nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒03‒29
seventeen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Seniority wages and the role of firms in retirement By Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R.
  3. Retirement Blues By Heller Sahlgren, Gabriel
  4. Rich, Poor, Singles, and Couples. Who Receives Medicaid in Old Age and Why? By Margherita Borella; Mariacristina De Nardi; Eric French
  5. Analysis of policy options to address Japan's declining population, shrinking birthrate, and aging society By Shimizu, Chihiro; Deng, Yongheng; Kawamura, Yasuhito; Nishimura, Kiyohiko
  6. Measuring ageing and the need for longer working lives in the EU By Barslund, Mikkel Marten von Werder; von Werder, Marten
  7. Pensions, Education, and Growth: A Positive Analysis By Tetsuo Ono; Yuki Uchida
  8. Social Security and Retirement Programs Around the World: The Capacity to Work at Older Ages – Introduction and Summary By Courtney Coile; Kevin S. Milligan; David A. Wise
  9. Health, Work Capacity and Retirement in Sweden By Per Johansson; Lisa Laun; Mårten Palme
  10. Health Capacity to Work at Older Ages: Evidence from Japan By Emiko Usui; Satoshi Shimizutani; Takashi Oshio
  11. Health Capacity to Work at Older Ages: Evidence from Spain By Pilar García-Gómez; Sergi Jimenez-Martin; Judit Vall Castelló
  12. Intra-household allocation of non-mandatory retirement savings By Metzger, Christoph
  13. Education, age and skills: an analysis using the PIAAC survey By Jorge Calero; Inés P. Murillo Huertas; Josep Lluís Raymond Bara
  14. Pension funds' herding By Dirk Broeders; Damiaan Chen; Peter Minderhoud; Willem Schudel
  15. The effect of health insurance on workers' compensation filing: Evidence from the Affordable Care Act's age-based threshold for dependent coverage By Marcus Dillender
  16. Social Security and Divorce By Marcus Dillender
  17. Local variability in long-term care services: local autonomy, exogenous influences and policy spillovers By José-Luis Fernández; Julien Forder

  1. By: Frimmel W.; Horvath T.; Schnalzenberger M.; Winter-Ebmer R. (ROA)
    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 profiles 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 instrumental variable 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
  2. By: Andrea Albanese; Bart Cockx; Yannick Thuy (-)
    Abstract: In this paper we study the effects on the survival rate in employment of a scheme that facilitates gradual retirement through working time reductions. We use information on the entire labour market career and other observables to control for selection and take dynamic treatment assignment into account. We also estimate a competing risks model considering different (possibly selective) pathways to early retirement. We find that participation in the scheme initially prolongs employment, as participants keep accumulating full pension rights. However, as participants become eligible for early retirement subsequently, these larger financial incentives induce them to leave the labour force prematurely. These adverse incentives are stronger for individuals who reduce their working time most. After two (four) years for men (women), the positive effects reverse. The more favourable effect for women is likely a consequence of their lower opportunities to enter early retirement. The gradual retirement scheme fails the cost-benefit test.
    Keywords: Part-time work, older workers, Inverse Probability Weighting, dynamic selection into treatment, endogenous sampling
    JEL: J14 C22 J18 J22
    Date: 2015–12
  3. By: Heller Sahlgren, Gabriel (London School of Economics)
    Abstract: This paper analyses the short- and long-term effects of retirement on mental health in ten European countries. It exploits thresholds created by regular state pension ages in a fuzzy regression-discontinuity design combined with individual-fixed effects to deal with endogeneity in retirement behaviour. The results display no short-term effects of retirement on mental health, but a large negative longer-term impact. This impact survives a battery of robustness tests, and applies to women and men as well as to people of different educational backgrounds equally. Differences compared to previous research are attributed to the study’s differentiation of short- and longer-term effects as well as its utilisation of a cleaner research design. Overall, the paper’s findings suggest that reforms inducing people to postpone retirement are not only important for making pension systems solvent, but with time could also pay a mental health dividend among the elderly and reduce public health care costs.
    Keywords: Mental Health; Retirement; SHARE; Regression-Discontinuity Design
    JEL: I10 J14 J26
    Date: 2016–03–09
  4. By: Margherita Borella; Mariacristina De Nardi; Eric French
    Abstract: We use the Health and Retirement Survey (HRS) data set to study who receives Medicaid in old age and why. First, we conduct a descriptive analysis of Medicaid recipiency along a number of important observables. This analysis shows that, while fewer people with high permanent income receive Medicaid, a significant fraction of high permanent income people receive Medicaid at very old ages. It also shows that more single people receive Medicaid than people in couples, that people who just lost their spouse rapidly become very similar in their Medicaid recipiency and other important observable characteristics to people who have been single for much longer, and that bad health commoves with Medicaid recipiency. Finally, this analysis shows even people having long-term care insurance end up on Medicaid, but that the fraction of people in this group that is on Medicaid is one-third that of the entire population of the elderly. Second, multivariate regression analysis allows us to disentangle the effects of many observables on Medicaid recipiency while conditioning for others and reveals several interesting patterns. First, permanent income and other variables capturing economic background have a major role in determining individuals’ Medicaid coverage and explain much of the observed differences in Medicaid recipiency among singles, couples, and people who recently lost their spouse. Second, impairments in the activities of daily living and residency in a nursing home have a large effect on the probability of being on Medicaid, with the effect of nursing home residency being relatively large for those in the middle and upper income groups. Lastly, having long-term care insurance has no independent effect on the probability of ending up on Medicaid.
    JEL: D1 D31 E21 H2 H31 H4 H51
    Date: 2016–01
  5. By: Shimizu, Chihiro; Deng, Yongheng; Kawamura, Yasuhito; Nishimura, Kiyohiko
    Abstract: Based on an analysis of the housing market, this study measures how Japan's declining population and aging society influences its economic system in order to clarify empirically the effects of various policies to address these issues. Specifically, we simulate the decline in housing asset prices brought about by these population changes by 2040 and estimates the effects of three policies designed to suppress this decline: a) accepting more immigrants, b) raising the retirement age, and c) promoting the social advancement of women. The results obtained show that a) staving off the decline in asset prices would be impossible unless 40 million working-age immigrants were encouraged to migrate to Japan by 2040, that b) raising the retirement age to 70 or 75 would have a significant effect on maintaining residential price, and that c) promoting the social advancement of women would not have a significant effect despite incurring considerable social costs. We also extend our empirical model to a multinational-level data and show that some of the largest economies, such as China and Germany, would experience the aging of society in the next 30 years and those demographic changes will negatively impact on residential prices like Japan. This indicate that the findings of this study offer numerous suggestions not only for Japan but also for European and other Asian countries whose societies are expected to age at a greater rate in the future.
    Keywords: Housing bubble, old-age dependency ratio, asset meltdown, immigration policy, social advancement of women
    JEL: E31 R21 R31
    Date: 2016–02
  6. By: Barslund, Mikkel Marten von Werder; von Werder, Marten
    Abstract: This study considers different ways of measuring the ageing of societies and their implications for public policy. The first part characterises the ongoing ageing of the population in the EU28 by relating it to past and future longer-term demographic trends for broad groups of countries. It goes beyond traditional chronological measures to include recently suggested prospective measures of ageing. The second part of the study is concerned with economic dependency ratios, which are a more relevant measure for summarising the economic challenges related to ageing. Three main findings emerge: first, prospective indicators of ageing reveal the challenge of population ageing to be less onerous than traditional chronological measures would suggest. Their relevance, however, will depend on the degree to which policy changes can respond to the changing age structure of the population. Second, substantial increases in the length of working lives are necessary to maintain current economic dependency ratios. Taking a year-2000 perspective on the economic challenges of ageing shows that substantial progress has been made. Third, looking towards 2050, education will have limited direct impact on the scale of the ageing challenge.
    Date: 2016–02
  7. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping generations model to capture the nature of the competition between generations regarding two redistribution policies, public education and public pensions. From a political economy viewpoint, we investigate the effects of population aging on these policies and economic growth. We show that greater longevity results in a higher pension-to-GDP ratio. However, an increase in longevity produces an initial increase followed by a decrease in the public education- to-GDP ratio. This, in turn, results in a hump-shaped pattern of the growth rate.
    Keywords: economic growth; population aging; public education; public pen-sions
    JEL: D78 E24 H55
    Date: 2014–12
  8. By: Courtney Coile; Kevin S. Milligan; David A. Wise
    Abstract: This is the introduction and summary to the seventh phase of an ongoing project on Social Security Programs and Retirement Around the World. The project compares the experiences of a dozen developed countries and uses differences in their retirement program provisions to explore the effect of SS on retirement and related questions. The first three phases of this project document that: 1) incentives for retirement from SS are strongly correlated with labor force participation rates across countries; 2) within countries, workers with stronger incentives to delay retirement are more likely to do so; and 3) changes to SS could have substantial effects on labor force participation and government finances. The fourth volume explores whether higher employment among older persons might increase youth unemployment and finds no link between the two. The fifth and sixth volumes focus on the disability insurance (DI) program, finding that changes in DI participation are more closely linked to DI reforms than to changes in health and that reducing access to DI would raise labor supply. This seventh phase of the project explores whether older people are healthy enough to work longer. We use two main methods to estimate the health capacity to work, asking how much older individuals today could work if they worked as much as those with the same mortality rate in the past or as younger individuals in similar health. Both methods suggest there is significant additional health capacity to work at older ages.
    JEL: H31 H55 I19 J14 J26
    Date: 2016–01
  9. By: Per Johansson; Lisa Laun; Mårten Palme
    Abstract: Following an era of a development towards earlier retirement, there has been a reversed trend to later exit from the labor market in Sweden since the late 1990s. We investigate whether or not there are potentials, with respect to health and work capacity of the population, for extending this trend further. We use two different methods. First, the Milligan and Wise (2012) method, which calculates how much people would participate in the labor force at a constant mortality rate. Second, the Cutler et al. (2012) method, which asks how much people would participate in the labor force if they would work as much as the age group 50-54 at a particular level of health. We also provide evidence on the development of self-assessed health and health inequality in the Swedish population.
    JEL: I10 I14 J14 J26
    Date: 2016–02
  10. By: Emiko Usui; Satoshi Shimizutani; Takashi Oshio
    Abstract: This paper explores the extent to which older Japanese can potentially expand the labor supply, based on two analytic approaches: the Milligan-Wise and Cutler et al. methods. First, we examine how much older individuals could work if they worked as much as those with the same mortality rate in the past (the Milligan-Wise method). Second, we estimate how much older individuals could work if they worked as much as younger ones in similar health (the Cutler et al. method). Results from both of these methods underscore a large work capacity in old age in Japan. We further investigate differences in health capacity across education groups and find that highly educated individuals tend to have more capacity to work after they are 65 years of age.
    JEL: H55 I12 J26
    Date: 2016–02
  11. By: Pilar García-Gómez; Sergi Jimenez-Martin; Judit Vall Castelló
    Abstract: In a world with limited PAYGO financing possibilities this paper explores whether older Spanish individuals have the health capacity to work longer. For that purpose we use Milligan-Wise and Cutler-Meara Cutler-Meara- Richards-Shubik simulation methods. Our results suggest that Spanish workers have significant additional capacities to extend their working careers.
    JEL: I1 J11 J14 J82
    Date: 2016–02
  12. By: Metzger, Christoph
    Abstract: Traditionally, households have been seen as acting as a single unit when it comes to savings. Although this might be correct for some parts of household savings, we question the correctness of the unitary model with respect to non-mandatory retirement savings. To answer this question we analyze the intra-household allocation of retirement savings between partners in Germany. First, the decision to save at all is analyzed using a seemingly unrelated bivariate probit model, showing that the possession of retirement saving accounts among spouses is positively correlated, hinting at a 'crowding-in' of saving accounts. However, this could be only due to some tax reasons. Thus, we analyze additionally the interaction of savings between spouses using three-stage least squares, allowing for endogeneity between the spouse's savings. These results additionally show a 'crowding-in' of total retirement saving amounts between spouses, probably due to some 'recognition effect'. The unitary model of household decision making can thus be rejected with respect to retirement savings.
    Keywords: savings,intra-household allocation,retirement,life-cycle,unitary model,household decision,three-stage least squares
    JEL: D14 D91 H31
    Date: 2016
  13. By: Jorge Calero (Universidad de Barcelona & IEB); Inés P. Murillo Huertas (Universidad de Extremadura); Josep Lluís Raymond Bara (Universidad Autónoma de Barcelona & IEB)
    Abstract: The main aim of this paper is to analyse the evolution of adult skills, as captured by cognitive competencies assessed in the PIAAC, across age cohorts, explicitly taking into account that the quality of schooling might change from one cohort to another. We estimate a model that relates numeracy and literacy competencies to age, schooling, gender and variables related to both family background and labour market performance. The specification allows us to control for changes in the efficiency of the transformation of schooling into competencies when drawing age-skill profiles. Our results show that the effect of ageing on skills, once isolated from cohort effects related to schooling, decreases monotonically across consecutive cohorts. The evolution of the efficiency of the transformation of schooling into both numeracy and literacy skills shows a remarkably similar pattern. Nonetheless, this evolution differs substantially between education levels, with the efficiency of the transformation of schooling into skills showing a steadier profile for intermediate than it does for higher education. Finally, empirical evidence is provided for the decomposition of the differences in the skill levels of the older vs. the prime age generations. The results suggest that the progressive expansion of schooling across younger generations partially offsets the negative effect of the irrepressible ageing of society on skills.
    Keywords: Adult competencies, schooling, ageing, age-skill profiles
    JEL: I21 J10
    Date: 2016
  14. By: Dirk Broeders; Damiaan Chen; Peter Minderhoud; Willem Schudel
    Abstract: This paper uses unique and detailed transaction data to analyse herding behavior among pension funds. We distinguish between weak, semi strong and strong herding behaviour. Weak herding occurs if pension funds have similar rebalancing strategies. Semi strong herding arises when pension funds react similarly to other external shocks, such as changes in regulation and exceptional monetary policy operations. Finally, strong herding means that pension funds intentionally replicate changes in the strategic asset allocation of other pension funds. Without an economic reason. We find empirical evidence supporting all three types of herding behaviour in the asset allocation of large Dutch pension funds.
    Keywords: Occupational Pension Funds; Asset Allocation; Herding; Financial Stability
    JEL: G11 G23
    Date: 2016–02
  15. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research)
    Keywords: Workers' compensation, Moral hazard, Health insurance, Affordable Care Act
    JEL: I13 J32 J38
  16. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research)
    Keywords: Retirement and pensions, Social Security, ten-year rule
    JEL: H55 J32
  17. By: José-Luis Fernández; Julien Forder
    Abstract: In many countries, public responsibility over the funding and provision of long-term care services is held at the local level. In such systems, long-term care provision is often characterised by significant local variability. Using a panel dataset of local authorities over the period 2002 to 2012, the paper investigates the underlying causes of variation in gross social care expenditure for older people in England. The analysis distinguishes between factors outside the direct control of policy makers, local preferences, and local policy spillovers. The results indicate that local demand and supply factors, and to a much lesser extent local political preferences and spatial policy spillovers, explain a large majority of the observed variation in expenditure.
    Keywords: long-term care; spatial; variability; spillovers
    JEL: J50
    Date: 2015–03–11

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