nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒03‒13
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Do Earnings Really Decline for Older Workers? By Stephen Bazen; Kadija Charni
  2. Are Cancer Survivors who are Eligible for Social Security More Likely to Retire than Healthy Workers? Evidence from Difference-in-Differences By David Candon
  3. Heterogeneous ability and the effects of fiscal policy on employment, income and welfare in general equilibrium By Freddy Heylen; Renaat Van de Kerckhove
  4. Institutional Deficit and Health Outcomes in Post-Communist States By Vladimir A. Kozlov; Dina Y. Balalaeva
  5. A generic model for spouse's pensions with a view towards the calculation of liabilities By Alexander Sokol
  6. Purchasing Term Life Insurance to Reach a Bequest Goal: Time-Dependent Case By Erhan Bayraktar; Virginia R. Young; David Promislow
  7. Population Dynamics and Long-Run Economic Growth By Casey, Gregory; Galor, Oded

  1. By: Stephen Bazen (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Kadija Charni (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)
    Abstract: Cross section data suggest that the relationship between age and hourly earnings is an inverted-U shape. Evidence from panel data does not necessarily confirm this finding suggesting that older workers may not experience a reduction in earnings at the end of their working life. In this paper we use panel data on males for Great Britain in order to examine why the two types of data provide conflicting conclusions. Concentrating on the over 50s, several hypotheses are examined: overlapping cohorts, job tenure, job-changing, labour supply behaviour and selectivity bias. Cohort and individual fixed effects partly explain the divergent conclusions. However, for fully, year-on-year employed individuals, there is no evidence of earnings decline at the end of working life. We find no role for selectivity due to retirement, although shorter working hours or partial retirement along with job-changing late in life do provide an explanation for why hourly earnings decline for certain older workers. We find no evidence that the process of ageing itself leads to lower earnings as suggested by the cross section profile.
    Keywords: age-earnings profile, older workers, Labour supply, cohort effects
    JEL: J3 J14 J24
    Date: 2015–02
  2. By: David Candon (University College Dublin)
    Abstract: Despite the fact that there are over a million new cancer cases detected in the U.S. every year, none of retirement-health literature focuses specifically on the effect that cancer has on retirement. Social Security may offer a pathway to retirement for eligible workers but the separate effects of both cancer, and Social Security, on retirement, need to be accounted for. I use the fact that some workers will be eligible for Social Security when they are diagnosed with cancer, while some will not, as a source of exogenous variation to identify the joint effect of cancer diagnosis and Social Security eligibility on retirement. With data from the Health and Retirement Study (HRS), I use a difference-in-differences model to show that being eligible for Social Security, and surviving cancer, increases the probability of retirement by 11.2% for male workers. Given the increase in both cancer survival rates, and the number of older workers in the labour force, it is important to know if cancer is causing permanent exits, in a population who otherwise would continue working.
    Keywords: Cancer; Employment; Retirement; Labour market
    JEL: I10 I18 J21 J26
    Date: 2015–02–27
  3. By: Freddy Heylen; Renaat Van de Kerckhove (-)
    Abstract: We construct an overlapping generations model for an open economy where hours worked, human capital accumulation, income and welfare are all endogenous. Within each generation we distinguish individuals with high, medium or low innate ability. These differences in ability explain inequality in income and welfare. The composition of fiscal policy plays a central role in our model. The government sets tax rates on labor, capital and consumption. It spends its revenue mainly on goods, nonemployment benefits and pensions. We find that our calibrated model’s predictions match the main facts quite well in a sample of 13 OECD countries. We then use the model to investigate optimal changes in taxes and non-employment benefits if the objective is not only to improve aggregate equilibrium employment, output (income) and welfare, but also to reduce intergenerational and intragenerational welfare inequality. Our results strongly prefer an overall reduction of nonemployment benefits to finance a combined decrease of labor tax rates on older workers and on all low-wage earners.
    Keywords: heterogeneous ability, employment by age, human capital, fiscal policy, welfare inequality, overlapping generations
    JEL: E62 H5 I28 J22 J24
    Date: 2014–12
  4. By: Vladimir A. Kozlov (National Research University Higher School of Economics); Dina Y. Balalaeva (National Research University Higher School of Economics)
    Abstract: In this paper we explore political-economic determinants of health. We draw upon the unique natural experiment of post-communist transitions to show the effect on health (measured as life expectancy and cause-specific mortality) of the interaction between institutions for political (democratic rules) and economic (free market entry) competitiveness. To analyze this relationship empirically, we employ panel regression analysis with country and time fixed effects. We find that, ceteris paribus, political and economic institutions exert cumulative positive impact upon health (even if their separate effects are negative or insignificant). One potential causal pathway is that political-economic liberalization increases certainty and people start investing in their health. Our findings are highly relevant to other countries that experience similar reforms
    Keywords: Democratization, Liberalization, Institutions, Mortality, Stress, Post-communist states
    JEL: P36 I15 J11
    Date: 2015
  5. By: Alexander Sokol
    Abstract: We introduce a generic model for spouse's pensions. The generic model allows for the modeling of various types of spouse's pensions with payments commencing at the death of the insured. We derive abstract formulas for cashflows and liabilities corresponding to common types of spouse's pensions. We show how the standard formulas from the Danish G82 concession can be obtained as a special case of our generic model. We also derive expressions for liabilities for spouse's pensions in models more advanced than found in the G82 concession. The generic nature of our model and results furthermore enable the calculation of cashflows and liabilities using simple estimates of marital behaviour among a population.
    Date: 2015–03
  6. By: Erhan Bayraktar; Virginia R. Young; David Promislow
    Abstract: We consider the problem of how an individual can use term life insurance to maximize the probability of reaching a given bequest goal, an important problem in financial planning. We assume that the individual buys instantaneous term life insurance with a premium payable continuously. By contrast with Bayraktar et al. (2014), we allow the force of mortality to vary with time, which, as we show, greatly complicates the problem.
    Date: 2015–03
  7. By: Casey, Gregory; Galor, Oded
    Abstract: This paper applies insights from theoretical and empirical research in economic growth to analyze the impacts of policies affecting fertility, migration and human capital accumulation on growth and poverty alleviation. It underlines the tradeoff between having more children and investing more resources in the human capital of each child as a critical force in devising policies that will alleviate hardship and generate long-term prosperity. In developing countries, policies increasing the return to education would trigger a virtuous cycle of fertility control, investment in education, poverty alleviation, and economic growth. Moreover, permitting migration of high skilled individuals to developed countries would mitigate the issues associated with aging populations in those societies, while encouraging human capital formation in developing countries.
    Keywords: Fertility, Demographic Structure, Unified Growth Theory, Migration
    JEL: J13 J16 J24 O15 O40
    Date: 2014–10

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