nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒04‒16
eighteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. How Do Job Skills That Decline With Age Affect White-Collar Workers? By Anek Belbase; Geoffrey T. Sanzenbacher; Christopher M. Gillis
  3. Improving the pension system and the welfare of retirees in Israel By Claude Giorno; Jacques Adda
  4. Os possíveis incentivos financeiros à aposentadoria da regra 85/95 progressiva By Aline Moraes Guerra; Bernardo Lanza Queiroz
  5. Old-age dependency: Is it really increasing in aging populations? By Tilak Abeysinghe
  6. The Role of Culture in Long-term Care By Elena Gentili; Giuliano Masiero; Fabrizio Mazzonna
  7. Factors influencing Pension Privatization in former communist countries in Eastern Europe and Central Asia By Claudiu Barbu
  8. Aging, international capital flows and long run convergence By Frédéric Gannon; Gilles Le Garrec; Vincent Touze
  9. Self-Enforcing Family Rules, Marriage and the (non)Neutrality of Public Intervention By Alessandro Cigno; Mizuki Komura; Annalisa Luporini
  10. Does independent needs assessment limit supply-side moral hazard in long-term care? By Rudy Douven; Pieter Bakx; Frederik T. Schut
  11. Who bears the cost of workers' health-related presenteeism and absenteeism By Atsuko Tanaka
  12. State Savings Initiatives: Lessons from California and Connecticut By Anek Belbase; Alicia H. Munnell; Nari Rhee; Geoffrey T. Sanzenbacher
  13. Long-term Forecasts of Age-specific Labour Market Participation Rates with Functional Data Models By Thomas Url; Rob J. Hyndman; Alexander Dokumentov
  14. The Actuarial Aging of Italian Veterans of World War I Born 1889-1901 and a Comparison to the Cohorts Born During the Years Immediately Following By Carlo Maccheroni
  15. Colombia: Una mirada desde la visión multipilar By Leonardo Villar; David Forero; Alejandro Becerra
  16. No Free Lunch, Buddy: Housing Transfers and Informal Care Later in Life By Emanuele Ciani; Claudio Deiana
  17. Income changes and their determinants over the lifecycle By Andrew Hood; Robert Joyce
  18. Spending on Health Care in the Netherlands: Not going so Dutch By Pieter Bakx; Owen O’Donnell; Eddy van Doorslaer

  1. By: Anek Belbase; Geoffrey T. Sanzenbacher; Christopher M. Gillis
    Abstract: As people age, their reaction times slow, flexibility diminishes, and strength declines. These changes in physical and sensory abilities are easy to spot. Thus, research on retirement timing assumes that people in blue-collar jobs, which often rely on these abilities, will retire relatively early. Conversely, researchers often assume that white-collar workers can retire later. But the cognitive abilities needed for many white-collar jobs, like memory and mental speed, also decline with age. And some white-collar jobs also rely on physical or sensory abilities – for example, oral surgeons must have dexterous fingers, steady hands, and excellent eyesight. These observations raise an obvious question: can all white-collar workers remain productive well into their sixties and, if not, which jobs are most vulnerable to age-related decline? To answer these questions, this brief presents a “Susceptibility Index,” which measures how likely the physical and cognitive abilities required by an occupation are to decline during the working years. Using the Index, this brief identifies white-collar jobs in which older workers could have a hard time remaining productive, ultimately leading to earlier retirements. This analysis has implications for policymakers and researchers, who often suggest working longer as a way to boost retirement income security and who may implicitly assume that it will be easier for white-collar workers. This brief proceeds as follows. The first section describes the Susceptibility Index. The second section illustrates that even though blue-collar jobs are more likely than white-collar jobs to rely on abilities that decline relatively quickly, some white-collar jobs may be quite hard to continue for those in their sixties. The third section describes how the Index affects the retirement timing of white-collar workers, using the Health and Retirement Study (HRS). The fourth section concludes that white-collar workers with jobs that rely on abilities that decline early will face similar difficulties
    Date: 2016–04
  2. By: Erkan KAVAS (Sulyman Demirel University)
    Abstract: The main purpose of the study is to investigate the contribution of spiritual support in order to increase old people's life quality and help them take active roles during active aging period. In the study, data was analyzed by reviewing the litrature on what to be done to ensure old people's participation in the active ageing period and the literature about why they should be provided with spiritual support during this period. When the related literature was reviewed scanned, it was found that there have been many studies on active ageing while there are few studies on spiritual support/care during old age. The most distictive feature of this study is that this is the first study aiming at analyzing the spiritual care during active ageing. Conclusion; In order for the old to take part in the active ageing life and this participation to be continuous, there is a need to offer the old who demand spiritual support services besides providing proper accomodation, working, health, solving psychological and economical problems and establishing solidarity environment. Considering the fact that the difficulties the elderly people experience including physical, mental or health collapse and that they feel densely that they have one foot in the grave, it's an indispensible need to satisfy their mind, logic and soul. Spiritual support service is the only solution for such psychological difficultis as well as physical ones. Spiritual support services should be used and provided for the old in order to help them involved in active ageing,to take part in the active ageing process continuously so that they feel the need for an active life and stay motivated for an active life.
    Keywords: Active Aging, Spiritual Support, Spiritual Care , Aging, Elderly, Spirit, Moral Values
    JEL: D46 Z12 I19
  3. By: Claude Giorno; Jacques Adda
    Abstract: Israel is a young country with still dynamic population growth, but it is already beginning to face the consequences of population ageing. The pension system relies largely on mandatory private retirement saving, which will moderate the long-term fiscal impact. Yet, there are questions about the fairness of the pension system, given the regressive nature of some of its tax provisions, its ability to effectively protect the most vulnerable elderly, whose poverty rate is high, as is the case for the rest of the population, and its efficiency in securing and valuing these retirement savings to guarantee pension adequacy. This review examines ways forward for policy to address these issues by reinforcing the protective role of basic pensions, by encouraging people to work longer and by improving the fairness and effectiveness of the system’s second pillar. This Working Paper relates to the 2016 OECD Economic Review of Israel ( Améliorer le système de retraite et le bien-être des retraités en Israël Fort d’une croissance démographique encore dynamique, Israël est un pays jeune, qui commence toutefois à faire face aux conséquences du vieillissement de sa population. Le système de retraite reposant largement sur l’épargne-retraite privée obligatoire, il pèsera moins lourd à long terme sur les finances publiques. Cela étant, des questions se posent quant à son équité compte tenu du caractère régressif de certaines de ses dispositions fiscales, à sa capacité à protéger efficacement les personnes âgées les plus vulnérables, parmi lesquelles le taux de pauvreté est élevé comme dans le reste de la population, et à son efficacité à protéger et à valoriser l’épargne-retraite ainsi constituée pour garantir des pensions suffisantes. Le présent chapitre examine la marche à suivre pour que les autorités puissent répondre à ces questions en renforçant le rôle protecteur des pensions de base, en encourageant les gens à travailler plus longtemps et en améliorant l’équité et l’efficacité du second pilier du système de retraite. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Israël 2016 ( ique-israel.htm).
    Keywords: ageing, pension system, defined contribution, retirement age, elderly poverty, âge du départ en retraite, régime de retraite à cotisations définies, vieillissement, système de retraite
    JEL: H55 H75 J14 J26 J32
    Date: 2016–04–12
  4. By: Aline Moraes Guerra (N/A); Bernardo Lanza Queiroz (Cedeplar-UFMG)
    Abstract: Social Security has gained importance in the political economy agenda of Brazil in recent years. Today, exists in the country, with the new Rule 85/95 Progressive, a structure of incentives for early retirement, such as not requiring a minimum age and the possibility to retire and continue working, which makes the discussion on the topic even more relevant. This paper analyzes whether the Rule 85/95 Progressive tends to increase or decrease the incentives for retirement? We estimate the incentives for retirement based on the measures proposed by Gruber and Wise (1999) using data from the 2013 National Survey by Household Sample (PNAD). The results indicate that the new rule tends to increase incentives to retirement, since retirement benefits are not well adjusted for an additional year of work. On the other hand, the average age of retirement also tends to rise, however, not substantially, and, in this case, the increase in the average age will be accompanied by a massive increase in social security costs. The 85/95 Rule progressive it is, therefore, a new device that will have an impact to the General Social Security System (RGPS), which need to be highlighted because it is necessary to ensure the maintenance of the system consisting of the principal or sole source of increasing income of millions of Brazilian elderly.
    Keywords: retirement, social security reform, financial incentives, fator previdenciário, Brazil
    JEL: J1 J18 J26
    Date: 2016–03
  5. By: Tilak Abeysinghe (Department of Economics, National University of Singapore)
    Abstract: To account for economic dependency we propose an adjustment to the old-age dependency ratio based on savings of the elderly. Singapore data highlight that the conventional dependency ratio substantially exaggerates the burden of the elderly.
    Keywords: Retiree savings, Birth cohorts, Savings-adjusted old-age dependency ratio JEL Classification: C1, E62, J11
  6. By: Elena Gentili (Institute of Economics (IdEP), Università della Svizzera Italiana (USI), Switzerland); Giuliano Masiero (Institute of Economics (IdEP), Università della Svizzera Italiana (USI), Switzerland; Department of Management, Information and Production Engineering (DIGIP), University of Bergamo, Italy); Fabrizio Mazzonna (Institute of Economics (IdEP), Università della Svizzera Italiana (USI), Switzerland)
    Abstract: The aim of this paper is to assess the role of culture in shaping individual preferences to- wards different long-term care (LTC) arrangements. The analysis uses Swiss data from two administrative databases covering the universe of formal LTC providers between 2007 and 2013. Switzerland is a multi-cultural confederation where state administrative borders do not always coincide with cultural groups. For this reason, we exploit the within-state variation in cultural groups to show evidence about cultural differences in LTC use. In particular, we use spatial regression discontinuity design (RDD) at the language border between French-speaking and German-speaking individuals living in bilingual cantons to provide causal interpretation of the differences in formal LTC use between these two main cultural groups. Our results suggest a strong role of culture in shaping household decisions about formal LTC use. In particular, elderly people residing in regions speaking a Latin language (French, Italian and Romansh) use home-based care services more intensely and enter in nursing homes at older ages and in worse health conditions with respect to elderly people in German regions. This difference across the two cultural groups are driven by different preferences towards LTC arrangements.
    Keywords: Long-term care, Culture, Spatial RDD
    JEL: I11 I18 C26
    Date: 2016–04–04
  7. By: Claudiu Barbu (Faculty of Sociology and Social Work, Babes-Bolyai University, Cluj-Napoca, Romania)
    Abstract: From 1990 onwards, a significant number of former communist countries from Eastern Europe and Central Asia decided to reform their public pension system by creating a mandatory private pillar. Other ex-communist countries from the same two regions only made some parametric changes to their public pension system. There are concurrent theories trying to explain why certain countries implemented a paradigmatic reform on the pension systems while others did not. All these theories are focusing on what factors determine the decision makers to reform the public pension system: the coercion of international financial institution, demographic and economic pressures, political support, the relative strength of government and unions or the proportion of peer countries that have adopted similar measures. This study tests the influence of all the factors mentioned above on the decision to adopt the pension privatization in former communist countries from Eastern Europe and Central Asia. Using event history analysis with time-varying covariates of data from 24 states between 1990 and 2013 the study shows that the probability to reform the public pension system in one country increases as the proportion of neighbor countries who adopted the same measure rises. The conclusions of this research can be compared with those taken from the interviews with the decision makers from countries of interest. Also, the research can be used as a starting point for studying the steps backwards made on this path by Hungary, Poland and Argentina. These countries had reversed the pension privatization by transferring savings under management by private pension funds back to the public sector.
    Keywords: pension reform, ex-communist countries, mandatory private pillar, coercion of international financial institution, demographic and economic pressures, diffusion wave
    JEL: A14 G23 P29
  8. By: Frédéric Gannon (EconomiX); Gilles Le Garrec (OFCE); Vincent Touze (OFCE)
    Abstract: This paper analyses how the economic, demographic and institutional differences between two regions -one developed and called the North, the other emerging and called the South- drive the international capital flows and explain the world economic equilibrium. To this end, we develop a simple two-period OLG model. We compare closed-economy and open-economy equilibria. We consider that openness facilitates convergence of South’s characteristics towards North’s. We examine successively the consequences of a technological catching-up, a demographic transitionand an institutional convergence of pension schemes. We determine the analytical solution of the dynamics of the world interest rate and deduce the evolution of the current accounts. These analytical results are completed by numerical simulations. They show that the technological catching-up alone leads to a welfare loss for the North in reason of capital flows towards the South. If we add to this Örst change a demographic transition, the capital demand is reduced in the South whereas its saving increases in reason of a higher life expectancy. These two effects contribute to reduce the capital flows from the North to the South. Finally, an institutional convergence of the two pension schemes reduces the South’s saving rate which increases the capital flow from the North to the South.
    Keywords: International capital flows; Economic Convergence; Demographic transition
    JEL: D91 F40 J10 O33
    Date: 2016–03
  9. By: Alessandro Cigno; Mizuki Komura; Annalisa Luporini
    Abstract: We demonstrate the existence of self-enforcing, renegotiation-proof family rules requiring adults to provide attention for their elderly parents in a model where individuals marry, and Nash-bargain the allocation of domestic resources with their partners. We show that public policy is neutralized by private action in some cases, but not in general.
    Date: 2016
  10. By: Rudy Douven; Pieter Bakx; Frederik T. Schut
    Abstract: The decision about the amount and type of care that a patient needs may be entrusted to health care providers or be delegated to an independent assessor. An independent assessment limits the scope for supply-side moral hazard and occurs frequently in long-term care (LTC), e.g. in the Netherlands, Germany, Belgium, Switzerland, and Japan. The characteristics of LTC, the potential lack of incentives for efficient use for consumers, providers and third-party payers, and the absence of other restrictions of supply and demand, suggest that there may be room for excessive LTC use in the Netherlands, so there might be a case for independent needs assessment. Unique individual level data about LTC-eligibility decisions and use show that consumers make use of the indicated type of care but that for virtually all subgroups in the population there is considerable non-take-up, meaning that the independent assessment does not limit the amount of care that patients use. This finding suggests that the independent needs assessment may only have a small effect on preventing supply-side moral hazard in LTC.
    JEL: H51 I11 I13 I18 L13 L33
    Date: 2016–03
  11. By: Atsuko Tanaka (University of Calgary)
    Abstract: With an aging population and a rising prevalence of chronic conditions in the United States (U.S.), it is important to understand what happens when workers suffer unanticipated reductions in productivity. This paper investigates who pays for the loss caused by labor productivity reductions---a phenomenon often described as “presenteeism†or “absenteeism†---due to a stroke. Using the Health and Retirement Study (HRS) data, I find that, in the case of older workers, the employer often pays through higher costs of labor, rather than the worker through lower wages, because wages and earnings remain at the level before the worker had a stroke despite reduced hours. The existence of such rigidity in the employment contract translates to an increase in calculated hourly wages. Thus, this study warns that wages, earnings, or salaries cannot be clearly interpreted as accurate values of the marginal product of labor.
    Date: 2016–03–25
  12. By: Anek Belbase; Alicia H. Munnell; Nari Rhee; Geoffrey T. Sanzenbacher
    Abstract: At any given moment, about half of private sector workers are not covered by any employer-sponsored retirement plan. To close this coverage gap, 18 states are considering retirement savings initiatives. These efforts have been spurred by the lack of action at the federal level – which would be preferable to a patch­work of state plans – and the apparent inability of ex­isting employer-sponsored plans to solve the problem. But the state initiatives are still at an early stage. To date, just two states – California and Connecticut – have completed “feasibility studies” to determine whether their initiatives can generate sufficient ac­count balances and employer support to be success­ful. Both states propose a mandate on employers to either set up a retirement plan already available in the market or join a state program of individual retire­ment accounts with automatic enrollment (“auto-IRAs”). This brief focuses on lessons learned from these two states to inform other states considering similar efforts. The discussion proceeds as follows. The first section describes the California and Connecticut initiatives. The second section presents three lessons learned from their feasibility studies: 1) high rates of employee participation can be expected; 2) employers are split in their support, but they will not discourage participation by employees; and 3) program design and implementation are critical. The final section concludes that while the work done by California and Connecticut suggests a promising outlook for auto-IRAs, success will depend on how well the programs are implemented.
    Date: 2016–03
  13. By: Thomas Url (WIFO); Rob J. Hyndman; Alexander Dokumentov
    Abstract: Many countries have implemented social programmes providing long-term financial or in-kind entitlements. These programmes often focus on specific age-groups and consequently their expenditure streams are subject to demographic change. Given the strains already existing on public budgets, long-term forecasts are an increasingly important instrument to monitor the budgetary consequences of social programmes. The expected development of the labour force is a key input to these forecasts. We suggest combining a functional data approach to age-profiles of labour market participation rates with information on education, marital status and other exogenous variables to improve long-term forecasts of labour supply.
    Keywords: forecast, labour supply, age-profile, smoothing
    Date: 2016–01–21
  14. By: Carlo Maccheroni (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: This paper develops a comparative analysis of results provided by the “human actuarial senescence†and by those of the demographic approach in relation to mortality in old age. In particular we will examine a case which has previously been recorded, but not with regards to Italy. It deals in particular with the cohorts born between 1889 and 1900; the men involved therefore, took part directly in the first world war whilst the women experienced the harsh conditions of life during those years.
    Keywords: First World War, Mortality, Actuarial senescence, Birth-cohort life tables, Demography.
    JEL: N4
    Date: 2016–03
  15. By: Leonardo Villar; David Forero; Alejandro Becerra
    Abstract: El presente documento, que busca elaborar una caracterización completa del Sistema General de Pensiones (SGP) colombiano, se divide en cinco partes, sin contar esta introducción ni las conclusiones. En el primer capítulo, se revisarán las principales características del régimen pensional colombiano, haciendo énfasis en los cuatro principios que debe cumplir todo esquema de protección a la vejez. En la segunda parte se describirá el Pilar Cero, o de pensiones no contributivas, que en Colombia está complementado por un pilar intermedio representado en el programa de BEPS. En la tercera parte se presentará algunas anotaciones sobre los subsidios y la sostenibilidad fiscal del RPM. En el cuarto capítulo se hará un análisis más detallado de las características técnicas y los resultados del esquema de capitalización individual (RAIS), y las diferencias esenciales con el régimen de reparto simple (RPM). El quinto capítulo examinará el funcionamiento del Pilar Tres de ahorro voluntario en Colombia, para terminar en la última parte con las conclusiones, que incluyen las tendencias, desafíos, lecciones y recomendaciones de política que surgen de este estudio.
    Keywords: Sistema General de Pensiones, Pensiones de Jubilación, Protección Social, Colombia, Sostenibilidad Fiscal
    JEL: H55 J32
    Date: 2015–03–31
  16. By: Emanuele Ciani; Claudio Deiana
    Abstract: Previous empirical literature on intergenerational transfers of assets and services has mostly focused on the contemporary exchange or on the bequest motive. Differently, using Italian data, we provide evidence that parents who help their adult children with housing at the time of marriage are rewarded by higher chances of receiving informal care later in life. We show that this relation is robust to controlling for a wide set of individual and family characteristics and we discuss three possible explanations: (i) increased geographical distance; (ii) parents' reinforcement through support for the production of grandchildren; (iii) correlation with future financial transfers.
    Keywords: informal care, grandchildren care, proximity, intergenerational transfers
    JEL: J12 J13 J14
    Date: 2016–03
  17. By: Andrew Hood (Institute for Fiscal Studies and Institute for Fiscal Studies); Robert Joyce (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: What explains the variation in how income changes as people age? Using household panel data, we investigate the contribution of different time-varying factors in explaining variation in income changes over prime working-age life (between 35-44 and 50-59). We find that demographic changes, such as acquiring or losing a partner and the entry or exit of children to and from the household, account for a larger share of the variation in household income changes than shifts in employment status or occupation. This is particularly true for women, for whom demographic changes explain 82% of ex-post predictable variation in household income changes, compared to only 12% explained by employment status and occupation. We find a similar result when looking at the transition into retirement (between 50-59 and 66-75). These results illustrate an important limitation of the extensive literature examining consumption and savings behaviour over the lifecycle: focusing on earnings and income whilst ignoring changes in household composition excludes the largest source of ex-post predictable variation in income changes. Also available: Executive Summary
    Date: 2015–12
  18. By: Pieter Bakx (Institute of Health Policy & Management (iBMG), Erasmus University Rotterdam, the Netherlands); Owen O’Donnell (Erasmus University Rotterdam, the Netherlands, University of Thessaloniki, Greece); Eddy van Doorslaer (Erasmus University Rotterdam, the Netherlands)
    Abstract: The Netherlands is among the top spenders on health in the OECD. We document the life-cycle profile, concentration and persistence of this expenditure using claims data covering both curative and long-term care expenses for the full Dutch population. Spending on health care is strongly concentrated: the one per cent of individuals with the highest levels of expenditure account for one quarter of the aggregate in any one year. Averaged over three years, the top one per cent still accounts for more than a fifth of the total, indicating a very high degree of persistence in the largest expenses. Spending on long-term care, which amounts to one third of all expenditure on health care, is even more concentrated: the top one per cent accounts for more than half of total spending on this type of care. Average expenditure rises steeply with age and even more so with proximity to death. Spending on individuals in their last year of life absorbs one tenth of aggregate health care expenditure. In a given year, spending on health care is highly skewed toward individuals with lower incomes. Average expenditure on the poorest fifth is more than three times that on the richest fifth. Spending on long-term care is five times more concentrated on the poor.
    Keywords: Health expenditure; Long-term care; Social insurance; the Netherlands
    JEL: D12 I13 I14
    Date: 2016–04–08

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