nep-age New Economics Papers
on Economics of Ageing
Issue of 2015‒12‒01
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Life time pension benefits relative to life time contributions By Dennis Fredriksen; Nils Martin Stølen
  2. The Affordable Care Act, Medicare Costs, and Retirement Security By Alicia H. Munnell; Anqi Chen
  3. Optimal social insurance and health inequality By Grossmann, Volker; Strulik, Holger
  4. From demographic dividend to demographic burden ? regional trends of population aging in Russia By Matytsin,Mikhail; Moorty,Lalita M.; Richter,Kaspar
  5. The Relationship Between Establishment Training and the Retention of Older Workers: Evidence from Germany By Berg, Peter B.; Hamman, Mary K.; Piszczek, Matthew; Ruhm, Christopher J.
  6. Optimal pay-as-you-go social security with endogenous retirement By Miyazaki, Koichi
  7. How inheriting affects bequest plans By Stark, Oded; Nicinska, Anna
  8. Elderly Poverty in the United States in the 21st Century: Exploring the Role of Assets in the Supplemental Poverty Measure By Christopher Wimer; Lucas Manfield
  9. Future-biased government By Francisco M. Gonzalez; Itziar Lazkano; Sjak A. Smulders
  10. Population, Migration, Ageing and Health: A Survey By Christian Dustmann; Giovanni Facchini; Cora Signorotto
  11. Pension Funding and the Economy: Would “Proper” Funding Cost Jobs? By Dean Baker and Nick Buffie
  12. Workforce diversity, productivity and wages in France: the role of managers vs. the proprietary structure of the firm By Andrea Garnero
  13. Demographics and the Portuguese economic growth By P. C. Albuquerque

  1. By: Dennis Fredriksen; Nils Martin Stølen (Statistics Norway)
    Abstract: Over the life course members of an insurance system normally will contribute by payments when in working age, and later receive pension benefits as e.g. disabled or old-age pensioners. Total expected discounted contributions from labour market earnings may be compared to the expected discounted sum of benefits from pensions received. The first cohorts covered with benefits from a pay-as-you go pension system will normally receive higher benefits than what follows from their contributions. Reforms of the pension system may also affect the ratio between discounted life time pension benefits and discounted life time contributions. In Norway the former National Insurance Scheme was introduced in 1967, and a reform of this system has been implemented from 2011. Budgetary and distributional effects are analysed by the dynamic micro simulation model MOSART. The aim of this paper is to analyse the distributional consequences between generations from implementation of the system in 1967 and the reform from 2011. Problems arising in this kind of analyses are discussed, and effects are presented for different groups of the population by birth cohort, gender, education and for natives versus immigrants. As expected the results show that the cohorts who established the pay-as-you-go system experienced a substantial gain by letting future generations pay. For later cohorts discounted value of benefits received is lower than the discounted value of contributions. With a positive net rate of interest the value of contributions as young is more worth than the corresponding value of benefits received as old. Over the life course the pension system distributes incomes from men to women, but women are more affected by the pension reform in 2011 than men.
    Keywords: Pension systems; Intergenerational distribution; Dynamic micro simulation
    JEL: D31 H55 J16
    Date: 2015–10
  2. By: Alicia H. Munnell; Anqi Chen
    Abstract: Rising Medicare costs have been a major contributor to projected long-run budget deficits, and rising out-of-pocket costs have become an increasing challenge to individuals’ retirement security. The 2010 Patient Protection and Affordable Care Act (ACA) made substantial changes to Medicare, designed both to im­prove the program’s finances and to reduce the out-of-pocket costs faced by retirees. However, the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS) warns that the assumed impact of the ACA may be overly optimistic and that realized savings may be far more muted. As a result, since 2010, OACT each year has released a set of alter­native projections to illustrate Medicare expenditures if current-law payment reductions are not sustained. This brief compares the baseline projections in the an­nual Medicare Trustees Report with OACT’s alternative projections. The discussion proceeds as follows. The first section discusses the ACA changes and the projected decline in Medicare expenditures. The second section examines how the reductions in expenditures trans­late into lower out-of-pocket spending for beneficia­ries. The third section outlines the key differences in assumptions between the Medicare Trustees Report and OACT’s alternative projections. The fourth sec­tion examines how the two sets of projections have changed over time. The conclusion is that they have been converging, suggesting increasing agreement that the ACA will significantly reduce long-run Medi­care costs.
    Date: 2015–11
  3. By: Grossmann, Volker; Strulik, Holger
    Abstract: This paper integrates into public economics a biologically founded, stochastic process of individual ageing. The novel approach enables us to investigate the interaction between health and retirement policy in order to quantitatively characterize the optimal joint design of the social insurance system today and in response to future medical progress, and its implications for health inequality. Calibrating our model to Germany, we find that currently the public health and pension system is approximately optimal. Future progress in medical technology calls for a potentially drastic increase in health spending that typically shall be accompanied with a lower pension savings rate and a higher retirement age. Medical progress and higher health spending is predicted to lead to more health inequality.
    Keywords: Ageing; Health Expenditure; Health Inequality; Social Security System; Retirement Age
    JEL: H50 I10 C60
    Date: 2015–11–23
  4. By: Matytsin,Mikhail; Moorty,Lalita M.; Richter,Kaspar
    Abstract: Do regions with higher working age populations grow faster? This paper examines this question using data from Russian regions and finds evidence that demographic trends influence regional growth convergence. In other words, keeping other factors constant, poorer regions grow faster than richer regions, and some of the growth convergence is explained by demographic changes: faster growth in poor regions in the past was related in part to more favorable demographic trends. This finding has important consequences for Russia. If the demographic trends in poorer regions worsen in the future, this could dampen economic convergence. Unless there are significant increases in labor productivity or additions to the labor force through migration, growth in Russian regions will moderate as the Russian population shrinks and ages in the coming decades.
    Keywords: Pro-Poor Growth,Population Policies,Regional Economic Development,Emerging Markets,Demographics
    Date: 2015–11–23
  5. By: Berg, Peter B. (Michigan State University); Hamman, Mary K. (University of Wisconsin, La Crosse); Piszczek, Matthew (University of Wisconsin, Oshkosh); Ruhm, Christopher J. (University of Virginia)
    Abstract: In the coming years, a substantial portion of Germany's workforce will retire, making it difficult for businesses to meet human capital needs. Training older workers may be a successful strategy for managing this demographic transition. This study examines relationships between establishment training programs, wages, and retirement among older men and women. Using unique matched establishment-employee data from Germany, the authors find that when establishments offer special training programs targeted at older workers, women – and especially lower wage women – are less likely to retire. Results suggest this relationship may be due to greater wage growth. For men, findings suggest establishment offer of inclusion in standard training programs may improve retention of low wage men, but analysis of pre-existing differences in establishment retirement patterns suggests this relationship may not be causal. Our research suggests targeted training programs likely play an important role in retaining and advancing careers of low wage older women.
    Keywords: workforce training, retirement, establishment training
    JEL: J20 J24 J26
    Date: 2015–11
  6. By: Miyazaki, Koichi
    Abstract: This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, the paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an allocation that maximizes welfare when a social planner distributes resources and forces an old agent to work and retire as she wants. The second-best allocation is an allocation that maximizes welfare when she can use only pay-as-you-go social security in a decentralized economy. The paper finds a range of an old agent’s labor productivity such that the first-best allocation is achieved in the decentralized economy. This differs from the finding in Micheland Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013] that the first-best allocation cannot be achieved in the decentralized economy.
    Keywords: Overlapping-generations model, pay-as-you-go social security, endogenous retirement, depreciation of labor productivity, first-best allocation, second-best allocation
    JEL: D91 H21 H55 J26
    Date: 2015–07–02
  7. By: Stark, Oded; Nicinska, Anna
    Abstract: We present and test the idea that bequest planning is linked with the experience of inheriting. We consider “a family tradition of bequeathing” as a channel through which the intention to bequeath is moulded by and is positively correlated with the experience of inheriting. Using data from the Survey on Health, Ageing and Retirement in Europe (SHARE), we find that the experience of inheriting enhances the intention to bequeath, independently of the positive impact of wealth. We also find that the expectation of inheriting has a positive impact on the intention to bequeath, controlling for the expected increase in wealth on account of future inheritances.
    Keywords: Intergenerational transfers, Bequest behavior, Experience of inheriting, Expectation of inheriting, Intention to bequeath, Family tradition, Agricultural Finance, Consumer/Household Economics, Institutional and Behavioral Economics, D02, D03, D19, D64, H31,
    Date: 2015–11
  8. By: Christopher Wimer; Lucas Manfield
    Abstract: Official estimates of elderly poverty do not take into account either the medical needs of the elderly, which can be quite extensive, or the assets at their disposal, which may also be extensive. The new Supplemental Poverty Measure (SPM) explicitly takes into account medical needs but has been criticized for not concomitantly taking into account asset portfolios. In this paper we consider both jointly, using an approach adapted from a recent National Academy of Sciences report recommending methods for measuring poverty and medical risk while taking account of assets. We use longitudinal data from the Health and Retirement Study (HRS).
    Date: 2015–11
  9. By: Francisco M. Gonzalez (Department of Economics, University of Waterloo); Itziar Lazkano (University of Wisconsin-Milwaukee); Sjak A. Smulders (Tilburg University)
    Abstract: We argue that governments are future biased when they aggregate the preferences of overlapping generations. Future bias, which involves preference reversals favoring future over current consumption, explains why governments legislate old-age transfers at the expense of capital accumulation and growth, even if generations are altruistic.
    JEL: D71 D72 H55
    Date: 2015–10
  10. By: Christian Dustmann; Giovanni Facchini; Cora Signorotto
    Abstract: We review the literature on recent demographic changes in Europe, focusing on two of the main challenges brought about by an ageing population: severe labor shortages in many sectors of the economy and growing pressures on both health and welfare systems. We discuss how and to what extent migration can contribute to address these challenges both from a short and a long term perspective. Finally, we identify several areas in which more research is needed to help devising more effective policies to cope with a greying society.
    Keywords: Population, Migration, Ageing
    Date: 2015
  11. By: Dean Baker and Nick Buffie
    Abstract: This paper calculates the impact on the economy of adopting NM&R funding rules during the last recession. Specifically, it calculates the impact on GDP and employment if state governments had decided to fill the funding gap calculated by NM&R over a 15-year time horizon, as they advocate.
    Keywords: pensions, novy-marx, rauh, employment, gross state product, budget
    JEL: H H6 H7
    Date: 2015–11
  12. By: Andrea Garnero
    Abstract: This paper estimates the impact of workforce diversity on productivity, wages, and productivity–wage gaps in a sample of French firms using data from a comprehensive establishment-level survey (REPONSE) for 2011 matched with companies’ balance sheet data. Controlling for a wide set of workers’ and firms’ characteristics, findings suggest that age and gender diversity are negatively linked to firm’s productivity and wages while education diversity is positively linked. Contrary to some widespread beliefs, the paper finds no differential effect according to manager characteristics (gender, age, education and tenure) but some heterogeneity according to the type of proprietary structures of the firms.
    Keywords: labour diversity; productivity; wages; management; firm ownership
    JEL: D24 J24 J31 M12
    Date: 2015–10–09
  13. By: P. C. Albuquerque
    Date: 2015–11

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