from alternative parties.
    JEL: H0 I38 N0 N41 N42
    Date: 2015–01
  16. By: David Boisclair; Jean-Yves Duclos; Steeve Marchand; Pierre-Carl Michaud
    Abstract: Nous utilisons des méthodes de simulation pour analyser les impacts de certaines propo- sitions de réforme visant à améliorer la couverture du risque de longévité. Ce risque, qui peut en principe être adéquatement couvert par les régimes de retraite classiques à prestations déterminées, fait l’objet d’une attention particulière au Québec depuis quelques années, no- tamment en raison du déclin de la participation à de tels régimes. Les propositions récentes visant à bonifier la couverture du risque de longévité se concentrent en grande partie sur l’ex- pansion du « 2e pilier » du système de revenu de retraite, actuellement constitué du Régime de rentes du Québec. Nous considérons à ce titre une proposition-clé du Comité d’Amours (la rente longévité), ainsi que deux autres propositions : celle de Mintz et Wilson, qui vise à augmenter la générosité du régime actuel, et celle de Wolfson, qui introduit une notion de taux de cotisation et de prestations différenciés selon le revenu. À l’aide de données provenant des enquêtes de Statistique Canada, nous analysons pour plusieurs types d’individus le taux de rendement interne (TRI) de ces propositions en prenant en considération l’inégalité d’es- pérance de vie, la variabilité temporelle des revenus ainsi que les interactions avec la fiscalité et les différents programmes de soutien du revenu à la retraite. Nous contrastons les résultats avec ceux obtenus en effectuant des contributions additionnelles à des véhicules d’épargne vo- lontaire existants combinées à l’achat d’une rente simple au moment de la prise de la retraite.
    Keywords: risque de longévité, épargne retraite, inégalité, espérance de vie
    JEL: I14 J18 J26 J32
    Date: 2014

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