nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒02‒22
twenty-two papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Retirement Behaviour in Austria: Incentive Effects on Old-Age Labor Supply By Hanappi, Tibor Paul
  2. Effective Age of Retirement: Innovative Methodology and Recent Experience By Maxime Comeau; Denis Latulippe
  3. The introduction of disincentives for early retirement and its effect on labor market participation By Kemptner, Daniel; Timm, Boenke; Holger, Luethen
  4. Mapping of effective technology-based services for independent living for older people at home By Sephanie Carretero
  5. Title: Strategic Intelligence Monitor on Personal Health Systems Phase 3 (SIMPHS 3) – INAA (Netherlands) Case Study Report By Anna Jansen; Francisco Lupiañez-Villanueva; Alexandra Theben
  6. Social Security and the Interactions Between Aggregate and Idiosyncratic Risk By Alexander Ludwig; Daniel Harenberg
  7. The Importance of Economic Expectations for Retirement Entry By Barbara Broadway; John P. Haisken-DeNew
  8. What Drives the Increase in Health Care Costs with Age By Maciej Lis
  9. Unequal Bequests By Francesconi, Marco; Pollak, Robert; Tabasso, Domenico
  10. Lifecycle Patterns in the Socioeconomic Gradient of Risk Preferences By Schurer, Stefanie
  11. Dental Use and Expenditures for Older Uninsured Americans: The Simulated Impact of Expanded Coverage By Richard J. Manski; John F. Moeller; Haiyan Chen; Jody Schimmel; John V. Pepper Patricia A. St. Clair
  12. Bulgarian Welfare System (1989 – 2014) During the Transition and the Crisis By Nenovsky, Nikolay; MIlev, Jeko
  13. Decision-Making Approaches and the Propensity to Default: Evidence and Implications By Jeffrey R. Brown; Anne M. Farrell; Scott J. Weisbenner
  14. Age, Cohort and Co-Authorship By Daniel S. Hamermesh
  15. Can demography affect inflation and monetary policy? By Mikael Juselius; Előd Takáts
  16. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back into the Labor Market? By Boockmann, Bernhard; Brändle, Tobias
  17. Further thoughts on replacement demand in Europe. With a focus on ageing of the workforce By Künn-Nelen A.C.
  18. CBO’s 2014 Long-Term Projections for Social Security: Additional Information By Congressional Budget Office
  19. Comparing the Costs of the Veterans' Health Care System with Private-Sector Costs By Congressional Budget Office
  20. Quality, Quantity and Duration of Lives By Jean-Yves DUCLOS; Bouba HOUSSEINI
  21. Underestimated Benefits from Periphery: Internal Migration and Subjective Well-being By Kopmann, Angela; Rehdanz, Katrin
  22. Unmet Aspirations as an Explanation for the Age U-shape in Wellbeing By Schwandt, Hannes

  1. By: Hanappi, Tibor Paul
    Abstract: This research analyses retirement behaviour in Austria based on a combined administrative dataset. Data from the Austrian social security database is merged with a dataset that contains very detailed information on all pension-relevant information on the individual level, e.g. insurance records as well as complete earnings histories. Based on this data a comprehensive microsimulation model of the Austrian pension system is developed and applied to calculate retirement benefit entitlements for each and every individual, double-checking the calculation rules with the actual, administratively calculated pension entitlements. A range of (forward-looking) incentive measures that describe the individual decision problem is constructed. Specifically, social security wealth, accrual rate, peak and option values are computed for more than 300,000 individuals within each year of the observational period (2002-2009). Based on this characterisation of the incentive structure an econometric model is developed, thus providing robust evidence for the effects of the incentive measures on old age labor supply. Simulation of several reform scenarios shows that a stronger emphasis on financial incentives in the pension system (the introduction of additional bonusses and deductions) reduces the outof- labor-force ratio of individuals aged 56-65 by 16.3% for females and 13.4% for males.
    JEL: J26 H55 H31
    Date: 2014
  2. By: Maxime Comeau; Denis Latulippe
    Abstract: Methodology to estimate effective retirement age from the labor market has been developed over the last 15 years and is now commonly used for experience review and policy development. However, both transition from work to retirement (including gradual retirement) and the socio-economic environment have evolved over this period which includes the 2008 economic crisis. This paper presents innovative ways to estimate retirement age, in order to better assess effective retirement from employment and not only focus on labor force participation rates. It also makes possible the distinction between retirement from full-time employment vs part-time employment. Results are presented for four countries (Austria and Germany, Ireland and the United Kingdom) with rather diverging experience.
    Keywords: Retirement age, Work-retirement transition, Gradual retirement, Retirement experience, Older workers’employment, Retirement age estimation
    JEL: J26
    Date: 2015
  3. By: Kemptner, Daniel; Timm, Boenke; Holger, Luethen
    Abstract: We evaluate the actual effectiveness of disincentives that have been introduced for early retirement in Germany. Therefore, we set up a detailed model of the German social security and tax system with special attention to the PAYG-pension system. Building on the fact that the institutional changes were phased in, impacting birth cohorts to a different degree we are able to estimate the parameters of a structural dynamic retirement model. This allows us to answers the question, whether and to what degree disincentives are able to steer retirement behavior of German pensioners. These estimates are based on high quality administrative data. We also discuss the implications for the financial stability of the PAYG-pension scheme and investigate distributional effects. On the basis of our simulations we try to give some insights on how a complementary private old age insurance plan (e.g. a life annuity) would have to look like, if the pre-reform level of old age income is to be retained.
    JEL: C61 J26 H55
    Date: 2014
  4. By: Sephanie Carretero (European Commission – JRC - IPTS)
    Abstract: This report identifies and maps technology-based services which have successfully enhance the independent living of older adults at home in and outside Europe. This is the first deliverable of the research project "Long-term care strategies for independent living of older people (ICT-AGE)", as a study targeted to produce policy recommendations for DG EMPL to support Member States in their long-term care strategy, according to the EC policy priorities of the Social Investment Package, the European Semester and the European Innovation Partnership on Active and Healthy Ageing. We found 14 different, mature and mainstreamed technology-based services for the independent living of older adults at home that effectively address a set of long-term care needs. To the best of our knowledge, this is the first study that has managed to obtain a number of practices in technology-based services which have scientifically evidenced to increase the independence of older people living at home, improve the productivity of carers, enable better quality of care, and generate savings, contributing to the financial sustainability of the long-term care systems.
    Keywords: long-term care, social investment, social return, information and communication technologies, active and healthy ageing, quality of care, productivity, carers, financial sustainability, care, savings, ageing in place, social innovation
    JEL: I00 I18
    Date: 2015–01
  5. By: Anna Jansen (Independent consultant); Francisco Lupiañez-Villanueva (Open Evidence); Alexandra Theben (Open Evidence)
    Abstract: The aim of INAA is to improve the quality of life (reducing feelings of loneliness, maintaining a meaningful life, creating a feeling of solidarity) and autonomy of frail elderly people living independently, allowing them to maintain a high level of physical functioning. In addition, this approach also aims to reduce the burden on informal caregivers who can benefit from the expertise of active elderly people (social/community participation) and contribute to enhancing cohesion in the suburb/neighbourhood. INAA aims to reinforce the coordination between residents, the social care and the healthcare systems at a neighbourhood level, improving the social network around frail older people and their informal caregivers in order to detect potential problems early on.
    Keywords: SIMPHS, eHealth, Remote Monitoring, ageing, integrated care, independent living, case studies, facilitators, governance, impact, drivers, barriers, integration, organisation
    JEL: I11 I18 O33 O38
    Date: 2015–01
  6. By: Alexander Ludwig (CMR, University of Cologne); Daniel Harenberg (ETH Zürich)
    Abstract: We ask whether a PAYG financed social security system is welfare improving in an economy with idiosyncratic and aggregate risk. We argue that interactions between the two risks are important for this question. One is a direct interaction in form of a countercyclical variance of idiosyncratic income risk. The other indirectly emerges over a household's life-cycle because retirement savings contain the history of idiosyncratic and aggregate shocks. We show that this leads to risk interactions even when risks are statistically independent. In our quantitative analysis, we find that introducing social security with a contribution rate of two percent leads to welfare gains of 2.2% of life-time consumption in expectation, despite substantial crowding out of capital. This welfare gain stands in contrast to the welfare losses documented in the previous literature which studies one risk in isolation. We show that jointly modeling both risks is crucial: 60% of the welfare benefits from insurance result from the interactions of risks.
    Date: 2014
  7. By: Barbara Broadway (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); John P. Haisken-DeNew (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: We estimate hazard rates of retirement entry as a function of the option value of work. The individuals’ expectations about the future economy are incorporated in the option value of work, through which they can impact on the timing of retirement entry. In a scenario where individuals expect a strong upturn, the annual hazard rate of retirement entry (average 8.4%) is reduced by 6.0% or half a percentage point compared to a scenario where they expect a downturn. Had individuals been able to anticipate the Global Financial Crisis, the mere expectation of this downturn would have increased retirement entries by 8.7%.
    Keywords: Retirement, expectations, pensions
    JEL: J26 D84 J32
    Date: 2014–12
  8. By: Maciej Lis (Instytut Badañ Strukturalnych)
    Abstract: The aim of the article is to show the role of the drivers of health care costs increases with age. An innovative decomposition strategy has been proposed and applied to the population-wide data on health care expenditure in Poland. We have found that the health care costs dynamics with age are driven by the rise in prevalence and the frequency of the use of the health care system. The cost of procedures and the share of decedents play minor roles here. If the pattern of morbidity remains constant, mortality constitutes an important restraint that prevents the costs of care exploding.
    Keywords: healthcare expenditure, ageing, red herring, death related costs
    JEL: H51 I12 I18 J14
    Date: 2015–01
  9. By: Francesconi, Marco (University of Essex); Pollak, Robert (Washington University, St. Louis); Tabasso, Domenico (University of Geneva)
    Abstract: Using data from the Health and Retirement Study (HRS), we make two contributions to the literature on end-of-life transfers. First, we show that unequal bequests are much more common than generally recognized, with one-third of parents with wills planning to divide their estates unequally among their children. These plans for unequal division are particularly concentrated in complex families, that is, families with stepchildren and families with genetic children with whom the parent has had no contact (e.g., children from previous marriages). We find that in complex families past and current contact between parents and children reduces or eliminates unequal bequests. Second, although the literature focuses on the bequest intentions of parents who have made wills, we find that many elderly Americans have not made wills. Although the probability of having a will increases with age, 30 percent of HRS respondents aged 70 and over have no wills. Of HRS respondents who died between 1995 and 2010, 38 percent died intestate (i.e., without wills). Thus, focusing exclusively on the bequest intentions of parents who have made wills provides an incomplete and misleading picture of end-of-life transfers.
    Keywords: bequests, intergenerational transfers, altruism, exchange, evolutionary motives, family structure
    JEL: D13 J12 K36
    Date: 2015–01
  10. By: Schurer, Stefanie (University of Sydney)
    Abstract: Who is most likely to change their risk preferences over the lifecourse? Using German nationally representative survey data and methods to separate age from cohort effects, we estimate the lifecycle patterns in the socioeconomic gradient of self-reported risk preferences. Tolerance to risk drops by 0.5 SD across all groups from late adolescence to age 40. From mid to old age, risk tolerance continues to drop for the most disadvantaged, while it stabilizes for all other groups. By age 65, the socioeconomic gradient reaches a maximum of 0.5 SD. Extreme risk aversion among the elderly poor has important policy implications.
    Keywords: risk preferences, socioeconomic inequalities, life-course analysis, cohort effects, SOEP
    JEL: D81 D01 D63
    Date: 2015–01
  11. By: Richard J. Manski; John F. Moeller; Haiyan Chen; Jody Schimmel; John V. Pepper Patricia A. St. Clair
    Abstract: Providing dental coverage to previously uninsured older adults would produce estimated monthly costs net of markups for administrative costs that comport closely to current market rates. Estimates also suggest that the total cost of providing dental coverage targeted specifically to nonusers of dental care may be less than similar costs for prior users.
    Keywords: Dental utilization, insurance, coverage, retirement
    JEL: I
    Date: 2015–02–01
  12. By: Nenovsky, Nikolay; MIlev, Jeko
    Abstract: Bulgarian welfare system was significantly changed in the late 1990’s and in early 2000’s following the whole economic and political changes since the collapse of communist system. On the next lines an attempt to summarize the most important changes in the Bulgarian economy in the early 2000’s is made. The accent is put on the welfare system and social inclusion. The reforms in the pension system and in the system concerning the employment policy in Bulgaria are at the center of the research since these two spheres appeared to be the most sensitive to the changes that took place at that time.
    Keywords: Welfare System, Pension System, Transition, Bulgaria
    JEL: I3 P3
    Date: 2014
  13. By: Jeffrey R. Brown; Anne M. Farrell; Scott J. Weisbenner
    Abstract: This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals’ decision-making approaches as well as their economic and demographic characteristics. Using a survey of plan participants, we find that procrastination and the need for cognitive closure are important determinants of the likelihood of default. We also explore an important implication of defaulting – individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.
    JEL: D03 D14 G11
    Date: 2015–02
  14. By: Daniel S. Hamermesh
    Abstract: The previously documented trend toward more co- and multi-authored research in economics is partly (perhaps 20 percent) due to different research styles of scholars in different birth cohorts (of different ages). Most of the trend reflects profession-wide changes in research style. Older scholars show greater variation in their research styles than younger ones, who use similar numbers of co-authors in each published paper; but there are no differences across cohorts in scholars’ willingness to work with different coauthors. There are only small gender differences in the impacts of age on numbers of coauthors, but substantial differences on choice of coauthors.
    JEL: A11 B31 J01
    Date: 2015–02
  15. By: Mikael Juselius; Előd Takáts
    Abstract: Several countries are concurrently experiencing historically low inflation rates and ageing populations. Is there a connection, as recently suggested by some senior central bankers? We undertake a comprehensive test of this hypothesis in a panel of 22 countries over the 1955–2010 period. We find a stable and significant correlation between demography and low-frequency inflation. In particular, a larger share of dependents (ie young and old) is correlated with higher inflation, while a larger share of working age cohorts is correlated with lower inflation. The results are robust to different country samples, time periods, control variables and estimation techniques. We also find a significant, albeit unstable, relationship between demography and monetary policy.
    Keywords: demography, ageing, inflation, monetary policy
    Date: 2015–02
  16. By: Boockmann, Bernhard (Institut für Angewandte Wirtschaftsforschung (IAW)); Brändle, Tobias (Institut für Angewandte Wirtschaftsforschung (IAW))
    Abstract: Job search assistance and intensified counseling have been found to be effective for labor market integration by a large number of studies, but the evidence for older and hard-to-place unemployed individuals more specifically is mixed. In this paper we present key results from the evaluation of "Perspektive 50plus", a large-scale active labor market program directed at the older unemployed in Germany. To identify the treatment effects, we exploit regional variation in program participation. Based on survey evidence, we argue that participation of regions is not endogenous in the vast majority of cases. We use a combination of different evaluation estimators to check the sensitivity of the results to selection, substitution and local labor market effects. We find large positive effects of the program in the range of five to ten percentage points on integration into unsubsidized employment. However, there are also substantial lock-in effects, such that program participants have a higher probability of remaining on public welfare benefit receipt for up to one year after commencing the program.
    Keywords: evaluation, active labor market programs, long-term unemployment, older unemployed
    JEL: J68 J14
    Date: 2015–01
  17. By: Künn-Nelen A.C. (ROA)
    Abstract: This report summarises some of the latest results from the Cedefop Skillsnet project on Forecasting skill supply and demand in Europe to 2022. This is part of an ongoing Framework Agreement which extends over 4 years. This report documents work carried out in Year 2 2014. The researchers are grateful to Cedefop for financial support the Framework Agreement relates to open invitation to tender No AO/RPA/AZU-VKVET/skill-forecast/003/12.
    Date: 2015
  18. By: Congressional Budget Office
    Abstract: This report presents additional information about CBO’s long-term projections of revenues and outlays for Social Security and provides information on Social Security benefits and payroll taxes for people born in different years and at different earnings levels. CBO has made a number of changes in the presentation and methodology of its distributional estimates since last year’s report. Lifetime Social Security benefit-to-tax ratios are higher this year as a result of those changes.
    JEL: H55 H60 H68 J26
    Date: 2014–12–18
  19. By: Congressional Budget Office
    Abstract: Legislation enacted in 2014 calls for the Veterans Health Administration (VHA) to expand the availability of health care to eligible veterans. The structure of VHA and published studies suggest that VHA care has been less expensive than care provided by the private sector. However, limited evidence and substantial uncertainty make it difficult to reach firm conclusions about whether it would be cheaper to expand veterans' access to health care in the future through VHA facilities or the private sector.
    JEL: I13 I18
    Date: 2014–12–10
  20. By: Jean-Yves DUCLOS (Université Laval); Bouba HOUSSEINI (FERDI)
    Abstract: The evaluation of development processes and of public policies often involves comparisons of social states that differ in income distributions, population sizes and life longevity. This may require social evaluation principles to be sensitive to the quality, the quantity and the duration of lives. This paper 1) reviews some of the normative issues at stake, 2) proposes and discusses some specific methods to address them in a generalized utilitarian framework, and 3) briefly illustrates the application of some of these methods to the global distribution of incomes, population sizes and longevity over the last century. Depending on the approach taken, it is found inter alia that global social welfare in 2010 can be deemed to be between 1.8 and 407 times that of 1910, the role given to the quantity of lives being particularly important in that assessment.
    JEL: I31 J17
    Date: 2015–01
  21. By: Kopmann, Angela; Rehdanz, Katrin
    Abstract: This paper is among the first to link internal migration and subjective well-being in developed countries. Economic theory predicts that individuals migrate towards urban agglomerations, if the potential gain in income is sufficient to cover costs. However, this narrow view cannot explain why migration exists also to the rural periphery. In our analysis, we investigate non-monetary benefits beyond economics from internal migration. Using highly disaggregated spatial information on people s migration decisions and their subjective well-being from 2006 to 2010 for Germany, we control for selection bias by applying an individual fixed effect model with additional controls on the labor market region level. We find positive benefits from migration, which are positive and diminishing with distance. Urban-to-rural migration provides higher benefits than rural-to-urban migration in general. Older generations derive large negative benefits from rural-to-urban migration, but positive benefits from urban-to-rural migration. The latter suggests that economic theory underestimates benefits from migration to the periphery when ignoring non-monetary compensating differentials.
    JEL: A12 C33 R23
    Date: 2014
  22. By: Schwandt, Hannes
    Abstract: An emerging economic literature has found evidence that wellbeing follows a U-shape over age. Some theories have assumed that the U-shape is caused by unmet expectations that are felt painfully in midlife but beneficially abandoned and experienced with less regret during old age. In a unique panel of 132,609 life satisfaction expectations matched to subsequent realizations, I find that future life satisfaction is strongly overestimated when young and underestimated during old age. This pattern is stable over time and observed within cohorts as well as across socio-economic groups. These findings support theories that unmet expectations drive the age U-shape in wellbeing.
    JEL: I30 J10 D84
    Date: 2014

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