nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒02‒28
29 papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Does Retirement Make you Happy? A Simultaneous Equations Approach By Raquel Fonseca ; Arie Kapteyn ; Jinkook Lee ; Gema Zamarro
  2. Is caring for elderly parents detrimental to women’s mental health? The influence of the European North-South gradient By Elenka Brenna ; Cinzia Di Novi
  3. The Financial Crisis and Consumers' Income and Pension Expectations By Luc Bissonnette ; Arthur van Soest
  4. Time Inconsistent Preferences and the Annuitization Decision By Schreiber, Philipp ; Weber, Martin
  5. Allocation of Expenditures in Elderly Households and the Cost of Widowhood By Daniel Burkhard
  6. A decomposition analysis of the German gender pension gap By Hänisch, Carsten ; Klos, Jonas
  7. Unequal Bequests By Francesconi, Marco ; Pollak, Robert A. ; Tabasso, Domenico
  8. The Great Recession, Retirement and Related Outcomes By Alan L. Gustman ; Thomas L. Steinmeier ; Nahid Tabatabai
  9. The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark By Hansen, Marianne Frank ; Schultz-Nielsen, Marie Louise ; Tranæs, Torben
  10. Age, Cohort and Co-Authorship By Hamermesh, Daniel S.
  11. The Coalition's Record on Adult Social Care: Policy, Spending and Outcomes 2010-2015 By Tania Burchardt ; Polina Obolenskaya ; Polly Vizard
  12. The Future of Social Security Pensions in Japan: A Review of the 2014 Government Actuary Report By Takayama, Noriyuki
  13. Impacts of Informal Caregiving on Caregiver Employment, Health, and Family By Bauer, Jan M. ; Sousa-Poza, Alfonso
  14. Voluntary Work, Health and Subjective Wellbeing: a Resource for Active Ageing. By Bechetti, Leonardo ; Conzo, Pierluigi ; Di Febbraro, Mirko
  15. Racial Disparities in Savings Behavior for a Continuously Employed Cohort By Kai Yuan Kuan ; Mark R. Cullen ; Sepideh Modrek
  16. Does Quality, Quantity and Duration of Lives By Jean-Yves Duclos ; Bouba Housseini
  17. Social Protection in ASEAN: Challenges and Initiatives for Post-2015 Vision By Fauziah ZEN ; Mukul G. ASHER
  18. The (w)health of Nations: the Contribution of Health Expenditure to Active Ageing. By Leonardo, Bechetti ; Conzo, Pierluigi ; Salustri, Francesco
  19. Overlapping political budget cycles in the legislative and the executive By Dirk Foremny ; Ronny Freier ; Marc-Daniel Moessinger ; Mustafa Yeter
  20. Incluir socialmente a los adultos mayores: ¿es suficiente Pensión 65? By Luis García Núñez
  21. Stochastic Population Analysis: A Functional Data Approach By Lei Fang ; Wolfgang K. Härdle ; ;
  22. Intergenerational Redistribution through Monetary Policy By Makoto Nakajima
  23. Does Medicare Part D save lives? By Dunn, Abe ; Shapiro, Adam Hale
  24. Differential Mortality and Progressivity of Social Security By Ali Shourideh ; Roozbeh Hosseini
  25. The Welfare State and Migration: A Dynamic Analysis of Political Coalitions By Razin, Assaf ; Sadka, Efraim ; Suwankiri, Benjarong
  26. Population structure and consumption growth: Evidence from National Transfer Accounts By Kuhn, Michael ; Prettner, Klaus
  27. Should Icelandic pension funds hedge currency risk in their foreign investments? By Ásgeir Daníelsson
  28. Love, money, and old age support : does parental matchmaking matter ? By Huang, Fali ; Jin, Ginger Zhe ; Xu, Lixin Colin
  29. Education, Health and Subjective Wellbeing in Europe. By Leonardo, Bechetti ; Conzo, Pierluigi ; Pisani, Fabio

  1. By: Raquel Fonseca (Université du Québec à Montréal ); Arie Kapteyn (University of Southern California ); Jinkook Lee (University of Southern California ); Gema Zamarro (University of Southern California )
    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 rules 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, income 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.
    Date: 2014–09
  2. By: Elenka Brenna (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore ); Cinzia Di Novi (Università Ca’ Foscari, Dipartimento di Economia, Venezia )
    Abstract: In the last decades, both the lengthening of life expectancy and an accentuated decline in birth rates have reduced the consistency of the younger generational cohorts. Due to an ageing population, the burden of care giving is expected to intensify in the next quarter of the century in Europe, especially for mature women. This paper investigates the impact of the provision of constant care for elderly parents on the mental health of adult daughters, between the ages of 50 and 65, living in different European countries. Data is collected from the Survey of Health, Ageing and Retirement in Europe (SHARE). Information on mental health status is provided by Euro-D depression scale, a standardized measure of depression employed across European countries. We focus on differences in the effects according to a North–South gradient: we test whether the relationship between informal caregiving and mental health differs across European macro- regions. Our results reveal the presence of a North-South gradient in the effect of caring on women’s mental health.
    Keywords: caregiver burden, depression, parent care, LTC systems, mature women
    JEL: I10 I12 D10
    Date: 2013–11
  3. By: Luc Bissonnette ; Arthur van Soest
    Abstract: The expectations of economic agents play a crucial role in almost any inter-temporal economic model. A period of economic crisis may make consumer expectations more pes- simistic and affect their saving or retirement plans and decisions. Using 2009-2012 panel data for a representative sample of the Dutch population, we analyze consumers’ per- ception of the crisis and its expected impact on the household. Second, we analyze the deviations between short run income expectations and realizations, and how they are shaped by how people perceive the crisis. Finally, we study how crisis perceptions affect retirement age and income expectation.
    Keywords: Subjective probabilities, retirement, replacement rates
    JEL: D84 H55 J26
    Date: 2015
  4. By: Schreiber, Philipp ; Weber, Martin
    Abstract: When entering retirement most people face the decision whether they would like their defined contribution account balance paid as a lump sum or to annuitize the amount. The fact that people tend to choose the lump sum even if economic reasons suggest not to is called the annuity puzzle. In a large online survey, we find that people behave time inconsistent: older people have a stronger tendency to choose the lump sum than younger people. This effect is considerably stronger for participants that answer simple time preference questions inconsistently. Our findings suggest to think about precommitment devices for the annuitization decision.
    Keywords: annuities; annuity puzzle; behavioral finance; insurance; longevity risk; survey study
    JEL: D14 D91 G02 H55 J14 J26
    Date: 2015–02
  5. By: Daniel Burkhard
    Abstract: Widowhood and retirement are likely to change the economic environment of elderly households. While retirement primarily changes income and expenditure patterns, widowhood fundamentally changes the structure of the household. Beside high non-monetary cost of losing the partner, resources are no longer shared and economies of scale arising from joint consumption are lost. This paper applies the Lewbel and Pendakur (2008) collective household model to expenditure data on elderly households in Switzerland. The findings suggest that between 40 and 50% of household resources are assigned to wives and both spouses save approximately 25% on expenditures due to economies of scale in consumption. Widowers tend to have higher wealth than widows. Estimates of indifference scales, however, indicate that the financial loss related to widowhood is larger for men than for women. Moreover, ignoring within household inequality, as implicitly done by traditional equivalence scales, underestimates total inequality among individuals.
    Keywords: Collective Household Model; Indifference Scale; Resource Shares; Economies of Scale in Consumption; Demand System Estimation; Engel Curves; Elderly Households
    JEL: D12 D13 C30
    Date: 2015–02
  6. By: Hänisch, Carsten ; Klos, Jonas
    Abstract: This paper discusses the gap in own old-age incomes of men and women and explores the causes for these differences by means of decomposition methods using German micro-data of the survey 'Alterssicherung in Deutschland' (ASID). The Gender Pension Gap has decreased but still amounts to about 60% as of 2007. We find that this gap is mainly explained by differences in labor market experience and education. The gap is especially high at the lower end of the pension income distribution. The contribution of differing labor market experiences to the explained gap is particularly pronounced for retires with low pensions.
    Keywords: Social Security,Public Pensions,Pension Gap,Decomposition
    Date: 2014
  7. By: Francesconi, Marco ; Pollak, Robert A. ; Tabasso, Domenico
    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: altruism; bequests; evolutionary motives; exchange; family structure; intergenerational transfers
    JEL: D13 J12 K36
    Date: 2015–02
  8. By: Alan L. Gustman ; Thomas L. Steinmeier ; Nahid Tabatabai
    Abstract: This paper uses data from the Health and Retirement Study to examine retirement and related labor market outcomes for the Early Boomer cohort, those in their mid-fifties at the onset of the Great Recession. Outcomes are then compared with older cohorts at the same age. The Great Recession increased their probability of being laid off and the length of time it took to find other full-time employment. Differences in layoffs between those affected by the recession and members of older cohorts in turn accounted for almost the entire difference between cohorts in employment change with age. The Great Recession does not appear, however, to have depressed the wages in subsequent jobs for those who experienced a layoff. In 2010, 17 percent of the Early Boomers were Not Working and Not Retired or Partially Retired, and 6 percent were unemployed, leaving at least 9 percent who were not working and not unemployed but not retired or only partially retired. At the recession’s peak, half of those who experienced a layoff ended up in the Not Retired or Partially Retired, Not Working category. But only a quarter of those who declared themselves to be Not Retired or Partially Retired, and were Not Working, had experienced a layoff. Most of the jump in Not Retired or Partially Retired, Not Working appears to reflect a change in expectations about the potential or need for future work, a change that is not the result of an actual job loss.
    JEL: E24 E32 J11 J14 J21 J26 J4 J6 J63 J64 J82
    Date: 2015–02
  9. By: Hansen, Marianne Frank (Danish Rational Economic Agents Model (DREAM) ); Schultz-Nielsen, Marie Louise (Rockwool Foundation Research Unit ); Tranæs, Torben (Rockwool Foundation Research Unit )
    Abstract: All over Europe, ageing populations threaten nations' financial sustainability. In this paper we examine the potential of immigration to strengthen financial sustainability. We look at a particularly challenging case, namely that of Denmark, which has extensive tax-financed welfare programmes that provide a high social safety net. The analysis is based on a forecast for the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. Net contributions to the public purse are presented both as cross-sectional figures for a long time horizon and as average individual life-cycle contributions. The main conclusion is that immigrants from richer countries have a positive fiscal impact, while immigrants from poorer countries have a large negative one. The negative effect is caused by both a weak labour market performance and early retirement in combination with the universal Danish welfare schemes.
    Keywords: immigration, sustainable fiscal policy, welfare benefits
    JEL: F22 E62 J61
    Date: 2015–02
  10. By: Hamermesh, Daniel S. (University of Texas at Austin, Royal Holloway )
    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.
    Keywords: sociology of economics, bibliometrics, rewards in economics
    JEL: A11 J01 B31
    Date: 2015–02
  11. By: Tania Burchardt ; Polina Obolenskaya ; Polly Vizard
    Abstract: Approaching 1.3 million older people and younger disabled and mentally ill adults use social care services in England, and 3.2 million are cared for informally, by their families and friends. How did the Coalition respond to long-term pressures that are putting care services and carers under growing stress?
    Date: 2015–01
  12. By: Takayama, Noriyuki
    Date: 2015–01
  13. By: Bauer, Jan M. (University of Hohenheim ); Sousa-Poza, Alfonso (University of Hohenheim )
    Abstract: As the aging population increases, the demand for informal caregiving is becoming an ever more important concern for researchers and policy-makers alike. To shed light on the implications of informal caregiving, this paper reviews current research on its impact on three areas of caregivers' lives: employment, health, and family. Because the literature is inherently interdisciplinary, the research designs, sampling procedures, and statistical methods used are heterogeneous. Nevertheless, we are still able to draw several conclusions: first, despite the prevalence of informal caregiving and its primary association with lower levels of employment, the affected labor force is seemingly small. Second, such caregiving tends to lower the quality of the caregiver's psychological health, which also has a negative impact on physical health outcomes. Third, the implications for family life remain under investigated. The research findings also differ strongly among subgroups, although they do suggest that female, spousal, and intense caregivers tend to be the most affected by caregiving.
    Keywords: informal care, employment, work hours, health, review
    JEL: E26 J14
    Date: 2015–02
  14. By: Bechetti, Leonardo ; Conzo, Pierluigi ; Di Febbraro, Mirko (University of Turin )
    Abstract: The hypothesis that active community involvement is beneficial for health finds strong support in the medical literature and in most policy guidelines for active ageing in OECD countries. We testit empirically documenting that lagged voluntary work is significantly correlated with later changes in various aggregated and disaggregated health indicators. However, when controlling for panel attrition, endogeneity and reverse causality, the positive effect of voluntary work remains robust only for a limited number of indicators. We calculate the monetary equivalent of health-related subjective wellbeing benefits of volunteer work with the compensating variation approach and compare it with benefits in terms of the social value of increased longevity.
    Date: 2015–02
  15. By: Kai Yuan Kuan ; Mark R. Cullen ; Sepideh Modrek
    Abstract: The wealth gap has reached record highs. At the same time there has been substantial proliferation of 401(k) savings accounts as the dominant retirement savings vehicle, and these accounts make up an increasing proportion of overall wealth. In this paper we examine 401(k) saving behavior of continuously employed workers over an eight-year period at a single, geographically diverse employer. We demonstrate substantial difference in 401(k) savings behavior by employee ethnicity even within a single employer 401(k) plan architecture. We show both African American and Hispanic employees are less likely to participate in the 401(k) plans. Moreover, conditional on participation African Americans contribute a lower proportion of their income to their 401(k) plan on average. We also show that African Americans and Hispanics tend to draw down on their 401(k) balances more often. Finally, we document that both African Americans and Hispanics favor safer assets within their plan options. Together these differences substantially impact the level of 401(k) balances accumulated and therefore overall wealth accumulation.
    JEL: D14 D31 I31 J11 J32
    Date: 2015–02
  16. By: Jean-Yves Duclos ; Bouba Housseini
    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.
    Keywords: Global welfare; Critical-level utilitarianism; Social evaluation; Longevity; Life expectancy; Population size
    JEL: D31 D63 I32 O15 Q56
    Date: 2015
  17. By: Fauziah ZEN (Economic Research Institute for ASEAN and East Asia (ERIA) ); Mukul G. ASHER (Professorial Fellow, National University of Singapore, Councillor, Takahashila Institution )
    Abstract: The Association of Southeast Asian Nations (ASEAN) is engaged in framing a post- 2015 vision for social protection in ASEAN which would facilitate productive ageing. This paper assesses existing social protection systems in ASEAN and suggests initiatives which policymakers and other stakeholders could consider for progressing towards a more robust social protection system. The paper argues that progressing towards the post-2015 vision of social protection will require greater coordination between ASEAN’s economic and social sector groups, as weak social protection systems existing today will increasingly constrain future economic growth. ASEAN as a group will also need to lessen its reliance on outside donors for funding and expertise. The specific initiatives suggested for facilitating productive ageing in ASEAN are (i) creating an ASEAN social protection forum for developing more robust databases, encouraging communication and indigenous research, and rendering technical assistance to members; (ii) pursuing measures to reduce expenditure needs of the elderly, including well-designed discount systems for public amenities and basic needs; (iii) giving greater priority to cross-border worker agreements to improve their living conditions, and encourage totalization agreements; and (iv) enhancing professionalism and systemic perspectives
    Keywords: ASEAN, social protection, cross-border workers, pensions, severance payment, workers'compensation, labour market, demographic trends
    JEL: H55 J18 J21 E26
    Date: 2015–02
  18. By: Leonardo, Bechetti ; Conzo, Pierluigi ; Salustri, Francesco (University of Turin )
    Abstract: We investigate the impact of health expenditure on health outcomes on a large sample of Europeans aged above 50 on individual and country level data. We find a significant negative impact on changes in the number of chronic diseases which varies according to age, health styles, gender, income and education subgroups. Our findings indicate potentially heterogeneous support to health expenditure across interest groups and are robust when we instrument health expenditure with parliament political composition.
    Date: 2015–02
  19. By: Dirk Foremny (Universidad de Barcelona & IEB ); Ronny Freier (German Institute for Economic Research (DIW Berlin) & Free University Berlin ); Marc-Daniel Moessinger (Centre for European Economic Research (ZEW Mannheim) ); Mustafa Yeter (Centre for European Economic Research (ZEW Mannheim) )
    Abstract: We advance the literature on political budget cycles by testing separately for cycles in expenditures for elections in the legislative and the executive. Using municipal data, we can separately identify these cycles and account for general year effects. For the executive branch, we show that it is important whether the incumbent re-runs. To account for the potential endogeneity associated with this decision, we apply a unique instrumental variables approach based on age and pension eligibility rules. We find sizable and significant effects in expenditures before council elections and before joint elections when the incumbent re-runs.
    Keywords: Election cycles, municipal expenditures, council and mayor elections, instrumental variables approach
    JEL: H11 H71 H72 H74
    Date: 2015
  20. By: Luis García Núñez (Departamento de Economía - Pontificia Universidad Católica del Perú )
    Abstract: La población peruana presenta un lento pero progresivo proceso de envejecimiento esperándose que en los próximos años el número de adultos mayores aumente. Las estadísticas actuales muestran que en la actualidad un importante porcentaje de adultos mayores de 65 años o más no cuentan ni con seguros de salud ni con pensiones de jubilación. Pese a que en los últimos años han existido algunos programas y políticas aplicadas directamente a los adultos mayores–como por ejemplo el Seguro Integral de Salud, o el reciente programa Pensión 65–con el fin de incluirlos a los beneficios mencionados, estos parecen ser insuficientes. Otras políticas más antiguas y un tanto más “preventivas” en el sentido que se orientan a los actuales jóvenes quienes serán los adultos mayores del mañana –como el Sistema Privado de Pensiones, las Empresas Prestadoras de Salud (EPS), y las modalidades de nuevos seguros independientes de EsSalud– tampoco presentan avances importantes que nos lleven a pensar que el problema de los adultos mayores del futuro esté totalmente resuelto. En este documento se revisa la problemática de este importante sector, se revisan críticamente los alcances y limitaciones de estas políticas, y de políticas recientes dadas en el siglo XXI que buscan corregir errores y llegar al objetivo de la universalidad de la seguridad social. JEL Classification-JEL:
    Keywords: sistemas de pensiones, jubilacion, Peru
    Date: 2014
  21. By: Lei Fang ; Wolfgang K. Härdle ; ;
    Abstract: Based on the Lee-Carter (LC) model, the benchmark in population forecasting, a variety of extensions and modifications are proposed in this paper. We investigate one of the extensions, the Hyndman-Ullah (HU) method and apply it to Asian demographic data sets: China, Japan and Taiwan. It combines ideas of functional principal component analysis (fPCA), nonparametric smoothing and time series analysis. Based on this stochastic approach, the demographic characteristics and trends in different Asian regions are calculated and compared. We illustrate that China and Japan exhibited a similar demographic trend in the past decade. We also compared the HU method with the LC model. The HU method can explain more variation of the demographic dynamics when we have data of high quality, however, it also encounters problems and performs similarly as the LC model when we deal with limited and scarce data sets, such as Chinese data sets due to the substandard quality of the data and the population policy.
    Keywords: Functional principal component analysis; Nonparametric smoothing; Mortality forecasting; Fertility forecasting; Asian demography; Lee-Carter model, Hyndman-Ullah method
    JEL: C14 C32 C38 J11 J13
    Date: 2015–02
  22. By: Makoto Nakajima (Federal Reserve Bank of Philadelphia )
    Abstract: How important are intergenerational heterogeneity and an aging population for the design of systematic monetary policy? We answer this question using a New-Keynesian business cycle model with overlapping generations of households. Our model features rich heterogeneity; households differ not only in their stage in the life-cycle, but also in the amount and allocation of wealth and in the size of non-financial income. Monetary policy generates redistribution of income and wealth in the model. Since retirees tend to hold larger (positive) amounts of financial assets and especially bonds, a rise in the interest rate induced by monetary policy increases their income. At the same time, working-age households tend to suffer because of falling wages and higher borrowing costs. The resulting wealth effects lead to a rise in aggregate labor supply, altering the monetary transmission channel compared to an representative agent economy. After showing that intergenerational redistribution of income and wealth can be significant when monetary policy strongly reacts to a severe recession, we study the design of implementable monetary policy in comparison to the complete market and representative agent benchmarks.
    Date: 2014
  23. By: Dunn, Abe (U.S. Bureau of Economic Analysis ); Shapiro, Adam Hale (Federal Reserve Bank of San Francisco )
    Abstract: This paper studies the impact of Medicare Part D on mortality for the population over the age of 65. We identify the effects of the reform using variation in drug coverage across counties before the reform was implemented. Studying mortality rates immediately before and after the reform, we find that cardiovascular-related mortality drops significantly in those counties most affected by Part D, while mortality rates for noncardiovascular diseases remain statistically unchanged. Estimates suggest that between 19,000 and 27,000 more individuals were alive in mid-2007 because of the Part D implementation in 2006.
    Date: 2015–02
  24. By: Ali Shourideh (University of Pennsylavnia ); Roozbeh Hosseini (Arizona State University )
    Abstract: Abstract This paper is motivated by two facts: 1) There is a significant difference in mortality across income groups. 2) This difference in mortality is getting larger. I study the extent in which progressively of social security is affected by differences in mortality across income groups and how changes in mortality differential affect the progressively of the social security and its budget. I use a life cycle overlapping generation model in which individuals are different in their lifetime earning profiles and higher earning individuals have lower mortality. I first calibrate the relation between earning and mortality using 1983-1997 data (reported in Cristia (Journal of Health Economics, 2009)) and compare current US system with a system in which there is a separate budget for each earning/mortality group (therefore by design there is no redistribution across earning/mortality groups). I find that these two systems have very similar replacement ratios, expect for the lowest 2% of earning distribution. To find the value of redistribution in current US social security system I calculate welfare differences between the resulting allocations. I find that the welfare gains from progressivity in current social security system are not monotone in lifetime earnings. Individuals in bottom two percent of earning distribution gain the most from it (up to 2.83% of their consumption) while those in second decile lose the most (up to 1% of their consumption). However, ex post gains and losses completely offset each other. There is no ex ante welfare gain. Using more recent earning and mortality relationship (1998-2003), I find that increase in the mortality differential will increase the cost of the social security by about 5%. Adjusting the benefit to maintain the cost will make the system even more regressive.
    Date: 2014
  25. By: Razin, Assaf ; Sadka, Efraim ; Suwankiri, Benjarong
    Abstract: We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter - and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We provide an analytical characterization of political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped. Naturally, a lower rate of population growth (that is, an aging population) increases the political clout of the old (the left group). But it also increases the burden on the young (particularly, the skilled).
    Keywords: center; dynamics of left and right coalitions; intra- and inter-generational transfers
    JEL: E10 F15 H10
    Date: 2015–02
  26. By: Kuhn, Michael ; Prettner, Klaus
    Abstract: We assess the impact of population structure on economic growth. Following recent research, we focus on the generational turnover as a key driver of consumption growth. We characterize the impact of the average birth and death rates on the generational turnover, depending on the age-profile of consumption and on the extent of annuity market imperfection. Using recent data from the National Transfer Accounts on consumption profiles for a number of countries, we assess in a comparative way the sign and magnitude of generational turnover and its impact on consumption growth. We find considerable cross-country variation and trace it back to differences in demographic rates and in the consumption structure.
    Keywords: demography,economic growth,generational turnover,National Transfer Accounts
    JEL: E21 J11 O40
    Date: 2015
  27. By: Ásgeir Daníelsson
    Abstract: This paper discusses efficient hedging of currency risk in foreign investments through short term forward contracts. It is shown that for long term investors the efficient level of currency hedging depends on the behaviour of the exchange rate. If the exchange rate follows random walk the efficient hedging of the currency risk may be as large as it is for the short term investor, or possibly larger, but if the exchange rate follows a stationary stochastic process efficient hedging of the long term currency risk through short term forward contracts is zero in most cases. It is also shown that pass through of changes in the exchange rate into inflation forms a partial hedge for an investor that considers the real return and its volatility rather than the nominal return, diminishing the efficient level of forward currency contracts. It is shown that it is possible to use forward currency contracts for speculative investments. These contracts are profitable investment opportunities if the interest rate differential exceeds the expected change in the exchange rate. This same condition motivated the carry trade.
    Date: 2014–08
  28. By: Huang, Fali ; Jin, Ginger Zhe ; Xu, Lixin Colin
    Abstract: Parental involvement in matchmaking may distort the choice of spouse because parents are willing to substitute love for market and household production, which are more sharable between parents and their children. This paper finds supportive evidence in a survey of Chinese couples. In both rural and urban areas, parent matchmaking is associated with less marital harmony between the couple, more submissive wives, and a stronger belief in old age support for the son. In contrast, its association with couple income differs by rural and urban regions, perhaps because of differences in earning opportunities and in the enforcement of the one-child policy. Moreover, parent matchmaking is associated with more children for the couple and lower schooling for wives only in rural areas. Thus, in places with a stronger need for old age support, parents tend to be involved in matchmaking and use it to select submissive daughters-in-law to ensure old age support. The results render support to Becker, Murphy and Spenckuch (2015), who imply that parents would meddle with children's preferences to ensure their commitment to providing old age support.
    Keywords: Population&Development,Population Policies,Gender and Law,Youth and Governance,Rural Poverty Reduction
    Date: 2015–02–01
  29. By: Leonardo, Bechetti ; Conzo, Pierluigi ; Pisani, Fabio (University of Turin )
    Abstract: The productive and allocative theories predict that education has positive impact on health: the more educated adopt healthier life styles and use more efficiently health inputs and this explains why they live longer. We find partial support for these theories with an econometric analysis on a large sample of Europeans aged above 50 documenting a significant and positive correlation among education years, life styles, health outputs and functionalities. We however find confirmation for an anomaly already observed in the US, namely the more educated are more likely to contract cancer. Our results are robust when controlling for endogeneity and reverse causality in IV estimates with instrumental variables related to quarter of birth and neighbours’ cultural norms.
    Date: 2015–02

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