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on Economics of Ageing |
| By: | Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana |
| 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. |
| Keywords: | annuity,lump sum,social security,delayed retirement,lifetime income,pension |
| JEL: | D04 D01 D12 D14 G22 H55 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:84&r=age |
| By: | Raquel Fonseca Benito; 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 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. |
| Keywords: | Well-being, Retirement, Institutions, Simultaneous Equation Approach, |
| JEL: | I3 J26 |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-07&r=age |
| By: | David Boisclair; Jean-Yves Duclos; Steeve Marchand; Pierre-Carl Michaud |
| Abstract: | We use simulation methods to analyze the impacts of certain proposed reforms to improve the coverage of longevity risk. This risk, which may in principle be adequately covered by classic defined-benefit pension plans, has been of particular interest in Quebec for some years now, notably due to the decline in the participation to such plans. Recent proposals which aim to increase the coverage of longevity risk mostly deal with expansion of the “2nd pillar" of the retirement income system, currently comprised of the Quebec Pension Plan. We therefore consider a key proposal of the D’Amours committee (the longevity pension), in addition to two other proposals: that of Mintz and Wilson, which aims to increase the generosity of the current regime, and that of Wolfson, which introduces a concept of contribution and benefit rates differentiated by income. Using data from Statistics Canada surveys, we analyze the internal rate of return (IRR) of these proposals for various types of individuals taking into consideration inequality in life expectancy, temporal variability of income, and interactions with taxation and the different retirement income support programs. We contrast the results with those obtained when opting instead for additional contributions into existing voluntary savings vehicles combined with a basic annuity purchased at retirement. |
| Keywords: | longevity risk, retirement savings, inequality, life expectancy, |
| JEL: | I14 J18 J26 J32 |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-09&r=age |
| By: | Luca Di Gialleonardo (Mefop, Rome, Italy); Mauro Marè (Tuscia University, Italy) |
| Abstract: | The scope of the supplementary pension funds is to provide workers with a satisfactory standard of living at retirement. An efficient and affordable system of pension funds is therefore an important factor to realize the workers’ aims of maximizing the value of their pension wealth. A rationalization of the industry structure, leading to the creation of bigger pension funds, that should be better able to take advantage of economies of scale, might contain the costs sustained by participants. In this paper, and for the first time (to the best of our knowledge), we attempt to carry out an econometric study of the principal factors which determine the costs level and the efficiency of Italian pension funds. Based on an original dataset of Italian closed pension funds in the 2007-2013 period, this work runs a panel estimate of the impact of dimension (the number of participants) on administrative costs. Our results highlight the existence of important overall economies of scale and that in those funds characterized by the outsourcing of some activities, the administrative costs result smaller. We adopt the same dataset also for the open pension funds, in order to evaluate the link between financial costs and the sum of resources under management. The estimates do not confirm the existence of particular economies of scale, probably due to the distinctive traits of the complementary pension funds industry in Italy. The commission fees of the financial management of pension funds, in particular of closed type, are much lower than those relative to other financial services and also to other types of foreign pension funds. This situation, fuelled by competition among financial managers, has gone on for some time, thus further limiting the ways in which savings can be made through an increase in the volume of the assets managed. |
| Keywords: | social security, pension funds, efficiency |
| JEL: | H55 G23 G14 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:21&r=age |
| By: | Luc Bissonnette; Michael Hurd; Pierre-Carl Michaud |
| Abstract: | In this paper, we compare individual survival curves constructed from objective (actual mortality) and elicited subjective information (probability of survival to a given target age). We develop a methodology to estimate jointly subjective and objective individualsurvival curves accounting for rounding on subjective reports of perceived mortality risk. We make use of the long follow-up period in the Health and Retirement Study and the high quality of mortality data to estimate individual survival curves which feature both observed and unobserved heterogeneity. This allows us to compare objective and subjective estimates of remaining life expectancy for various groups, evaluate subjective expectations of joint survival and widowhood by household, and compare objective and subjective mortality with standard life-cycle models of consumption. |
| Keywords: | Subjective probabilities, old age mortality, joint survival of couples, |
| JEL: | C81 D84 I10 |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-08&r=age |
| By: | World Bank |
| Keywords: | Government Diagnostic Capacity Building Finance and Financial Sector Development - Debt Markets Gender - Gender and Law Private Sector Development - Emerging Markets Public Sector Development Social Protections and Labor Social Protections and Labor - Pensions & Retirement Systems |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:21120&r=age |
| By: | Brocas, Isabelle; Carrillo, Juan D; Combs, T. Dalton; Kodaverdian, Niree |
| Abstract: | Employing a variant of GARP, we study consistency in aging by comparing the choices of younger adults (YA) and older adults (OA) in a 'simple', two-good and a `complex' three-good condition. We find that OA perform worse than YA in the complex condition but similar in the simple condition. Working memory scores correlate significantly with consistency levels. Finally, OA are more prone to use simple heuristics than YA, and this helps them behave consistently in the simple condition. Our findings suggest that the age-related deterioration of neural faculties responsible for working memory is an obstacle for consistent decision-making. |
| Keywords: | aging; complexity; laboratory experiments; revealed preferences |
| JEL: | C91 D11 D12 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10457&r=age |
| By: | FUKAO Kyoji; MAKINO Tatsuji |
| Abstract: | By merging two newly created databases for the analysis of prefecture-level productivity—the R-JIP Database 2013 and the R-LTES Database 2013—with other regional statistics, we examine how and why "aged prefectures" differ from other prefectures. Our main findings can be summarized as follows:1. The high aged population ratio of some prefectures such as Akita and Shimane is due to a large out-migration experienced during Japan's high-speed growth era from 1955 to 1970.2. Aged prefectures tend to have lower labor productivity. At the same time, we find that population aging does not systematically reduce local total factor productivity (TFP) levels. We therefore argue that, rather than population aging reducing TFP levels, the causality runs in the opposite direction. Most prefectures with a high aged population ratio today had a low TFP level 30-40 years ago; as low TFP levels mean lower wage rates, such prefectures experienced an out-migration of the young. Given that TFP differences across prefectures are stable over time (prefectures with a low relative TFP level maintain this condition), we observe a negative correlation between current TFP levels and current aged population ratios. This implies that there is no need for concern about Japan's average labor productivity declining in the future as a result of population aging.3. Aged prefectures tend to have large net imports of goods and services. Their large net imports are mainly the result of large negative government savings. Active government capital formation in aged prefectures also contributes to some extent to their net imports. Since large transfers in the form of receipts of public pensions and medical care from less aged prefectures to more aged ones are not sustainable, it seems that residents in prefectures that are less aged now should expect a post-retirement life that will be much less prosperous than what residents in Akita and Shimane enjoy today. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:15022&r=age |
| By: | John Ameriks; Joseph S. Briggs; Andrew Caplin; Matthew D. Shapiro; Christopher Tonetti |
| Abstract: | Older wealthholders spend down assets slowly. To study this pattern, the paper introduces health dependent utility into a model in which different preferences for bequests, expenditures when in need of long-term care (LTC), and ordinary consumption combine with health and longevity uncertainty to determine saving behavior. To help separately identify motives, it develops Strategic Survey Questions (SSQs) that elicit stated preferences. The model is estimated using new SSQ and wealth data from the Vanguard Research Initiative. Estimates of the health-state utility function imply that motives associated with LTC are significantly more important than bequest motives in determining late in life saving. |
| JEL: | D91 E21 H31 I10 J14 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20973&r=age |
| By: | Chiaki Hara (Professor, Institute of Economic Research, Kyoto University); Kenjiro Hirata (Lecturer, Faculty of Economics, Kobe International University) |
| Abstract: | We formulate the pension fund's problem of choosing optimal pension schemes in an inflnite, discrete-time setting as a sequence of Nash bargaining problems in which the members (contributors) of the fund are the bargainers and the disagreement points are determined by the utility levels they can attain by quitting and receiving lump-sum payments from the fund. We show that if the members are heterogeneous in their subjective time discount rates, then the sequence of the Nash bargaining solutions, obtained at each point in time, leads to an inefficient allocation of consumption processes, thereby indicating a source of dynamic inconsistency in pension fund management. Based on a set of micro data, we show the welfare loss of dynamic inconsistency can be as high as 14% of the members' total wealth, and the dynamically inconsistent choices of pension schemes tend to favor myopic members. |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:916&r=age |
| By: | World Bank |
| Keywords: | Finance and Financial Sector Development - Access to Finance Health, Nutrition and Population - Population Policies Gender - Gender and Law Finance and Financial Sector Development - Debt Markets Social Protections and Labor Social Protections and Labor - Pensions & Retirement Systems |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:21112&r=age |
| By: | Steven A. Sass; Anek Belbase; Thomas Cooperrider; Jorge D. Ramos-Mercado |
| Abstract: | The brief’s key findings are: *Americans need to save more on their own for retirement, but human nature suggests they will focus more on day-to-day financial needs. *Analysis of a recent survey confirms that a household’s level of financial satisfaction is tied more to short-term – rather than long-term – concerns. *Even households that are in reasonable shape in the short term do not seem to focus more on distant concerns like retirement saving. *And households that are more financially literate appear only modestly more attuned to long-term financial issues. |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2015-3&r=age |
| By: | John Ameriks; Andrew Caplin; Minjoon Lee; Matthew D. Shapiro; Christopher Tonetti |
| Abstract: | This paper introduces the Vanguard Research Initiative (VRI), a new panel survey of wealthholders designed to yield high-quality measurements of a large sample of older Americans who arrive at retirement with significant financial assets. The VRI links survey data with a variety of administrative data from Vanguard. The survey features an account-by-account approach to asset measurement and a real-time feedback and correction mechanism that are shown to be highly successful in eliciting accurate measures of wealth. Specifically, the VRI data reflect unbiased and precise estimates of wealth when compared to administrative account data. The VRI sample has characteristics similar to populations meeting analogous wealth and Internet access eligibility conditions in the Health and Retirement Study (HRS) and Survey of Consumer Finances (SCF). To illustrate the value of the VRI, the paper shows that the relationship between wealth and expected retirement date is very different in the VRI than in the HRS and SCF—mainly because those surveys have so few observations where wealth levels are high enough to finance substantial consumption during retirement. |
| JEL: | D91 E21 H31 J14 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20972&r=age |
| By: | David Neumark (University of California–Irvine, National Bureau of Economic Research, and Institute for the Study of Labor); Joanne Song (State University of New York–Buffalo); Patrick Button (University of California–Irvine) |
| Abstract: | We explore the effects of disability discrimination laws on hiring of older workers. A concern with antidiscrimination laws is that they may reduce hiring by raising the cost of terminations and – in the specific case of disability discrimination laws – raising the cost of employment because of the need to accommodate disabled workers. Moreover, disability discrimination laws can affect nondisabled older workers because they are fairly likely to develop work-related disabilities, yet are not protected by these laws. Using state variation in disability discrimination protections, we find little or no evidence that stronger disability discrimination laws lower the hiring of nondisabled older workers. We similarly find no evidence of adverse effects of disability discrimination laws on hiring of disabled older workers. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp315&r=age |
| By: | Ayse Imrohoroglu (USC) |
| Abstract: | In 1978, California passed one of the most significant tax changes initiated by voters in the United States. Proposition 13, stipulated rolling back property assessments for tax purposes to 1975 market value levels, and restricted future property tax increases. In this paper, we study the implications of Proposition 13 on house prices, housing choices, turnover over the life cycle, and welfare of the households in an economy populated with overlapping generations of agents who derive utility from consumption of goods and housing. We find that Proposition 13 distorts housing choices by lowering turnover and smoothing housing consumption over the life cycle. We study the transition dynamics of moving from an economy featuring Proposition 13 to alternative revenue-neutral regimes with proportional real estate taxes. We find that different revenue-neutral regimes generate very different levels of support. While most middle-aged and older households prefer the status-quo with Proposition 13, younger agents may support the elimination of Propostion 13 as long as the reform does not lead to an increase in house prices. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:1250&r=age |
| By: | Mauro Marè (Tuscia University, Italy); Antonello Motroni (Mefop, Rome, Italy); Francesco Porcelli (University of Exeter, UK) |
| Abstract: | Nonostante le modifiche alle prestazioni previdenziali pubbliche e la crescente consapevolezza che in futuro sarà necessario integrare le pensioni statali con risorse aggiuntive accumulate durante la carriera lavorativa, l’attitudine dei lavoratori italiani nei confronti della previdenza integrativa rimane scarsamente favorevole. Partendo dai dati di due survey condotte presso un campione di lavoratori, il paper evidenzia come la scelta di adesione a previdenza complementare sia legata soprattutto a considerazioni di natura patrimoniale/reddituale, alla condizione lavorativa e al livello di fiducia nei confronti degli investimenti finanziari. I lavoratori con maggiore probabilità di adesione hanno già attivato altre forme di investimento mobiliare e immobiliare, dispongono di un reddito più elevato rispetto a quelli che non partecipano alla previdenza di secondo pilastro, sono iscritti a un sindacato e lavorano presso aziende del settore privato. Di contro, i lavoratori non sindacalizzati, con basse retribuzioni e ridotte capacità di risparmio hanno una minore probabilità di iscriversi a un fondo pensione. Si tratta, tuttavia, dei soggetti che, presumibilmente, avranno maggiore necessità di previdenza complementare a causa delle riforme approvate negli ultimi anni, sia sul versante pensionistico pubblico, sia in materia di diritto del lavoro. Le determinanti dell'adesione agli schemi di secondo pilastro rimangono stabili nel tempo, le recenti crisi finanziare non sembrano avere modificato nella sostanza il profilo degli iscritti ai fondi previdenziali integrativi. |
| Keywords: | Household savings, Investment choise, Institutional investors, Social security and public pension |
| JEL: | D14 G11 G23 H55 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:20&r=age |
| By: | Romina Boarini; Marcos Díaz |
| Abstract: | Recent research suggests that younger generations are less likely to be engaged in formal political participation than older ones. However, there is little evidence on the trends for non-formal participation (e.g. signing petitions, demonstrations, etc.) This paper tries to fill a gap in this field by looking at the evolution of extra-parliamentary participation in politics through various measures of civic and political engagement, based on data from six waves of the European Social Survey. The paper confirms that younger generations in European countries participate less in politics through formal activities. A similar trend is observed for extra-parliamentary participation, although this trend is less clear-cut. The results also show that the financial crisis of 2007-2009 witnessed a halt in the downward trend of period effects in the various forms of political participation, followed by the increase of period effects on both formal and extra-parliamentary political participation in the subsequent years (2011-2012.) |
| Date: | 2015–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stdaaa:2015/2-en&r=age |
| By: | Alberto F. Alesina; Ugo Troiano; Traviss Cassidy |
| Abstract: | We evaluate the effect of a politician’s age on political governance, reelection rates,and policies using data on Italian local governments. Our results suggest that younger politicians are more likely to behave strategically in response to election incentives: they increase spending and obtain more transfers from higher levels of government in preelection years. We argue that is a sign of stronger career concerns incentives. The results are robust to adopting three different identification strategies: fixed-effects regression, standard regression discontinuity design, and an augmented regression discontinuity design that controls for residual heterogeneity. |
| JEL: | C21 D78 H72 H77 J18 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20977&r=age |
| By: | Marie-Louise Leroux; Pierre Pestieau; Grégory Ponthière |
| Abstract: | Dans cet article, nous étudions l'impact des différences de longévité sur la conception des politiques publiques, en particulier celles liées au départ à la retraite. Nous montrons premièrement qu'alors même que l'espérance de vie a augmenté de manière très importante tout au long du siècle dernier, il subsiste encore de fortes disparités. Deuxièmement, nous étudions d'un point de vue normatif comment les différences de longévité sont généralement prises en compte dans les modèles de cycle de vie et montrons que certaines hypothèses peuvent avoir des implications fortes en termes de redistribution intra-générationnelle. Nous identifions au moins trois arguments en faveur d'une redistribution vers les agents à faible longévité : l'aversion à l'inégalité intertemporelle, l'aversion au risque de mortalité et la compensation pour des caractéristiques dont les agents ne sont pas responsables. Nous étendons ensuite notre analyse de manière à tenir compte du fait que les individus puissent être en partie responsables de leur longévité. Finalement, nous lions ces résultats aux débats actuels sur la réforme des systèmes de retraite. Nous montrons qu'en général, parce que les pensions de retraite sont conditionnelles à la survie des bénéficiaires, les systèmes de retraite publics vont redistribuer des ressources des agents dont la durée de vie est courte vers ceux dont la durée de vie est longue. Nous fournissons des pistes de réformes qui viseraient à mieux prendre en compte ces différences de longévité et en particulier, celles relatives à la création d'une « rente longévité » telle que souhaitée par le Comité d'Amours et au développement de l'assurance autonomie, qu'elle soit privée ou publique. |
| Keywords: | , Systèmes de retraite, mortalité differentielle |
| JEL: | H31 H53 I31 |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-06&r=age |