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on Economics of Ageing |
| By: | Alicia H. Munnell |
| Abstract: | The brief’s key findings are: *Labor force activity among older Americans began rising in the mid-1980s due to: *changing Social Security incentives; the shift to 401(k) plans; and *improving health, longevity, and education. *Updated data, however, suggest that these factors may have played themselves out. *As a result, the average retirement age has increased only slightly in the last 10 years: to 64 for men and 62 for women. |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2015-4&r=age |
| By: | Montizaan, Raymond (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University) |
| Abstract: | This paper investigates whether employers can induce employees to postpone retirement by offering access to training courses that maintain job proficiency. We use unique, matched employer–employee surveys for the Dutch public sector, which include detailed information on a wide range of HR practices applied in the organization, as well as the expected retirement age of its employees. We find that training policies, as reported by employers, are significantly positively related to employee expected retirement age, irrespective of whether employees actually participate in training. We show that this positive relationship is driven by employees' positive reciprocal inclinations, indicating that provision of training may serve as a tool to motivate older employees in their job and consequently to retire later. The provision of training access may therefore complement existing pension reforms in many industrialized countries that aim to increase labor-force participation of older workers. Robustness analyses indicate that the relationship between offering training access and expected age of retirement is unlikely to be driven by reverse causality, self-selection, or the presence of other organizational characteristics. |
| Keywords: | training access, reciprocity and retirement |
| JEL: | J24 J31 I2 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8862&r=age |
| By: | Maxim Troshkin (Cornell University); Ali Shourideh (University of Pennsylavnia) |
| Abstract: | This paper provides a theoretical and quantitative analysis of efficient pension systems as integral parts of the overall tax code. We study lifecycle environments with active intensive and extensive labor margins. First, we analytically characterize Pareto efficient policies when the main tension is between redistribution and provision of incentives: while it may be more efficient to have highly productive individuals work more and retire older, earlier retirement may be needed to give them incentives to fully realize their productivity when they work. We show that, under plausible conditions, efficient retirement ages increase with productivity. We also show that this pattern is implemented by pensions that not only depend on the age of retirement but are designed to be actuarially unfair. Second, using individual earnings and retirement data for the U.S. as well as intensive and extensive labor elasticities, we calibrate policy models to simulate robust implications: it is efficient for individuals with higher lifetime earning to retire (i) older than they do in the data (at 69.5 vs. at 62.8 in the data, for the most productive workers) and (ii) older than their less productive peers (at 69.5 for the most productive workers vs. at 62.2 for the least productive ones), in sharp contrast to the pattern observed in the U.S. data. Finally, we compute welfare gains of between 1 and 5 percent and total output gains of up to 1 percent from implementing efficient work and retirement age patterns. We argue that distorting the retirement age decision offers a powerful novel policy instrument, capable of overcompensating output losses from standard distortionary redistributive policies. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed014:1319&r=age |
| By: | Marta Lachowska (W.E. Upjohn Institute for Employment Research); Michal Myck (Centre for Economic Analysis) |
| Abstract: | In order to study whether public pension systems displace private saving, we use the quasi-experimental variation in pension wealth created by Poland’s 1999 pension reform. Using the 1997–2003 Polish Household Budget Surveys, we begin by estimating “difference-in-differences” regressions, where we compare household saving and expenditure across time and between cohorts affected and unaffected by the reform. Next, we estimate the extent of crowd-out by using two-stage least squares. We identify the effect of pension wealth on private saving by using the cohort-by-time variation in pension wealth that is explained by the reform. We find that one additional Polish zloty, or PLN, of pension wealth crowds out about 0.24 PLN in household saving. We also find heterogeneity in responses. For the middle-aged cohorts, we find a large public pension crowd-out of private saving (about 0.54 PLN of private saving for each 1 PLN of public pension wealth), while the crowd-out for younger cohorts equals about 0.30 PLN of private saving per 1 PLN. Finally, we find a close-to-complete crowd-out among highly-educated households. |
| Keywords: | Pension reforms, crowd-out effect, retirement saving, difference-in-differences, natural experiment |
| JEL: | E21 H55 I38 P35 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:15-223&r=age |
| By: | Jie Cai (University of New South Wales, School of Economics, Australian School of Business); Andrey Stoyanov (York University, Department of Economics, Faculty of Liberal Arts and Professional Studies) |
| Abstract: | In this paper we show that demographic di§erences between countries are a source of comparative advantage in international trade. Since many skills are age-dependent, population aging decreases the relative supply and increases the relative price of skills which depreciate with age. Thus, industries relying on skills in which younger workers are relatively more efficient will be more productive in countries with younger labor force and less productive in countries with older populations. Building upon the behavioral and economics literature, we construct industry-level measures of intensities in various age- dependent skills and show that population aging leads to specialization in industries which use age-appreciating skills intensively and erodes comparative advantage in industries for which age-depreciating skills are more important. |
| Keywords: | trade patterns; comparative advantage, population aging, cognitive skills |
| JEL: | F14 F16 J11 J24 |
| Date: | 2015–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:yca:wpaper:2015_1&r=age |
| By: | Bloemen, Hans (VU University Amsterdam); Hochguertel, Stefan (VU University Amsterdam); Zweerink, Jochem (VU University Amsterdam) |
| Abstract: | We estimate and explain the impact of early retirement of husbands on their wives’ probability to retire within one year, using administrative micro panel data that cover the whole Dutch population. We employ an instrumental variable approach in which the retirement choice of husbands is instrumented with eligibility rules for generous early retirement benefits that were temporarily and unexpectedly available to them. We find that early retirement opportunities of husbands increased the wives' probability to retire by 24.6 percentage points. This is a strong, and robust effect. Partly, wives respond to husbands' choices at ages when they are themselves likely eligible for early retirement programs. |
| Keywords: | instruments, retirement, couples |
| JEL: | C26 J26 J12 J14 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8861&r=age |
| By: | Karlsson, Tobias (Department of Economy and Society, School of Business, Economics and Law) |
| Abstract: | Along with rapid growth and improved standards of living, the first decades of the twentieth century saw the introduction of new technology and new ways to organize production. There are contrasting views on what impact these developments, often summarized as the Second Industrial Revolution, had on the situation of old men in the labour market. Some contemporary observers and modern-day historians have described how old men were crowded out of the labour force and pushed into an ‘industrial scrap heap’. Other researchers have maintained a more optimistic view on the opportunities of old men and argued that labour force withdrawal often was made possible by rising real earnings and savings. Since most of the research in the field has been based on cross-sectional data, the debate has relied on anecdotes, indirect evidence and assumptions.This paper uses data from a longitudinal panel of men living in the city of Gothenburg during the period 1923-1943. In contrast to most previous studies, this one takes up actual transitions into retirement and how such transitions were associated with access to resources. The main result is that a lack of resources was associated with a higher risk of retirement. This association appears even clearer when the sample is restricted to workingclass men and to the latter half of the period of investigation, when unemployment was lower and pension benefits higher. Thus, it would appear that transitions into retirement were most frequent when push and pull mechanisms were combined.<p> |
| Keywords: | labour markets; ageing; retirement; Sweden; inter-war period ISSN: 1653- |
| JEL: | J14 J26 N34 N94 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunhis:0019&r=age |
| By: | Maria D. Fitzpatrick (Cornell University) |
| Abstract: | In this paper, I document evidence that intergovernmental incentives inherent in public sector defined benefit pension systems distort the amount and timing of income for public school teachers. This intergovernmental incentive stems from the fact that, in many states, local school districts are responsible for setting the compensation that determines the size of pensions, but are not required to make contributions to cover the resulting pension fund liabilities. I use the introduction of a policy that required experience-rating on compensation increases above a certain limit in a differences-in-differences framework to identify whether districts are willing to pay the full costs of their compensation promises. In response to the policy, the size and distribution of compensation changed significantly. On average, public school employees received lower wages largely through the removal of retirement bonuses. However, the design of the policy led some districts to increase compensation, rendering the policy less effective that it might have otherwise been. |
| Keywords: | Intergovernmental Incentives, Teacher Compensation, Teacher Retirement |
| JEL: | H75 H72 H77 J26 I21 I28 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:15-220&r=age |
| By: | van der Heijden, E.C.M. (Tilburg University, Center For Economic Research); Koç, E. (Tilburg University, Center For Economic Research); Ligthart, J.E. (Tilburg University, Center For Economic Research); Meijdam, A.C. (Tilburg University, Center For Economic Research) |
| Abstract: | Pensioners have increasingly more control over their income streams as a result of<br/>pension reforms, which gives them more freedom to save for their old age. We devise an experiment where subjects face a life-cycle optimization task with lifetime uncertainty and a given lifetime income. The aims are to test whether subjects' saving and consumption behaviour is affected by: (i) the steepness of the income profile; and (ii) the freedom to choose the steepness of the income prole before the optimization task. In general, subjects' consumption decisions deviate systematically from the optimal ones in the sense that they are overly sensitive to current income and financial wealth. Subject behavior is unaffected by the steepness of the income. When subjects are given such a flexibility their consumption decisions are relatively more sensitive to current income and financial wealth. |
| Keywords: | pensions; life-cycle model; Dynamic Optimization; rule of thumb; lab experiment |
| JEL: | C91 G23 H55 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:3de611f3-a000-4281-9747-29577a508867&r=age |
| By: | O'Hare, Colin; Li, Youwei |
| Abstract: | In recent years the issue of life expectancy has become of upmost importance to pension providers, insurance companies and the government bodies in the developed world. Significant and consistent improvements in mortality rates and hence life expectancy have led to unprecedented increases in the cost of providing for older ages. This has resulted in an explosion of stochastic mortality models forecasting trends in mortality data in order to anticipate future life expectancy and hence quantify the costs of providing for future ageing populations. Many stochastic models of mortality rates identify linear trends in mortality rates by time, age and cohort and forecast these trends into the future using standard statistical methods. These approaches rely on the assumption that structural breaks in the trend do not exist or do not have a significant impact on the mortality forecasts. Recent literature has started to question this assumption. In this paper we carry out a comprehensive investigation of the presence or otherwise of structural breaks in a selection of leading mortality models. We find that structural breaks are present in the majority of cases. In particular, where there is a structural break present we find that allowing for that improves the forecast result significantly. |
| Keywords: | Mortality; stochastic models; forecasting; structural breaks |
| JEL: | C51 C52 C53 G22 G23 J11 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62994&r=age |
| By: | Jana R. Steele; Barry Gros; Karen J. Hall; Ian McSweeney |
| Keywords: | Governance and Public Institutions, Pension Papers |
| JEL: | J32 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:205&r=age |
| By: | Youssouf A. F. Toukourou; Fran\c{c}ois Dufresne |
| Abstract: | We discuss the role of integrated chance constraints (ICC) as quantitative risk constraints in asset and liability management (ALM) for pension funds. We define two types of ICC: the one period integrated chance constraint (OICC) and the multiperiod integrated chance constraint (MICC). As their names suggest, the OICC covers only one period whereas several periods are taken into account with the MICC. A multistage stochastic linear programming model is therefore developed for this purpose and a special mention is paid to the modeling of the MICC. Based on a numerical example, we firstly analyse the effects of the OICC and the MICC on the optimal decisions (asset allocation and contribution rate) of a pension fund. By definition, the MICC is more restrictive and safer compared to the OICC. Secondly, we quantify this MICC safety increase. The results show that although the optimal decisions from the OICC and the MICC differ, the total costs are very close, showing that the MICC is definitely a better approach since it is more prudent. |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1503.05343&r=age |
| By: | Steven A. Sass; Anek Belbase; Thomas Cooperrider; Jorge D. Ramos-Mercado |
| Abstract: | Subjective financial assessments are used by social scientists as a measure of financial well-being and by households as the basis for action. Financial well-being, however, increasingly requires workers to build-up savings to meet hard-to-see future needs, specifically retirement, their children’s education, and paying off student loans. This paper analyzes data from the FINRA Investor Education Foundation’s 2012 Financial Capability Survey to test whether subjective financial assessments 1) primarily reflect day-to-day, rather than distant, financial concerns; 2) increasingly reflect distant concerns if the household’s day-to-day finances are in reasonably good shape; and 3) increasingly reflect distant concerns if the worker is financially literate. The paper found that: * Subjective financial assessments primarily reflect day-to-day conditions. * This remains the case even if the household’s day-to-day finances are in reasonably good shape. * Financial literacy enhances sensitivity to the lack of a retirement plan and having a mortgage greater than the value of one’s house, but it has no noticeable effect on sensitivity to life and medical insurance deficits, having an inactive retirement plan, not saving for college, or student debt burdens. The policy implications of the findings are: * Subjective financial assessments have become a poor measure of financial well-being. * Workers by themselves cannot be expected to devote much effort to addressing distant deficits. * Initiatives to improve well-being must raise awareness – or compensate for the lack of awareness – of hard-to-see distant future deficits. |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2015-3&r=age |
| By: | James D. Reschovsky; Amanda E. Lechner; Alwyn Cassil |
| Abstract: | Most Americans want to die at home, but most die in hospitals or other facilities. Most people care more about quality of life than prolonging life as long as possible, but many receive invasive, life-sustaining treatments that diminish quality of life. |
| Keywords: | Patient Wishes, End of Life, quality of care, Health |
| JEL: | I |
| Date: | 2015–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:21d18bbc68b748c2bbd95b0b1b391d31&r=age |
| By: | Jeffrey R. Brown; Joshua M. Pollet; Scott J. Weisbenner |
| Abstract: | This paper provides evidence on the investment behavior of 27 state pension plans that manage their own equity portfolios. Even though these state plans typically hold broadly diversified portfolios, they substantially over-weight the equity of companies that are headquartered in-state. The over-weighting of within-state stocks by these plans is three times larger than that of other institutional investors. We explore three possible reasons for this in-state bias: familiarity bias, information-based investing, and political considerations. While there is a substantial preference for in-state stocks, there is no similar tilt toward holding stocks from neighboring states or out-of-state stocks in the state’s primary industry. States generate excess returns through their in-state investment activities, particularly among smaller stocks in the state’s primary industry. We also find that state pension plans are more likely to hold a within-state stock if the headquarters of the firm is located in a county that gave a high fraction of its campaign contributions to the current governor. These politically-motivated holdings yield excess returns for the pension fund. |
| JEL: | G11 G23 H75 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21020&r=age |
| By: | Groß, Marcus; Rendtel, Ulrich; Schmid, Timo; Schmon, Sebastian; Tzavidis, Nikos |
| Abstract: | Modern systems of official statistics require the timely estimation of area-specific densities of sub-populations. Ideally estimates should be based on precise geo-coded information, which is not available due to confidentiality constraints. One approach for ensuring confidentiality is by rounding the geo-coordinates. We propose multivariate non-parametric kernel density estimation that reverses the rounding process by using a Bayesian measurement error model. The methodology is applied to the Berlin register of residents for deriving density estimates of ethnic minorities and aged people. Estimates are used for identifying areas with a need for new advisory centres for migrants and infrastructure for older people. |
| Keywords: | ageing,binned data,ethnic segregation,non-parametric estimation,official statistics |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20157&r=age |
| By: | Andrey Stoyanov (York University, Department of Economics, Faculty of Liberal Arts and Professional Studies); Nikolay Zubanov (Goethe University Frankfurt, Faculty of Economics and Business Administration, Grueneburgplatz 1, 60323 Frankfurt am Main, Germany); Yoonseok Lee (Syracuse University, Department of Economics and Center for Policy Research, 426 Eggers Hall, Syracuse, NY 13244, USA) |
| Abstract: | We show, in a very plausible theoretical setting, that control function estimators (CFEs) of firm production function, such as Olley-Pakes, may be biased. The bias will occur, in particular, when investments respond dfferently to short-and long-lasting changes in productivity. We modify the original CFE approach to allow for this differential response by introducing firm fixed effects to the control function. Applying our modified CFE to the data, we find that it does better than the existing CFEs in terms of controlling for persistent unobserved heterogeneity in productivity. Our findings imply that allowing firm fixed effects in the control function enhances its ability to capture firm productivity, and hence improves statistical quality of productivity estimates. |
| Keywords: | production function, control function estimator, panel data |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:yca:wpaper:2015_2&r=age |
| By: | Antón Arturo; Leal-Ordoñez Julio C. |
| Abstract: | In a typical developing country, coverage of the contributory social security system is low. We analyze the aggregate effects of a revenue-neutral fiscal-cum-social policy reform that consists of: 1) the implementation of universal social insurance to replace the system with low coverage; and 2) the elimination of the social security payroll tax to replace it with a generalized VAT. We find that this reform increases productivity by 2 percent and output by 3 percent as it improves the allocation of resources across firms and sectors, and generates a substantial change in occupational choices. Thus, wages (before transfers) increase for all employees. Also, due to the reconfiguration of transfers, earnings (wages after transfers) for informal employees increase relative to the earnings of formal employees, which decreases inequality. However, the reform could affect some groups in the population, given the regressive nature of VAT and heterogeneity in the valuation of transfers across workers. |
| Keywords: | Universal Social Insurance;Fiscal Reform;Inequality;VAT;Allocation of Resources across Firms and Sectors. |
| JEL: | E62 H55 O17 O47 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2015-04&r=age |