nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒03‒17
five papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Long-Term Care and Births Timing By Pestieau, P.; Ponthiere, G.
  2. The Rise in Life Expectancy, Health Trends among the Elderly, and the Demand for Health and Social Care By Lindgren, Björn
  3. Seniority wages and the role of firms in retirement By Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R.
  4. How Do Non-Financial Factors Affect Retirement Decisions? By Steven A. Sass
  5. The Fiscal Consequences of Shrinking Populations By Benedict J. Clements; Kamil Dybczak; Vitor Gaspar; Sanjeev Gupta; Mauricio Soto

  1. By: Pestieau, P. (Université catholique de Louvain, CORE, Belgium); Ponthiere, G. (University Paris East)
    Abstract: Due to the ageing process, the provision of long-term care (LTC) to the dependent elderly has become a major challenge of our epoch. But our societies are also characterized, since the 1970s, by a postponement of births, which, by raising the intergenerational age gap, can affect the provision of LTC by children. In order to examine the impact of those demographic trends on the optimal policy, we develop a four-period OLG model where individuals, who receive children is informal LTC at the old age, must choose, when being young, how to allocate births along their life cycle. It is shown that, in line with empirical evidence, early children provide more LTC to their elderly parents than late children, because of the lower opportunity cost of providing LTC when being retired. When comparing the laissez-faire with the long-run social optimum, it appears that individuals have, at the laissez-faire, too few early births, and too many late births. We then study, in first-best and second-best settings, how the social optimum can be decentralized by encourageing early births, in such a way as to reduce the social burden of LTC provision.
    Keywords: Long term care, birth timing, childbearing age, family policy, OLG models
    JEL: E13 J13 J14
    Date: 2015–06–17
  2. By: Lindgren, Björn (Lund University, Lund, Sweden and National Bureau of Economic Research, Cambridge, MA, United States.)
    Abstract: The objective of this report is to review the evidence on (a) ageing and health and (b) the demand for health and social care among the elderly. The issues discussed are: does health status of the elderly improve over time, and how do the trends in health status of the elderly affect the demand for health and social care? The review is based on some 100 published scientific papers. While it is not a complete review, it covers most recent empirical studies of health trends and the changing pattern of demand for health and social care. Health is a multidimensional concept. It includes self-assessed health, presence of disease, functional status, and disability, usually expressed as capacity to perform activities of daily living (ADL). There are certainly elderly who have no problems in any of these dimensions. But health among elderly varies, and to a much larger extent than among younger people. Many elderly have one or more chronic diseases; if the disease is well controlled, there may be no problems in other dimensions of health. If not, other health problems may follow, lowering self-assessed health, creating ADL limitations etc. When analyzing health trends, it is important to cover all four dimensions of health, since the impact on health care and social care differ, depending on which dimension shows improved health. The reviewed literature provides strong evidence that the prevalence of chronic disease among the elderly has increased over time. There is also fairly strong evidence that the consequences of disease have become less problematic due to medical progress: decreased mortality risk, milder and slower development over time, making the time with disease (and health care treatment) longer but less troublesome than before. Evidence also suggests the postponement of functional limitations and disability. Some of the reduction in disability may certainly be attributed to improvements in treatments of chronic diseases. But they are apparently also due to the increased use of assistive technology, public transport, accessibility of buildings, etc. The results, hence, indicate that the ageing individual is expected to need health care for a longer (and not necessarily postponed) period of time than previous generations but elderly care for a shorter (and certainly postponed) period of time. Thus, one might say that the development overall has been in accordance with the “dynamic equilibrium” scenario. A general conclusion of the empirical literature seems to be that expenditures will not be lower over remaining life years but they will be distributed over a longer period of time. Several authors warn against the potential negative impact of an increasing prevalence of obesity on life expectancy, health, and health and social care. The role of technological advances within medicine is highlighted by many authors and its consequences for the elderly analyzed.
    JEL: H51 I10 I38 J11 J14
    Date: 2016–03–01
  3. By: Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R. (GSBE)
    Abstract: In general, retirement is seen as a pure labor supply phenomenon, but firms can have strong incentives to send expensive older workers into retirement. Based on the seniority wage model developed by Lazear 1979, we discuss steep seniority wage proles as incentives for firms to dismiss older workers before retirement. Conditional on individual retirement incentives, e.g., social security wealth or health status, the steepness of the wage profile will have different incentives for workers as compared to firms when it comes to the retirement date. Using an instrumentalvariable approach to account for selection of workers in our firms and for reverse causality, we find that firms with higher labor costs for older workers are associated with lower job exit age.
    Keywords: Social Security and Public Pensions; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; Retirement; Retirement Policies; Wage Level and Structure; Wage Differentials;
    JEL: J14 J26 J31 H55
    Date: 2015
  4. By: Steven A. Sass
    Abstract: Financial factors clearly influence retirement deci­sions, as everyone would like to have sufficient income when they leave the workforce. But numer­ous studies find that such factors are only a small part of the story. Non-financial considerations clearly contribute to the decision to retire. This brief reviews studies, mainly by the Social Security Administration’s Retirement Research Con­sortium, that examine how two types of non-financial factors affect retirement decisions: the worker’s on-the-job experience and the allure of retirement activities. The discussion proceeds as follows. The first sec­tion presents evidence that a positive work experience is a critical component in decisions of workers ages 65 and over to remain in the labor force. The second section identifies job characteristics that either incline workers to retire or to remain on the job. The third section examines how personal objectives affect work/retirement decisions. The final section concludes that non-financial benefits seem far more important than non-financial costs – both in keeping some workers in the labor force and drawing others into retirement.
    Date: 2016–02
  5. By: Benedict J. Clements; Kamil Dybczak; Vitor Gaspar; Sanjeev Gupta; Mauricio Soto
    Abstract: This Staff Discussion Note looks at the stark fiscal challenges posed by the decline and aging of populations between now and 2100. It finds that without reforms, pensions and health spending would rise to 25 percent of GDP by end-century in more developed countries (and 16 percent of GDP in less developed countries), with potentially dire fiscal consequences. Given the uncertainty underlying the population projections and associated large fiscal risks, a multi-pronged approach will be required. This could include entitlement reform—starting now but at a gradual pace; policies that affect demographics and labor markets; and better tax systems and more efficient public expenditure.
    Keywords: Demographic transition;Population growth;Aging;Human fertility;Mortality;Migrations;Labor markets;Health care spending;Public debt;Fiscal sustainability;Demographics, Pension Spending, population, fertility, health care, International Migration, Demographic Trends and Forecasts, General, Forecasts of Budgets, Deficits, and Debt,
    Date: 2015–10–26

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