nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒04‒11
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Synthesis of pension system parametric assessment By Arzybaev Askar
  2. Spending time together? Effects on the retirement decision from partner’s labour market status By Boman, Anders
  3. Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement? By Andrea ALBANESE; Bart COCKX
  4. Demographic Structure and Macroeconomic Trends By Yunus Aksoy; Henrique S. Basso; Tobias Grasl; Ron P. Smith
  5. Lifecycle Patterns in the Socioeconomic Gradient of Risk Preferences By Stefanie Schurer
  6. Economic-financial literacy and (sustainable) pension reforms: why the former is a key ingredient for the latter By Elsa Fornero
  7. "An Ounce of Prevention at Half Price:Evaluating a Subsidy on Health Investments" By Matthew N. White
  8. Are Cognitive Constraints a Barrier to Annuitization? By Jeffrey R. Brown; Arie Kapteyn; Erzo F.P. Luttmer; Olivia S. Mitchell
  9. Does Prescription Drug Coverage Increase Opioid Abuse? Evidence from Medicare Part D By Rosalie Liccardo Pacula; David Powell; Erin Taylor
  10. Longévité différentielle et redistribution: enjeux théoriques et empiriques By LEROUX, Marie-Louise; PESTIEAU, Pierre; PONTHIERE, Grégory
  11. Product Innovation and Economic Growth Part IV: Demand changes in an aging society (Japanese) By YOSHIKAWA Hiroshi; ANDO Koichi

  1. By: Arzybaev Askar (Universidad Azteca, Mexico)
    Abstract: Population aging and last decade economic circumstances are the factors the pension systems should overcome for maintaining either appropriate level of benefit amount for decent life in the developed countries or minimum subsistence allowances in developing and poor countries, hence many public pension systems worldwide are experiencing difficult economic period as its economy is in the period of financial crisis which affected to the social budget sustainability. Private pension scheme are making its low records worldwide but trying to keep necessary minimum level accrued rights for asset holders and it is clear that the asset holders, means insured people, need to wait till the stormy period of financial crisis is over. Public pension PAYG scheme with its redistribution nature is still being the main bearer of the role of the old age income security. How to keep a national public pension system sustainable? The only prescription how to do it is a periodical renovation by testing the public pension scheme on (i) soundness and effectiveness within national financial and economic system, (ii) appropriateness of its organization and administration, (iii) compliance of parameters with international standards. The listed measures allow to look into a pension system more closely and especially to the pension main indicators which play various roles in the providing of the system vitality. Being steadily studied separately, each indicator can be easily discussed and described. But when we try to synthesize multifactor analysis, then we are limited only by narrative conclusions and reports. To obtain more calculable and tangible results, and in order to make the analysis more attractive, in the research, it is applied empirical quantitative approach of econometrics as a tool that mediates between factor analysis and decision making for explaining old age security national indicators behavior. Paper is suggesting analytical system for assessing national pension system by applying new techniques of (i) the pension indicators evaluation and (ii) its values synthesis for the following indicators: existence of first public and funded pillars, inflation adjustment rules, salary growing adjustment, system adequacy and affordability, dependency ratio, length of service, retirement age.
    Keywords: old age security, cohesive testing, public pension, pension indicators, international standards.
    Date: 2015–04
  2. By: Boman, Anders (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this paper we study retirement decisions and more specifically, the influence of a partner’s labour market status on this decision. We use information from three waves of the Survey of Health Ageing and Retirement in Europe (SHARE), providing information on a wide range of variables, including economic, social, as well as health variables not only of the respondent but also of the partner of the respondent, if any. Most importantly, we are able analyse the transition into retirement rather than the state of being retired and also to distinguish between different degrees of labour market attachment of the partner. Initially, we find that having a partner who is retired or a homemaker increases the likelihood of retirement, whereas an unemployed partner or a partner who is not working due to permanent sickness or disability has no statistically significant effect. However, dividing the sample into men and women, we find that the effects differ substantially between these two groups. The probability of retirement among men is not influenced by their partner’s labour market status, and among women we only find a statistically significant effect of having a partner who is retired. Our findings are robust to variations in the definition of retirement and subsamples.
    Keywords: retirement; labour market; family; joint leisure; SHARE
    JEL: J14 J26
    Date: 2015–03
  3. By: Andrea ALBANESE (Ghent University, SHERPPA and DEFAP Graduate School (University of Milan-Bicocca and Catholic University of the Sacred Heart)); Bart COCKX (Ghent University, SHERPPA, UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and CESifo, IZA)
    Abstract: In several OECD countries age-targeted wage subsidies have been introduced to increase the employment of older workers, but evidence on their effectiveness is scarce. This paper examines the effects of a permanent wage cost subsidy in Belgium on the employment rate, working time and hourly wage. We estimate these effects by integrating Inverse Probability Weighting in a, possibly trend-adjusted, Difference-in-Differences of endogenously sampled repeated cross sections. We find small positive short-run impacts on working time and larger ones on the employment rate, but only for employees at high risk of leaving to early retirement. The wage is not affected.
    Keywords: Employers’ wage subsidies, older workers, Weighted Difference-in-Differences, endogenous sampling
    JEL: J14 C21 J18 J3
  4. By: Yunus Aksoy (Department of Economics, Mathematics & Statistics, Birkbeck); Henrique S. Basso (Banco de España); Tobias Grasl (Department of Economics, Mathematics & Statistics, Birkbeck); Ron P. Smith (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We analyse both empirically and theoretically the effects of changes in demographic structure on the macroeconomy, looking particular at their impact to medium-term trends. Our empirical exercise examines the impact of the proportion of the population in each age group, on growth, savings, investment, hours, interest rates and inflation using a panel VAR estimated from data for 20 OECD economies for the period 1970-2007. This flexible dynamic structure with interactions among the main variables allows us to estimate both the direct impact of demographic structure and their feedback effects. Our estimates confirm the importance of age structure, with young and old dependants having a negative impact on most macroeconomic variables while workers contribute positively. Our theoretical framework incorporates demographic heterogeneity and endogenous productivity, allowing us to study the medium-term interaction of demographic changes and savings, investment, and innovation decisions. Theoretical simulations incorporating the changes in demographic structure experienced by many OECD countries in the past decades replicate well our empirical findings. The current trend of population aging and reduced fertility, expected to continue in the next decades, is found to be a strong force in reducing output growth and real interest rates across OECD countries.
    Keywords: Demographic changes, population age profile, medium-term, output growth, savings and investment.
    JEL: E32 J11
    Date: 2015–01
  5. By: Stefanie Schurer
    Abstract: Who is most likely to change their risk preferences over the lifecourse? Using German nationally representative survey data and methods to separate age from cohort effects, we estimate the lifecycle patterns in the socioeconomic gradient of self-reported risk preferences. Tolerance to risk drops by 0.5 SD across all groups from late adolescence to age 40. From mid to old age, risk tolerance continues to drop for the most disadvantaged, while it stabilizes for all other groups. By age 65, the socioeconomic gradient reaches a maximum of 0.5 SD. Extreme risk aversion among the elderly poor has important policy implications.
    Keywords: Risk preferences, socioeconomic inequalities, life-course analysis, cohort effects, SOEP
    JEL: D81 D01 D63
    Date: 2015
  6. By: Elsa Fornero (University of Torino and CeRP-Collegio Carlo Alberto)
    Abstract: Financial literacy has important implications for economic reforms. Reforms are meant to change people’s behavior and their effectiveness crucially depends on the ability of citizens to recognize and generally approve their necessity, their general design, and their “sense of direction.” Without basic understanding by citizens, reforms risk having little or no effect or even being reversed. Informed judgment about economic reforms requires information and numeracy as well as literacy. This is particularly true of pension reforms because of their profound impact on people’s life plans. The 2011 Italian pension reform is a case in point.
    Date: 2014–11
  7. By: Matthew N. White (Department of Economics, University of Delaware)
    Abstract: This paper examines how investments in health, through spending on preventive care, affect subsequent spending on medical care among the retired population.Augmenting a traditional dynamic consumption-savings model with two medical care goods, I estimate a structural life cycle model using data on single retired Americans from the Health and Retirement Study; I then conduct policy counterfactuals to ascertain the effect of a subsidy on preventive care on health and fiscal outcomes. A narrowly targeted subsidy improves longevity by 0.76 months at a public cost of $760 per capita, but does not reduce lifetime demand for medical care.
    Keywords: Consumption, dynamic optimization, health insurance, health investment
    JEL: D14 D91 I13
    Date: 2015
  8. By: Jeffrey R. Brown; Arie Kapteyn; Erzo F.P. Luttmer; Olivia S. Mitchell
    Abstract: The brief’s key findings are: *Even though retirees are increasingly responsible for deciding how to draw down their assets, few buy annuities. *Researchers have offered a host of explanations for the limited take-up, but the puzzle has never been solved. *This analysis finds that valuing annuities is hard for people, so they may only buy one if offered a very good deal. *To test this finding, alternative explanations were explored and the results were negative, strengthening the conclusion that people find annuities hard to value. *These results suggest that many individuals, on their own, may have difficulty making well-informed choices about managing their money in retirement.
  9. By: Rosalie Liccardo Pacula; David Powell; Erin Taylor
    Abstract: Opioid abuse, as measured by deaths involving opioid analgesics and substance abuse treatment admissions, has increased dramatically since 1999, including a 20% increase in opioid-related mortality between 2005 and 2006. This paper examines whether the introduction of the Medicare Prescription Drug Benefit Program (Part D) in 2006 may have contributed to the increase in prescription drug abuse by expanding access to prescription drug benefits among the elderly. We test whether opioid abuse increased not only for the population directly affected by Part D (ages 65+) but also for younger ages. We compare growth in opioid prescriptions and abuse in states with relatively large ages 65+ population shares to states with smaller elderly population shares. Using data from the Drug Enforcement Agency’s Automation of Reports and Consolidated Orders System (ARCOS), we find opioid distribution increased faster in states with a larger fraction of its population impacted by Part D. We also find that this relative increase in opioids resulted in increases in opioid-related substance abuse treatment admissions. Interestingly, these states experienced significant growth in opioid abuse among both the 65+ population and the under 65 population, though the latter was not directly impacted by the implementation of Medicare Part D. We also find that opioid-related mortality increased disproportionately in the high elderly share states, though this relationship is not statistically different from zero.
    JEL: I13 I18 K42
    Date: 2015–04
  10. By: LEROUX, Marie-Louise (Département des Sciences Economiques, ESG-UQAM, Montréal, Canada; CIRPEE; CESifo and Université catholique de Louvain, CORE, Belgium); PESTIEAU, Pierre (University of Liège, CREPP, Belgium; Université catholique de Louvain, CORE, Belgium; Toulouse School of Economics, France and CEPR); PONTHIERE, Grégory (University Paris East, Créteil and Paris School of Economics, France)
    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 terme 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 différentielle
    JEL: H31 H53 I31
    Date: 2014–11–05
  11. By: YOSHIKAWA Hiroshi; ANDO Koichi
    Abstract: Under a declining population, the engine for economic growth is regarded as broadly defined technical progress or innovation. We demonstrate that the production of goods always follows logistic growth. This simple fact results from the saturation of demand for any existing goods and services. This indicates that the growth rate of an advanced economy will eventually fall to zero unless new goods and services are introduced to the market; namely, product innovation is paramount to economic growth. The role of product innovation is not fully captured by the endogenous growth literature which emphasizes the importance of innovation. We present two case studies—hybrid cars and disposable diapers for the aged—to demonstrate the significance of product innovation.
    Date: 2015–03

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