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on Economics of Ageing |
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| By: | Tetsuo Ono (Graduate School of Economics, Osaka University) |
| Abstract: | This study presents an overlapping-generation model featuring probabilistic vot- ing over two policy issues: pensions and public goods. The results show that as the population ages, the pension-to-GDP ratio and the growth rate of capital increase, but the public goods-to-GDP ratio decreases. Moreover, per retiree pension-to- GDP shows a hump-shaped pattern in response to population aging, but only a rising phase is valid under empirically plausible parameter values. |
| Keywords: | Economic Growth; Population Aging; Probabilistic Voting; Public Pension; Public Goods Provision |
| JEL: | D70 E24 H55 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1417r&r=all |
| By: | T. Müller |
| Abstract: | Both household investments in own housing and payments into the pension system are forms of a life-cycle redistribution process of income from working age to retirement. They can be seen as a store of wealth that can be released in the old-age. There is a already well-established theory about a possible trade-off between both income forms or more generally speaking between home ownership and the development of the welfare state. This paper adds to the existing literature by estimating the offset between pension and housing wealth using cross-sectional data of households in 12 European countries within the Survey of Health, Ageing and Retirement in Europe (SHARE), a multidisciplinary panel database that includes data on health, socio-economic status and social and family networks of more than 85,000 individuals aged 50 or over. We calculate all measures of wealth including pension wealth at the peak of the households asset wealth curve to analyze their portfolio composition with a focus on pension and housing wealth. By applying a simple life-cycle model we find empirical evidence in favor of the trade-off theory. However we are able to show that the offset effect varies between countries which is in line with expectations due to differences in their pension system. |
| Keywords: | Home Ownership; Household Wealth; Housing; Pension |
| JEL: | R3 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2015_125&r=all |
| By: | Ludovico Carrino (Department of Economics, University Of Venice Cà Foscari); Cristina Elisa Orso (Department of Economics, University Of Venice Cà Foscari); Giacomo Pasini (Department of Economics, University Of Venice Cà Foscari, Networks for Studies on Pensions, Aging and Retirement, The Netherlands) |
| Abstract: | In the context of an unprecedented aging process, the role of domiciliary care for older adults is becoming increasingly essential. In order to design effective and proactive policies of formal elderly-care, it is crucial to understand how vulnerable elderly individuals would adjust their informal long-term care utilization to changes in the formal-care provision. Although theoretical frameworks have been proposed, showing that a positive relationship could arise when the elderly exhibit an excess demand of care, empirical evidence is scant, due to the lack of credible instruments to account for the endogenous nature of formal-care decisions. We propose a novel instrument, an index that capture individuals’ eligibility status to the LTC domiciliary programmes implemented in their own nation or region. That is, a dummy variable - being eligible or not - which is grounded on the LTC regulation context at national or regional level, but still has individual within region variation due to differences in health conditions and vulnerability assessment. We estimate an IV two-part model using a representative sample of the over 60 population for non-institutionalised individuals in Austria, Germany, France and Belgium. Our results, which are robust to a number of different specifications, point at the lack of crowding-out of the informal- by the formal-care, thus suggesting the existence of a substantial unmet demand of LTC among the elderly. |
| Keywords: | home care, instrumental variables, unmet demand, SHARE data |
| JEL: | C36 I13 J14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2015:26&r=all |
| By: | Alicia H. Munnell; Wenliang Hou; Anthony Webb |
| Abstract: | Today’s working-age households, in aggregate, will inherit a substantial amount of wealth. The effect of inheritances on retirement readiness, however, is unclear. On the one hand, past research has shown that higher-income households – who are less likely to be unprepared for retirement – are more likely to receive inheritances and to receive larger amounts than their lower-income counterparts. On the other hand, the anticipated inheritance receipts of low- and middle-income households represent a much larger percentage of their current wealth, suggesting that inheritances could potentially be more influential in boosting their retirement security. This brief uses the National Retirement Risk Index (NRRI), which is based on the Federal Reserve’s Survey of Consumer Finances (SCF), plus additional questions from the SCF about inheritances to explore the extent to which inheritance receipts reduce the percentage of households “at risk.” The NRRI measures Americans’ retirement preparedness by comparing projected replacement rates – retirement income as a percentage of pre-retirement income – with target rates and shows that today’s workers face a major retirement income challenge. Even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, more than half are at risk in retirement. The question is the extent to which considering inheritances changes this story. The discussion proceeds as follows. The first section describes the NRRI. The second section discusses the inheritance questions in the SCF and shows the relationship between inheritance responses and the NRRI status of households. The third section reports on the percentage of households that would have been at risk in the absence of inheritances, by subtracting inheritances from the wealth currently held by NRRI households. The fourth section explores how more inheritances in the future – perhaps as a result of unspent 401(k) balances – might reduce the percentage at risk. The final section concludes that inheritances already received – and potential increased inheritances from unspent 401(k) balances – have only a modest effect on the overall percentage of households at risk. The reasons are that many households do not receive any inheritance at all and – among those that do – most inheritances are relatively small and the large inheritances go to households already prepared for retirement. |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2015-15&r=all |
| By: | Elisabetta Trevisan (Department of Economics and Management, University Of Venice Cà Foscari); Francesca Zantomio (Department of Economics, University Of Venice Cà Foscari) |
| Abstract: | We investigate the consequences of experiencing an acute health shock, namely the first onset of myocardial infarction, stroke or cancer, on the labour supply of older workers in Europe. Despite its policy relevance to social security sustainability, the question has not yet been empirically addressed in the European context. We combine data from the the English Longitudinal Study of Ageing and the Survey of Health, Ageing and Retirement in Europe and cover sixteen European countries, representative of different institutional settings, in the years spanning from 2002 to 2013. The empirical strategy builds on the availability of an extremely rich set of health and labour market information as well as of panel data. To remove the potential confounding bias, a selection on observables strategy is adopted, while the longitudinal dimension of data allows controlling for time invariant unobservables. Implementation is based on a combination of stratification and propensity score matching methods. Results reveal that experiencing an acute health shock on average doubles the risk of an older worker leaving the labour market, and is accompanied by a deterioration in physical functioning and mental health, as well as by a reduction in perceived life expectancy. Men’s labour market response appears driven by the onset of impairment acting as a barrier to work. In in the case of women, preferences for leisure and financial constraints seem to play a prominent role. Heterogeneity in behavioural responses across countries – with the largest labour supply reductions observed in the Nordic and Eastern countries, and England – are suggestive of a relevant role played by social security generosity. |
| Keywords: | health shocks, labour supply, Europe, older workers, propensity score matching |
| JEL: | J22 J18 I10 C14 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2015:27&r=all |
| By: | Joey Au; Andrew Coleman; Trudy Sullivan (The Treasury) |
| Abstract: | This paper investigates the practicality of using a sophisticated multi-criteria analysis technique to estimate the preferences of a representative sample of the public to inform policy advice. Our application concerns retirement income policy and we use a multicriteria decision-making survey to (i) investigate the relative importance of seven aspects of retirement income policies to a sample of 1,066 New Zealanders, (ii) document the diversity of policy preferences in a statistically rigorous manner, and (iii) evaluate the way people rank three different retirement income policies from an individual well-being perspective. The results of the paper suggest that multi-criteria surveys as a tool have considerable potential to help policymakers develop and identify policies that are aligned with the way people want to live. In terms of retirement income policies, we find that (i) there is widespread opposition to means-testing, (ii) a majority of respondents would choose an increase in current taxes if this could prevent even larger tax increases on future generations, and (iii) there are strongly divergent preferences over the appropriate eligibility age for New Zealand Superannuation. Overall, a policy combination that raises the age of eligibility for New Zealand Superannuation and reduces future tax increases is opposed by many and preferred by few. However, a policy that more aggressively prefunds New Zealand Superannuation by immediately raising taxes is supported by a majority of people of all ages and income groups. |
| JEL: | H55 I31 I39 J26 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:15/14&r=all |
| By: | Gopi Shah Goda; Shanthi Ramnath; John B. Shoven; Sita Nataraj Slavov |
| Abstract: | Despite the large and growing returns to deferring Social Security benefits, most individuals claim Social Security before the full retirement age, currently age 66. In this paper, we use a panel of administrative tax data on likely primary earners to explore some potential hypotheses of why individuals fail to delay claiming Social Security, including liquidity constraints and private information regarding one’s expected future lifetime. We find that approximately 31-34% of beneficiaries who claim prior to the full retirement age have assets in Individual Retirement Accounts (IRAs) that would fund at least 2 additional years of Social Security benefits, and 24-26% could fund at least 4 years of Social Security deferral with IRA assets alone. Our analysis suggests that these percentages would be considerably higher if other assets were taken into account. We find evidence that those who claim prior to the full retirement age have higher subjective and actual mortality rates than those who claim later, suggesting that private information about expected future lifetimes may influence claiming behavior. |
| JEL: | D14 H31 H55 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21544&r=all |
| By: | Dieppe, Alistair; Guarda, Paolo; Albani, Maria; González Pandiella, Alberto; Gordo Mora, Esther; Grech, Owen; Irac, Delphine; Kilponen, Juha; Kulikov, Dmitry; Marchiori, Luca; Mourinho Félix, Ricardo; Papadopoulou, Niki; Rodano, Lisa; Sideris, Dimitris; Vogel, Edgar |
| Abstract: | This paper analyses the challenges that high public debt and ageing populations pose to medium-term growth. First, macroeconometric model simulations suggest that medium-term growth can benefit from credible fiscal consolidation, partly through reductions in sovereign risk premia. Second, a disaggregated growth accounting exercise suggests that the impact of population ageing on medium-term growth can be mitigated by structural reforms boosting labour force participation. Finally, general equilibrium models suggest that pay-as-you-go public pension systems will require reforms combining lower benefits, a later retirement age and higher social contributions. These findings suggest several policy recommendations: (a) “fiscal space” should be preserved to counter adverse shocks, (b) credible fiscal plans can benefit growth through the sovereign risk channel, (c) the demographic transition increases the need for improved fiscal policy coordination and more flexible labour migration policies, and (d) fiscal consolidation should avoid perverse incentive effects that could lower labour supply and medium-term growth. JEL Classification: E4, E5 |
| Keywords: | ageing, fiscal consolidation, medium-term growth, pensions, sovereign debt, structural reforms |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2014165&r=all |
| By: | Geoffrey T. Sanzenbacher; Anthony Webb; Candace M. Cosgrove; Natalia S. Orlova |
| Abstract: | As the gap between retirement resources and needs grows, many researchers have prescribed the antidote of working longer. But this prescription may disadvantage lower socioeconomic status (SES) households because they have shorter lives than higher-SES households, and working longer may increase existing disparities in retirement durations. This paper uses data from the National Longitudinal Mortality Study to quantity these disparities by SES since 1979, using education as a proxy for SES. The paper finds that age-65 life expectancies have increased for all levels of educational attainment but that the gains have been much greater for those in the top quartile. The paper uses these calculations to determine hypothetical retirement ages that hold constant for each SES group the 1979 ratios of time spent in retirement to time spent working. The findings suggest that all educational groups can work longer today than in the past, while spending a similar fraction of their lives in retirement; those in the top quartile of educational attainment can work a full one to two years longer than those in the bottom quartile and still maintain their 1979 ratios. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2015-21&r=all |
| By: | P. Deschermeier |
| Abstract: | Demographic change is dramatically transforming the German society: the ratio of young to old and of the gainfully employed to pensioners is shifting in favor of older persons. In the coming decades this development causes a substantial macroeconomic structural transfor-mation affecting all of the important markets in Germany. For example the labor market will lack young workers, the product markets will have to adjust to structurally changed consumer demands and on the capital market, savings behavior and the demand for productive in-vestments will be changing. With respect to the real estate market the change in the age structure and the regional distribution of the population will affect the demand for personal living space. Besides the macroeconomic dimension, the demand for personal living space is determined by social factors (e.g. more “living apart together†relationships increase the demand for smaller flats in the metropolitan areas), demographic factors (old people demand other hous-ing as young) and individual preferences (buying vs. renting properties). The research pro-posal aims at providing forecasts of the age specific demand of personal living space for Germany until 2030. The analysis will use data of the German Socio-Economic Panel, a lon-gitudinal panel dataset of the population in Germany. The analysis will feature a functional data model with time series coefficients, which are used to model the age-specific demand for living space. This model will be forecasted up to the year 2030. The results provide an insight on the challenges of the demographic transition in Germany with respect to the real estate market. The presentation will focus especially on the economic consequences of the aging society in Germany on the demand for personal living space. |
| Keywords: | Demography; Forecasting; Germany; Personal Living Space |
| JEL: | R3 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2015_12&r=all |
| By: | F.Kwakutse Ametefe; S. Stevenson; S. Devaney |
| Abstract: | The role of real estate in investment portfolios was analysed within an Asset Liability Management Framework since 2000 (see Chun et al (2000), Craft (2001, 2005), Booth (2002)). It was found that, when liabilities are taken account of, the diversification role of real estate turns out to be more limited and accounts for the reduced exposure to this asset as witnessed in the portfolio of most institutional investors._ _Brounen et al (2010) highlighted another important issue: the choice of liability stream. They demonstrated that different definitions of liability result in different allocations to real estate. They compared results obtained when the actuarial projected benefit obligations of DB Schemes as used in Chun et al (2000) to those obtained by using the market value of the projected benefit obligations. The market values were obtained by accounting for interest rate and inflation risk. With the shift from Defined Benefit to Defined Contribution pension structures across the globe, many feel that there is no need to adopt an ALM approach in optimisation. However, the global financial crisis which occurred between 2007 and 2008 has brought to the fore the uncertainty of income that pension contributors, especially those based on defined contribution (DC) formulas. Pension legislations in some OECD countries require that DC Pension funds provide a certain minimum on pension contributions. These minimum guarantees could be absolute or relative. Relative return guarantees are set in relation to a certain benchmark synthetic investment portfolio or the average performance of pension funds in the industry. When minimum return guarantees are offered by companies that sponsor DC Plans, the plan inherently takes on DB features (OECD, 2012). In the first part of this study, we examine the long-run relationship between the various asset classes and our chosen liability benchmarks using correlation analysis and cointegration techniques. We make use of various minimum return guarantees and other potential benchmarks as our definition of liabilities: 0% nominal return; 0% real return (inflation proxies: CPI and RPI), government bond rate, risk-free rates such as t-bill and repo rates (Sharpe, 1994). In the second part of our study, we use the dynamic Asset Liability Model of Dempster et al (2002). As in Brounen et al (2010), results of our study would demonstrate how a change in definition of liability impacts on the asset allocation decision. |
| Keywords: | Asset Allocation; Cointegration; Liability; Pensions; Portfolio |
| JEL: | R3 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2015_140&r=all |
| By: | S. Moulton; D. Haurin; W. Shi; M. Ericksen |
| Abstract: | Internationally, there is increasing interest in the potential of elderly households to withdraw their home equity, but remain in their home, through some form of reverse mortgage. However, reverse mortgage markets are limited to the U.S. and South Korea. One question is whether seniors will originate reverse mortgages if the contract and process are well documented, the mortgage is insured and relatively riskless. If seniors are willing to tap home equity through this mechanism, then the potential for growth in the reverse mortgage market is very large in both the U.S. and world. However, very little is known about the characteristics of those who obtain reverse mortgages in the U.S. compared with the general population of seniors. The penetration rate is only about two percent. Our study helps address this deficiency through the analysis of a unique data set of senior households who sought counseling in 2010 and 2011 for the predominant form of reverse mortgages, the government insured Home Equity Conversion Mortgage (HECM). We combine data on counseled households with weighted nationally representative data from the 2010 wave of the Health and Retirement Study. Our estimation model focuses on two decisions: seeking counseling (which is a prerequisite for applying for a reverse mortgage) and obtaining the mortgage. We use a truncated bivariate probit model for the estimation. We find that household income, home equity, race and prior credit performance are associated with the probability of obtaining a reverse mortgage. Specifically, the largest demand for reverse mortgages is among seniors who have high home equity but a low income flow. Seniors who were past due on their previous mortgage also have a relatively high probability of seeking a reverse mortgage; however, counseling tends to moderate this demand. In general, the required counseling session tends to increase the probability that credit worthy households apply for reverse mortgages, reducing the probability for seniors with a poor credit history. We exploit an exogenous change in counseling requirements and find that enhanced counseling is associated with a reduced likelihood of obtaining a HECM, and that this effect is largely explained by information provided about eligibility for alternative public benefits. |
| Keywords: | Counseling; Mortgage Choice; Reverse Mortgage; Senior Housing |
| JEL: | R3 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2015_35&r=all |
| By: | Manabu Shimasawa (Senior Researcher National Institute for Research Advancement); Kazumasa Oguro (Associate Professor Faculty of Economics, Hosei University); Minoru Masujima (Director for Macroeconomic Analysis Cabinet Office, Government of Japan) |
| Abstract: | We employed the Generational Accounting model in estimating the generation-specific lifetime (both past and the future) benefits/burdens and income and evaluating their values as of 2010, thus estimating the lifetime net burden ratio (= lifetime net burden/lifetime income). As a result, the following points were elucidated: 1) Among the current living generations, the lifetime net burden ratio of the 0-year-old generation is about 25 percentage points higher than that of the current 90-year-old generation; 2) The lifetime net burden ratio of the future generations is about 31 percentage points higher than that of the 0-year-old generation; 3) The net burden of the current generations would have to be increased in order to narrow the generational gap between the current generations and the future generations, which would inevitably lead to an expansion of the intragenerational gap of the current generations; and 4) In order to prevent conflict of interest between the current generations, in particular the younger generations and future generations, and at the same time, narrow the intergenerational gap, it is desirable to increase the income of the current generations, in particular that of the younger generations, by achieving a high economic growth rate and implementing macroeconomic policy management that would inhibit increase in the risk premium included in the interest rate. |
| Keywords: | Generational Accounting, falling birthrates and aging population, fiscal sustainability, government debt |
| JEL: | H61 E62 B41 |
| URL: | http://d.repec.org/n?u=RePEc:mof:wpaper:ron258&r=all |
| By: | Y. Essafi; A. Simon |
| Abstract: | Worldwide variations in the population structure are taking place over the next century, and this is expected to have impacts on the whole economic systems, and particularly on the housing market (i.e. price of homes, ownership structure, and supply and demand of residential properties). In this paper, we empirically investigate how the French real estate is affected by both economic and demographic factors. Starting from the theoretical benchmark model of Takˆts (2012), we fist investigate the relationship between collective and individual housing prices dynamics and GDP, total population and old age dependency ratio. Results from fixed effect regressions on 94 French departments on the period 2000-2013 show that real estate prices are significantly and positively affected by the total population number and the total GDP, while they are significantly and negatively affected by the old age dependency ratio (ratio of population aged 60+ to the working population). This study, to our knowledge, is conducted for the first time across departments in France. Furthermore, obtained results and the particular case of France have motivated further research by enriching the baseline model with various financial, real estate, economic and demographic explanatory variables and analyzing our panel in a more segmented way. In all cases, economic impact on real estate market is significant and around the unit_ i.e. 1% increase in GDP leads a 1% increase in housing prices_ while demographic factors seem to have a greater impact on housing market prices. |
| Keywords: | Demographic Factors; Economic Factors; Fixed Effect; Housing Market Prices; Panel Data |
| JEL: | R3 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2015_165&r=all |
| By: | Grégory Ponthière (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics) |
| Abstract: | Individuals care not only about their own survival, but also about the survival of other persons. However, little attention has been paid so far to measuring the contribution of longer coexistence time to living standards. For that purpose, we develop a measure of coexistence time - the joint life expectancy -, which quantifies the average duration of existence for a group of persons. Then, using a lifecycle model with risky lifetime, we construct an equivalent consumption measure incorporating gains in single and joint life expectancies. An empirical application to France (1820-2010) shows that, assuming independent individual mortality risks, the rise in joint life expectancies contributed to improve standards of living significantly. We examine the robustness of that result to the introduction of dependent mortality risks using copulas, and we show that equivalent consumption patterns are robust to introducing risk dependence. |
| Keywords: | Mortality,Joint survival,Coexistence,Measurement,Standards of living |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01194427&r=all |
| By: | Bram De Rock (ECARES-ULB, Avenue Franklin Roosevelt 50, CP 114/04, 1050 Bruxelles); Bart Capéau |
| Abstract: | On the basis of a concatenation of fifteen Belgian household budget surveys from 1995/96 to 2010, we investigate the impact of demographic factors, such as ageing and changing household composition, on saving behaviour. Not focusing on high frequency events (e.g. business cycles and unexpected shock), we find that saving behaviour is fundamentally driven by the change in household size and composition. Older people seem to be more impatient, and thus save less, though this evidence is not clear cut. Contrary to the usual practice of considering the allocation of household income over consumption and saving to be the result of one particular household’s member decision, we present here a more individually based analysis of the data. By lack of true panel data, the assumptions that have to be made for such an approach (identical intertemporal preferences among household members) are severe, but not necessarily less preferable than those, if any, underlying the common practice of assuming one single individual decision maker. |
| Keywords: | Saving, consumption, life-cycle, intertemporal choice, household demographics. |
| JEL: | D14 D91 E21 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201509-286&r=all |
| By: | Chadwick C. Curtis; Steven Lugauer; Nelson C. Mark |
| Abstract: | We present a model of household life-cycle saving decisions in order to quantify the impact of demographic changes on aggregate household saving rates in Japan, China, and India. The observed age distributions help explain the contrasting saving patterns over time across the three countries. In the model simulations, the growing number of retirees suppresses Japanese saving rates, while decreasing family size increases saving for both China and India. Projecting forward, the model predicts lower household saving rates in Japan and China. |
| JEL: | E2 J1 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21555&r=all |
| By: | S. Luzi |
| JEL: | R3 |
| Date: | 2013–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2013_ind_111&r=all |
| By: | M. Abatecola |
| JEL: | R3 |
| Date: | 2013–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2013_ind_110&r=all |