nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒10‒04
twenty-one papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Aging, social security design, and capital accumulation By Dedry,Antoine; Onder,Harun; Pestieau,Pierre
  2. Red Herring in the Vistula River: Time-to-Death and Health Care Expenditure By Maciej Lis
  3. Modeling and projecting mortality. A new model of heterogeneity and selection in survivorship By Hans Oluf Hansen
  4. Government Subsidized Individual Retirement System By Okan Eren; Serife Genc Ileri
  5. Suspicious Minds (can be a good thing when saving for retirement) By A.M.J. Deetlefs; H. Bateman; L. Isabella Dobrescu; B.R. Newell; Andreas Ortmann; Susan Thorp
  6. The impact of ageing on income inequality technological change By Dr. Thomas Drosdowski; Britta Stöver; Dr. Marc Ingo Wolter
  7. Couples' and Singles’ Savings After Retirement By Mariacristina De Nardi; Eric French; John Bailey Jones
  8. Does Age-Related Decline in Ability Correspond with Retirement Age? By Anek Belbase; Geoffrey T. Sanzenbacher; Christopher M. Gillis
  9. Job Polarization and Labor Market Outcomes for Older, Middle-Skilled Workers By Matthew S. Rutledge; Qi Guan
  10. How Has Shift to Defined Contribution Plans Affected Saving? By Alicia H. Munnell; Jean-Pierre Aubry; Caroline V. Crawford
  11. Title: Strategic Intelligence Monitor on Personal Health Systems Phase 3 (SIMPHS 3) – MOMA and Maccabi Healthcare Services (Israel) Case Study Report By Ignacio Peinado; Elena Villalba; Francisco José Mansoa; Alberto Sánchez
  12. Estimation of EU-Comparable Poverty-Related Variables in the United States, 1995-2014 By Nico Palesch; Brendon Andrews; Jasmin Thomas
  13. Human Capital: Challenges for Russia By Vladimir Mau
  14. Isgucune Katilim Orani Ongoruleri By Evren Ceritoglu; Okan Eren
  15. The Cost of Uncertainty about the Timing of Social Security Reform By Frank N. Caliendo; Aspen Gorry; Sita Slavov
  16. What Causes Workers to Retire Before They Plan? By Alicia H. Munnell; Geoffrey T. Sanzenbacher; Matthew S. Rutledge
  17. Estimation of EU-Comparable Poverty-Related Variables in Australia, 2001-2013 By Brendon Andrews; Jasmin Thomas
  18. Title: Strategic Intelligence Monitor on Personal Health Systems Phase 3 (SIMPHS 3) – Operational Guidelines for ICT-supported Integrated Care and Independent Living By Wilco Graafmans; Ramon Sabes-Figuera; Fabienne Abadie
  19. Financial Education for Long-term Savings and Investments: Review of Research and Literature By Adele Atkinson; Flore-Anne Messy; Lila Rabinovich; Joanne Yoong
  20. Family Caregiving: 20 Years of Federal Policy By Debra Lipson
  21. Some Explanation of Disparities of Mortality Rates of Working Age Population in Eastern, Central and Western Europe By Maria Lacko

  1. By: Dedry,Antoine; Onder,Harun; Pestieau,Pierre
    Abstract: This paper analyzes the impact of aging on capital accumulation and welfare in a country with a sizable unfunded social security system. Using a two-period overlapping generation model with endogenous retirement decisions, the paper shows that the type of aging and the type of unfunded social security system are important in understanding this impact. The analysis compares two types of demographic changes, declining fertility and increasing longevity; three types of pensions, defined contributions, defined benefits, and defined annuities; as well as mandatory and optimal retirement systems to investigate the differences in implications of aging.
    Keywords: Economic Theory&Research,Population Policies,Emerging Markets,Labor Policies,Pensions&Retirement Systems
    Date: 2015–09–22
  2. By: Maciej Lis
    Abstract: The aim of the article is to quantify the role of time-to-death in shaping health care costs. By combining a detailed break-down of population-wide data on publicly financed health care expenditure with the population and mortality data we are able to estimate a flexible model of live-cycle healthcare expenditure. We show that introducing time to death into the model enables the health care costs model to fit data perfectly. Our results confirm that the cumulative costs of health care over life-span depend on the age of death to a limited extend. As a result, the effect of rising life expectancy has a minor impact on HCE. However, the transitional effect of the changing age structure of the population should affect the aggregate health care expenditure.
    Keywords: healthcare expenditure, ageing, red herring
    JEL: H51 I12 I18 J14
    Date: 2015–09
  3. By: Hans Oluf Hansen (Department of Economics, University of Copenhagen)
    Abstract: The demographic and epidemiological literature offers abundant examples of a range of shortcomings of statistical modeling to describe mortality by sex, age, time/cohort, and cause-of-death. Statistical modeling of mortality operating with implicitly homogenous sub-groupings exposed to mortality risk fails to consider latent biological heterogeneity at the level of individuals, and thereby important biological and social selection of survivorship. Defined on the state space of the simple life model, this study presents a proportional hazard model that makes up for such drawbacks as far as latent biological heterogeneity is concerned. The model describes heterogeneity and selection in individual survivorship by iterative stochastic micro simulation using cohort-based population mortality as an empirical benchmark. The model offers efficient linkage between past assorted mortality, on one hand, and informed anticipation of future heterogeneous survivorship, on the other hand. The combination of stochastic micro-simulation and log-linear modeling of the period effect or trend uncovered under the model makes the new Heterogeneity and Selection Model a powerful analytic and predictive tool of survivorship. Postulating a trend independent of age makes the popular Lee-Carter model (1992) unfit for professional demographic and actuarial use. Moreover, by sweeping latent biological heterogeneity under the rug, mortality analysis and projection based on central rates such as the Lee-Carter model (1992) underrates mortality in the mature and elderly ages. This is demonstrated by comparing current official mortality projections of Sweden, Denmark, and England & Wales to a set of alternative mortality projections under the Heterogeneity and Selection Model.
    Keywords: biodemography, heterogeneity and selection, stochastic micro-simulation, projection of survivorship
    JEL: J1 J11 J11 J14 J17
    Date: 2015–09–22
  4. By: Okan Eren; Serife Genc Ileri
    Abstract: A new private pension scheme where the government makes direct contributions to the retirement accounts has been effective in Turkey since 2013. In this paper we examine the quantitative impacts of this new individual retirement system on the saving rate, capital stock and the long-run welfare of the individuals. We build a multi-period OLG model and simulate an economy with a pension scheme similar to the one in Turkey. Our simulation results reveal that the introduction of this private pension scheme increases the net saving rate by 0.27 percentage points. 23.9 percent of the increase in individual retirement assets constitutes incremental saving. The impact of the new system on physical capital stock is a 15.6 percent rise. According to our long-run welfare analysis, an unborn individual prefers to be born into the economy with individual retirement accounts (IRAs). Our results also suggest that cutting down the fees charged on individual retirement accounts generates a considerable improvement in net saving rate and the stock of physical capital.
    Keywords: Household Saving, Fiscal Policy, Private Pension Accounts
    JEL: D14 D91 E21 E62
    Date: 2015
  5. By: A.M.J. Deetlefs (School of Marketing, UNSW Business School, UNSW); H. Bateman (School of Risk & Actuarial Stidies, UNSW Business School, UNSW); L. Isabella Dobrescu (CEPAR and School of Economics, UNSW Business School, UNSW); B.R. Newell (School of Psychology, UNSW Business School, UNSW); Andreas Ortmann (School of Economics, UNSW Business School, UNSW); Susan Thorp (Discipline of Finance, University of Sydney)
    Abstract: Retirement saving is an area now jam-packed with defaults meant to address delayed or absent decision making. Yet, getting individuals engaged with retirement saving decisions is critical to avoid unsuitable one-size-fits-all defaults and optimise accumulated wealth. We apply a market-segmentation approach to the problem based on two attitudinal motivators of behavioral engagement: trust and interest. Our research sheds new light on why and how engagement occurs. Engagement grows with interest, yet engagement can also be motivated by low levels of trust. However, when interest is lacking, trust is related to reducing monitoring behaviour. This increases the vulnerability of individuals to exploitation exposing the “dark side of trust” (Gargiulo and Ertug 2006). Based on this interaction of trust and interest and how it feeds into engagement, a personalised approach by pension plan providers that addresses members’ diverse needs and means in terms of time, knowledge, and financial resources seems desirable.
    Keywords: pension defaults, trust, engagement, retirement savings
    JEL: J26 J32
    Date: 2015–03
  6. By: Dr. Thomas Drosdowski (GWS - Institute of Economic Structures Research); Britta Stöver (GWS - Institute of Economic Structures Research); Dr. Marc Ingo Wolter (GWS - Institute of Economic Structures Research)
    Abstract: The question whether ageing leads to more or less inequality is not easily answered. Different, in part opposed, effects can be identified that are sensible to reactions of private households, the implementation of political measures etc. To get a better idea of the effect of demographic change on the distribution of income in Germany we apply a scenario analysis using the macro-econometric input-output model INFORGE and the socio-economic module DEMOS. Different exogenously given population projections are applied to identify the structural and quantity effect of ageing on inequality of disposable incomes between household groups. In summary, the projected demographic change in Germany is likely to increase income inequality. Main driver is the disproportionate increase in wage income due to labour market shortages. While the quantity effect acts slightly equalising on income inequality, the structural effect definitely raises income inequality.
    Keywords: income inequality, ageing, socio-economic modelling
    JEL: D31
    Date: 2015
  7. By: Mariacristina De Nardi (University College of London, Federal Reserve Bank of Chicago, Institute for Fiscal Studies, and NBER); Eric French (University College of London, Federal Reserve Bank of Chicago, and Institute for Fiscal Studies); John Bailey Jones (SUNY-Albany)
    Abstract: We model the saving problem of retired couples and singles facing uncertain longevity and medical expenses in presence of means-tested social insurance. Households can save to self-insure against uncertain longevity and medical expenses, and to leave bequests. Individuals in a couple can be altruistic towards their spouse and other heirs and split bequests optimally. Single people can care about leaving bequests to children and others. Using AHEAD data, we first estimate the model and we then evaluate the relative importance of the various savings motives and the risk exposure of couples’ versus singles.
    Date: 2015–07
  8. By: Anek Belbase; Geoffrey T. Sanzenbacher; Christopher M. Gillis
    Abstract: While declines in physical and mental performance are inevitable as workers age, they are not uniform across the various systems of the body – some physical and cognitive abilities decline much earlier than others. This variance implies that workers in occupations that rely on skills that decline early may be unable to work until late ages, even as policy changes like increases in the Full Retirement Age (FRA) encourage them to. Researchers often estimate models of early retirement that include a control for whether a worker is in a blue-collar job – basically assuming that less-physical white-collar work allows longer careers. But this assumption ignores the fact that even workers in white-collar occupations may find themselves relying on skills that have declined. This paper instead reviews the literature on aging and constructs a Susceptibility Index meant to reflect how susceptible an occupation is to declines in ability, regardless of whether the occupation relies on physical abilities (as blue-collar occupations do) or cognitive ones.
    Date: 2015–09
  9. By: Matthew S. Rutledge; Qi Guan
    Abstract: Numerous studies have found that even as employment growth in high- and low-skill occupations has been robust, employment in middle-skill occupations such as office administration and manufacturing is in long-term decline. The timing of this decline could not be worse for the older workers looking to prolong their careers to compensate for decreasing Social Security and pension income. But few existing studies have examined the consequences of job polarization on older workers, who may be less likely than prime-aged workers to find work in high- or low-skill occupations. This paper uses the Survey of Income and Program Participation to investigate employment outcomes specifically for older workers first observed in middle-skill jobs. If they leave a middle-skill job, are they able to find jobs in another skill level, or are they forced out of employment prematurely? What are the circumstances surrounding these transitions, and how are the workers’ earnings affected?
    Date: 2015–09
  10. By: Alicia H. Munnell; Jean-Pierre Aubry; Caroline V. Crawford
    Abstract: Many commentators – ourselves included – assert that people are saving less for retirement as a result of the shift from defined benefit to defined contribution plans. To support such an assertion, it would be nice to have counterfactual data showing what the world would look like today in terms of retirement saving if workers were still covered by defined benefit plans and compare that saving with actual contributions to defined contribution plans. But these data do not ex­ist. Furthermore, even if these data did exist, today’s more mobile workforce would make defined benefit plans a less effective way to save than they were in the past. So such an exercise simply is not feasible. Interestingly, it is possible to get some idea about what is going on by looking at the National Income and Product Accounts (NIPAs). These data used to show annual contributions to both defined benefit and defined contribution plans. Contributions to defined benefit plans, however, provided little infor­mation about pension saving because, when the stock market booms, employers’ contributions can drop to zero as they rely on investment returns to fund accruing benefits. In 2013, the government changed accounting for defined benefit plans from a cash basis to an accrual basis. That is, instead of reporting how much an employer contributes to a defined benefit plan, the NIPAs now report how much participants in a plan are accruing in benefits. This brief uses these new data to provide some insight on how pension sav­ing has changed over time. The discussion proceeds as follows. The first sec­tion describes the new NIPA data and how they allow for a more direct comparison of pension saving be­tween defined benefit plans and defined contribution plans. The second section focuses on defined benefit accruals and makes some adjustments to standardize for interest rates over time and to reflect the fact that the benefits are based on final earnings. The third section turns to the defined contribution data to better understand the pattern over time. The final section puts the two sides together. The conclusion is that after various adjustments, the percentage of salary going towards retirement saving has declined slightly. On the other hand, if returns on accumulations are included, the annual change in pension wealth appears to have remained relatively steady. In short, the NIPA data suggest that people are not accumulating less as the result of the shift from defined benefit to defined contribution plans. What has changed is not the amount of saving going on, but rather who is bearing the risk.
    Date: 2015–09
  11. By: Ignacio Peinado (Hospital Universitario de Getafe); Elena Villalba (Hospital Universitario de Getafe); Francisco José Mansoa (Hospital Universitario de Getafe); Alberto Sánchez (Hospital Universitario de Getafe)
    Abstract: MOMA is a care model based on a multidisciplinary 24/7 advanced technology call centre for treatment of various chronic diseases. It was established in 2012 by Maccabi Healthcare Services in cooperation with the Gertner Institute. Maccabi Healthcare Services is one of the four authorised health funds providing universal healthcare services in Israel. The MOMA initiative was designed as a technological tool to improve the integration of different services such as long-term care, pharmacy, homecare and hospital care, in coordination with the patient’s primary care physician and other community-based resources. MOMA addresses the needs of chronically ill patients, which Maccabi Healthcare Services considered as patients who should receive special care instead of standard care.
    Keywords: SIMPHS, eHealth, Remote Monitoring, ageing, integrated care, independent living, case studies, facilitators, governance, impact, drivers, barriers, integration, organisation
    JEL: I11 I18 O33 O38
    Date: 2015–09
  12. By: Nico Palesch; Brendon Andrews; Jasmin Thomas
    Abstract: This report seeks to compare poverty rates and poverty gaps for the overall population, the elderly population and single-parent headed households in the United States and selected European Union (EU) countries. In order to make sure that our estimates for the United States, which are based on the United States’ Current Population Survey (CPS) March Supplement, are directly comparable with EU estimates from Eurostat, we undertook a detailed study of the methodology underpinning Eurostat’s poverty estimates, which are derived from the Survey of Income and Labour Conditions (EU-SILC). The outcomes of this paper are estimates six poverty-related variables including overall and elderly poverty gaps and poverty rates, as well as single parent headed household poverty gaps and the Gini coefficient. The results suggest that overall poverty, elderly poverty and single-parent headed household poverty is higher in the United States than in the average European country.
    Keywords: Poverty Rate, Poverty Gap, Gini Coefficient, United States, European Union, Elderly Poverty, Household Income
    JEL: I32 N34 N32
    Date: 2015–09
  13. By: Vladimir Mau (Gaidar Institute for Economic Policy)
    Abstract: The development of human capital is now recognized as being the most important precondition of economic growth in modern times. It should be a priority in our socio-economic policy. However, recognition of this fact alone will not produce a qualitative leap in the development of education, healthcare and the pension system. We need fundamental changes in these sectors if they are to become capable of meeting the challenges of post-industrial society. This will mean individualization of the services provided, continuous delivery of these services (over the lifetime of an individual), privatization (an increase in the role of private funding), the internationalization of competition and implementation of the latest technologies in the delivery of services.
    Keywords: human capital; education; healthcare, pension system, socioeconomic policy.
    JEL: G23 H75 I15 I18 I25 I28
    Date: 2013
  14. By: Evren Ceritoglu; Okan Eren
    Abstract: [TR] Bu calismanin amaci Turkiye ekonomisinin 2014 – 2050 donemi icin isgucune katilim orani ongoruleri hazirlamaktir. Isgucune katilim orani ongoruleri TUIK tarafindan yayimlanan Hanehalki Isgucu Anketi (HÝA) mikro-ekonomik verileri kullanilarak yas gruplari, cinsiyet ve egitim duzeyi ayriminda uretilmistir. Alt gruplar icin uretilen isgucune katilim orani tahminleri guncel TUIK nufus projeksiyonlari ile agirliklandirilarak Turkiye geneli icin ongorulere ulasilmistir. Bu calismanin Turkiye ekonomisine iliskin yazina en onemli katkisi onumuzdeki yillarda egitim duzeyinin yukselmesinin ve nufusun yaslanmasinin isgucune katilim oranlari uzerindeki etkilerini dikkate alarak isgucune katilim oran ongoruleri olusturmasidir. Bu cercevede, isgucune katilim oraninin onumuzdeki yillarda artmaya devam etmesi, fakat nufusun yaslanmasinin artis egilimini sinirlandirmasi beklenmektedir. [EN] This study aims to prepare labor force participation rate projections for the 2014 – 2050 period of the Turkish economy. Labor force participation rate projections are produced with respect to age group, gender and education categories using micro-economic data from the TURKSTAT Household Labor Force Surveys. Labor force participation rate predictions produced for each category are weighted by up-to-date TURKSTAT population projections to reach country level projections. The main contribution of this study to the literature on the Turkish economy is that it reveals the effects of the increase in education level and the ageing of the population on labor force participation rates in the next years. As a result, the rise in labor force participation rates is expected to continue in the coming years, but the ageing of the population will limit its growth.
    Date: 2015
  15. By: Frank N. Caliendo; Aspen Gorry; Sita Slavov
    Abstract: We develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event. The model is used to study optimal decision making and welfare when individuals face uncertainty about when and how Social Security will be reformed. When individuals save optimally for retirement, the welfare cost of uncertainty about the timing and structure of reform is just a few basis points of total lifetime consumption. In contrast, the cost of reform uncertainty can be greater than 1% of total lifetime consumption for individuals who do not save.
    JEL: C61 E21 E60 H30 H55
    Date: 2015–09
  16. By: Alicia H. Munnell; Geoffrey T. Sanzenbacher; Matthew S. Rutledge
    Abstract: This paper explores the extent to which health, employment, family, or finances are associated with earlier-than-planned retirement using the Health and Retirement Study (HRS). The importance of any shock that drives early retirement depends both on its effect on those experiencing it and its prevalence in the population; therefore, the analysis proceeds in two steps. First, a probit regression is used to determine the strength of the relationship between the shocks and earlier-than-planned retirement, controlling for individual characteristics. Second, to incorporate the prevalence of the shock, counterfactual experiments are run to determine how much early retirement would be reduced in the population if these shocks did not occur.
    Date: 2015–09
  17. By: Brendon Andrews; Jasmin Thomas
    Abstract: This report seeks to compare poverty rates and poverty gaps for the overall population, the elderly population and single-parent headed households in Australia and selected European Union (EU) countries. In order to make sure that our estimates for Australia, which are based on the Household, Income and Labour Dynamics in Australia (HILDA) survey from the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, are directly comparable with EU estimates from Eurostat, we undertook a detailed study of the methodology underpinning Eurostat’s poverty estimates, which are derived from the Survey of Income and Labour Conditions (EU-SILC). The outcomes of this paper are estimates of six poverty-related variables including overall and elderly poverty gaps and poverty rates, as well as single parent headed household poverty gaps and the Gini coefficient. The results suggest that overall poverty, elderly poverty and single-parent headed household poverty is higher in Australia than in many other European countries for the majority of the six poverty-related variables.
    Keywords: Poverty Rate, Poverty Gap, Gini Coefficient, Australia, European Union, Elderly Poverty, Household Income
    JEL: I32 N34 N37
    Date: 2015–09
  18. By: Wilco Graafmans (European Commission); Ramon Sabes-Figuera (Catalan Institute of Public Policy Evaluation (Ivàlua)); Fabienne Abadie (European Commission – JRC - IPTS)
    Abstract: The guidelines in this report have been developed as part of the Strategic Intelligence Monitor on Personal Health Systems Phase 3 (SIMPHS3) project. Twenty-four ICT-supported integrated care initiatives in the EU were identified which supported integrated care and/or independent living and were either deployed or promising large scale pilots. The aim of this report is to define a set of recommendations to guide the process of developing and implementing ICT-supported integrated care and independent living, based on the experiences made in these 24 initiatives. The intended audience for this guidance document are those who work on the development and implementation of initiatives at an operational level, such as professionals, managers in healthcare organisations, regional managers of health or social care, health insurers, professionals’ organisations, etc.
    Keywords: SIMPHS, eHealth, Remote Monitoring, ageing, integrated care, independent living, case studies, facilitators, governance, impact, drivers, barriers, integration, organisation
    JEL: I11 I18 O33 O38
    Date: 2015–09
  19. By: Adele Atkinson; Flore-Anne Messy; Lila Rabinovich; Joanne Yoong
    Abstract: Long-term savings and investments (LTSI) by individuals enhances their financial security while also supporting growth and financial development. Evidence shows that financial knowledge and skills are positively related to LTSI behaviour, and indicates a strong correlation between levels of financial literacy and retirement wealth accumulation. However, both the quantity and quality of LTSI are often worryingly low, pointing to an important role for financial education to increase levels of financial literacy and thus improve LTSI among individuals. Evaluations of various types of financial education aimed at increasing LTSI have identified some promising results. Initial findings suggest the need for additional, targeted evaluation of education programmes to compare the effects of different delivery channels and the intensity of provision in order to identify optimal approaches. More detailed research is also important to fully understand why some evaluations indicate mixed outcomes from certain programmes.
    Keywords: saving, long-term investing, financial education
    JEL: D04 D14 D31 G28 I21
    Date: 2015–09–25
  20. By: Debra Lipson
    Abstract: Family caregivers are a hidden workforce that is essential to meet the growing demand for long-term services and supports by older adults and people with disabilities.
    Keywords: Family Caregiving, Federal Policy, Long-term Services and supports
    JEL: I
    Date: 2015–10–01
  21. By: Maria Lacko (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: There is considerable variation in mortality rates of the working age populations across the “old” and the “new” EU member states, and former Soviet Union countries. The explanation for these differences is investigated by scrutinizing three different groups of factors: 1. Socio-economic factors; 2. Lifestyle factors; 3. Health care resources. The analysis is based on regression analysis of health production functions (HPF) calculated from cross-country estimations for 2011. The explanatory variables of the health production function can explain 83-93% of the cross-country differences in mortality rates. The most important contribution comes from the past economic and political system represented by the historical structure of production and the present level of development. We confirmed what other authors found that the “example of Europe shows political system can significantly affect health and mortality conditions.” Economic and lifestyle disadvantages turn out to be more harmful for men than women. The effects of health expenditure, the geographical location of the country and the relative prices of alcohol and tobacco products are similar for the two genders. The consumption of spirits and tobacco, the share of the hidden economy, and the education level are significant explanatory factors for men, but non-significant for women.
    Keywords: mortality rate, cross-country comparison, East-, Central and West-Europe
    JEL: I12
    Date: 2015–07

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