nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒06‒18
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Aging, Retirement and Pay-As-You-Go Pensions By Cipriani, Giam Pietro
  2. Saving for old age By Demirguc-Kunt,Asli; Klapper,Leora; Panos,Georgios A.
  3. Life Cycle Consumption of Food: Evidence from French Data By Kyureghian, Gayaneh; Soler, Louis-Georges
  4. Macroeconomics, Aging and Growth By Ronald Lee
  5. Trends in employer costs for defined benefit plans By Works, Richard
  6. Retirement Financing: An Optimal Reform Approach By Hosseini, Roozbeh; Shourideh, Ali
  7. Understanding the Improvement in Disability Free Life Expectancy In the U.S. Elderly Population By Michael Chernew; David M. Cutler; Kaushik Ghosh; Mary Beth Landrum
  8. The Political Economy of Underfunded Municipal Pension Plans By Jeffrey Brinkman; Daniele Coen-Pirani; Holger Sieg
  9. A Narrative Account of Legislated Social Security Changes for Germany By Sebastian Gechert; Christoph Paetz; Paloma Villanueva
  10. Inequity in unmet medical need among the European elderly By Bora Kim
  11. Does the introduction of non-contributory social benets discourage registered labour? Testing the impact of pension moratoriums on unregistered employment in Argentina (2003-2015). By Leonardo Eric CALCAGNO
  12. Gone with the wind: demographic transitions and domestic saving By Eduardo Cavallo; Gabriel Sánchez; Patricio Valenzuela
  13. To Avoid or Not to Avoid Inheritance Taxes? That Is the Question for Parents: Empirical Evidence from Japan By Niimi, Yoko
  14. Suivi de la collecte et des placements des 12 principaux assureurs-vie à fin décembre 2015. By Kora-Yarou N.; Malgras F.; Bontemps-Chanel A.-L.

  1. By: Cipriani, Giam Pietro (University of Verona)
    Abstract: In this paper we consider the effects of population aging on a pay-as-you-go financed defined contributions pension scheme. We show that when retirement decisions are endogenous, aging increases the retirement age and the steady state level of capital. The effect on pension payouts is in general ambiguous, except for the solution of full retirement, when this effect is unambiguously negative.
    Keywords: retirement, aging, PAYG pensions, overlapping generations model
    JEL: J13 H55
    Date: 2016–05
  2. By: Demirguc-Kunt,Asli; Klapper,Leora; Panos,Georgios A.
    Abstract: Countries around the world face a retirement crisis brought on by aging populations, declining birthrates, and fiscal shortfalls. As a result, policy makers increasingly seek to understand retirement savings patterns, a crucial component of the safety net for the elderly. Drawing on the 2014 Global Findex database, which provides individual-level data on the use of financial products in more than 140 countries, this paper examines how adults save for old age. It finds that about 25 percent of adults worldwide save for old age, with rates exceeding 35 percent in high-income Organisation for Economic Co-operation and Development economies and the East Asia and Pacific region. On average, men are slightly more likely than women to save for this purpose, but the gender gap is deeper in developing countries. Worldwide, saving for old age is more common among older adults, more educated adults, and adults who own accounts. Adults in countries with English legal origin, and with high savings rates, are also more likely to save for old age. The paper also finds that measures to increase trust in the financial system, such as the safety net/moral hazard index based on deposit insurance, lead to higher rates of saving for old age. Finally, the paper finds little evidence of substitution between pension system provisions and contribution rates with saving for old age.
    Keywords: Financial Literacy,Population&Development,Access to Finance,Emerging Markets,Youth and Government
    Date: 2016–06–02
  3. By: Kyureghian, Gayaneh; Soler, Louis-Georges
    Abstract: Over the next few decades, the share of the elderly population in France (i.e., aged 65 and older) will increase steadily. There is concern that upon retirement aging people cannot maintain the pre-retirement level of consumption, giving rise to nutrition and health deprivation, even food insecurity. Compounded by the increasing proportion of the aging population, this can quickly become a public health threat. Although there is empirical evidence that the expenditure for durables decreases as households age, there does not seem to be any evidence whether the quantity, quality or the structure of food baskets change in France. The objective of this research is to investigate this issue. In particular, we establish that aging households pay effectively lower prices through changing shopping tactics, leaving the food quantities practically uncompromised.
    Keywords: Aging, Life cycle consumption, Home production function, Food Demand, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, D12, D91,
    Date: 2016
  4. By: Ronald Lee
    Abstract: Inevitable population aging and slower population growth will affect the economies of all nations in ways influenced by cultural values, institutional arrangements, and economic incentives. One outcome will be a tendency toward increased capital intensity, higher wages, and lower returns on capital, a tendency partially offset when the elderly are supported by public or private transfers rather than assets, and when economies are open, in which case aging will lead to increased flows of capital and labor. Rising human capital investment per child accompanies the falling fertility that drives population aging, and partially offsets slower labor force growth. Research to date finds little effect on technological progress or labor productivity. National differences in labor supply at older ages, per capita consumption of the elderly relative to younger ages, strength of public pension and health care systems, and health and vitality of the elderly all condition the impact of population aging on the economy. Policy responses include increasing the size of the labor force, mainly by raising the retirement age; reducing benefits and/or raising taxes for public transfer programs for the elderly, with concern for dead-weight loss and the fair distribution of costs across socioeconomic classes; investing more in children to increase the quality and productivity of the future labor force; and public programs that promote fertility by facilitating market work for women with children.
    JEL: E20 E24 H51 H55 J11 J14 J18
    Date: 2016–06
  5. By: Works, Richard
    Abstract: Defined benefit pension plans can provide financial security to retirees who receive the monthly benefit payments throughout their retirement. Defined benefit plans are pension plans that provide guaranteed income during retirement, and are often based on a formula that considers years of service and a percentage of a worker’s salary. Employers have traditionally offered defined benefit plans to their employees, but the high costs associated with these plans have caused many employers to switch to alternate retirement plan options.1 In March 2015, costs for defined benefit plans for private industry employers were approximately 61 cents per employee hour worked, on average. However, when data are averaged only by the employers that offer these plans, the costs are much higher. In this Beyond the Numbers article, we’ll explore how costs fluctuate by industry, occupation, establishment size, and region, and review trends in costs for employees with access to these plans from 2008 to 2015.
    Keywords: defined benefit, pension
    JEL: J32
    Date: 2016–02–19
  6. By: Hosseini, Roozbeh; Shourideh, Ali
    Abstract: We study policy reforms aimed at overhauling retirement financing. We develop a novel approach by considering optimal reforms: policy reforms that minimize the cost for the government while respecting the distribution of welfare in the economy. Our model is an OLG model with life-cycle features and bequest motives where individuals are heterogeneous in their earning ability and mortality. Theoretically, we show that due to the negative correlation between earnings ability and mortality, postretirement distortions to saving decisions are a robust feature of any optimal policy. We, then, use this framework to quantitatively analyze optimal reforms. Our quantitative exercise shows that an optimal reform relative to the status-quo must have three key features: First, post-retirement assets must be subsidized while bequests must be taxed. On average, optimal marginal subsidies on assets for individuals above age 65 is 3.2 percent, while optimal marginal tax on their bequest is 60 percent. Second, pre-retirement transfers must increase while social security benefits must become less generous in the aggregate and more progressive towards low income groups. Finally, earnings tax reform does not contribute to optimal reforms, i.e., optimal marginal taxes on earnings remain very close to the status-quo. The optimal policies reduce the present discounted value of net tax and transfers to each generation by 15 percent.
    Keywords: Retirement, Optimal Taxation, Social Security
    JEL: E6 H21 H55
    Date: 2016–01–19
  7. By: Michael Chernew; David M. Cutler; Kaushik Ghosh; Mary Beth Landrum
    Abstract: Understanding how healthy lifespans are changing is essential for public policy. This paper explores changes in healthy lifespan in the U.S. over time and considers reasons for the changes. We reach three fundamental conclusions. First, we show that healthy life increased measurably in the US between 1992 and 2008. Years of healthy life expectancy at age 65 increased by 1.8 years over that time period, while disabled life expectancy fell by 0.5 years. Second, we identify the medical conditions that contribute the most to changes in healthy life expectancy. The largest improvements in healthy life expectancy come from reduced incidence and improved functioning for those with cardiovascular disease and vision problems. Together, these conditions account for 63 percent of the improvement in disability-free life expectancy. Third and more speculatively, we explore the role of medical treatments in the improvements for these two conditions. We estimate that improved medical care is likely responsible for a significant part of the cardiovascular and vision-related extension of healthy life.
    JEL: I1 I31
    Date: 2016–06
  8. By: Jeffrey Brinkman; Daniele Coen-Pirani; Holger Sieg
    Abstract: This paper analyzes the determinants of underfunding of local government's pension funds using a politico-economic overlapping generations model. We show that a binding downpayment constraint in the housing market dampens capitalization of future taxes into current land prices. Thus, a local government's pension funding policy matters for land prices and the utility of young households. Underfunding arises in equilibrium if the pension funding policy is set by the old generation. Young households instead favor a policy of full funding. Empirical results based on cross-city comparisons in the magnitude of unfunded liabilities are consistent with the predictions of the model.
    JEL: E6 H3 H7 R5
    Date: 2016–06
  9. By: Sebastian Gechert; Christoph Paetz; Paloma Villanueva
    Abstract: Exploiting official historical records of the German Bundestag and Bundesrat, the Federal Ministry of Labour and Social Affairs and the German statutory pension insurance scheme, we construct a narrative of legislated social security changes for Germany between 1970 and 2013 in order to identify important discretionary shocks to the social security system. The historical account covers major changes in transfers and social security benefits and contributions for pensions, health care, long-term care and unemployment insurance on the German federal level and thus complements the tax narrative of Uhl (2013). Based on the provided information we are able to code a rich bottom-up time-series of fiscal policy shocks for empirical macroeconomic analysis, addressing the identification problem. Therefore, we collect information regarding the underlying motivation, the dates of the legislative process and the prospective financial impact, closely following the methodology of Romer and Romer (2010) and Uhl (2013).
    Keywords: Narrative Record Identification, Action-Based Approach, Social Security
    JEL: E62 H20 H30 H55 N00
    Date: 2016
  10. By: Bora Kim
    Abstract: This study evaluates unfair inequality, namely inequality of opportunity (IOp), in access to medical care among the elderly population. I compare the magnitude of IOp across 14 European countries using data from the Survey of Health, Aging and Retirement in Europe (SHARE) collected in 2013. Self-reported unmet medical need caused by cost-related reasons is used as a measure of medical access. Separate models are introduced to accommodate two competing philosophical views (e.g. control and preference approaches) that result in a different definition of the scope of individual responsibility. A joint estimation strategy is applied to take unobserved heterogeneity into account. We find the highest IOp to exist in medical access in EE and IT, and the lowest in AT, CH, SI, NL, SE and DK. However, some results are sensitive to normative assumptions. For instance, EE, IT and DE show greater IOp when it is assumed that individuals are responsible for their decisions made on the basis of genuine preference rather than control. Additional results from a policy simulation suggest that IOp could have been significantly reduced due to educational promotion in many countries, with the exception of EE, NL, SI, SE and DK.
    Date: 2016–05
  11. By: Leonardo Eric CALCAGNO
    Date: 2016
  12. By: Eduardo Cavallo; Gabriel Sánchez; Patricio Valenzuela
    Abstract: This study explores the relationship between demographic factors and saving rates using a panel dataset covering 110 countries between 1963 and 2012. In line with predictions from theory, this paper finds that lower dependency rates and greater longevity increase domestic saving rates. However, these effects are statistically robust only in Asia. In particular, Latin America, which is a region that has undergone a remarkably similar demographic transition, did not experience the same boost in saving rates as Asia. The paper highlights that the potential dividends arising from a favorable demographic transition are not automatically accrued. This is a sobering message at a time when the demographic tide is shifting in the world. JEL classifications: E21; J10;O16. Key words: Keywords: Demographic dividend, Dependency rates, Saving rates
    Date: 2016
  13. By: Niimi, Yoko
    Abstract: This paper examines the behavioral response of households to wealth transfer taxation using household survey data from Japan. The data reveal that relatively few households plan to reallocate the newly taxable amount of wealth to their own consumption or inter vivos transfers in response to the recent lowering of the basic deduction of the inheritance tax, largely because of a lack of concern about taxes. This may partly reflect the fact that bequest motives are relatively weak and/or that the majority of saving is for either retirement or precautionary purposes in Japan. However, our estimation results also suggest that parents with an altruistic motive for bequests are more likely to avoid an increase in their children’s tax bill by reallocating the newly taxable amount of wealth to inter vivos transfers. Parents with an exchange motive for bequests are also found to be responsive to changes in tax policy, but their reaction is heterogeneous: some of them reallocate the newly taxable amount of wealth to their own consumption while others reallocate it to inter vivos transfers.
    Keywords: bequests; inheritance tax; inter vivos transfers; Japan; precautionary saving
    JEL: D31 D64 H26 H31
    Date: 2016–06–02
  14. By: Kora-Yarou N.; Malgras F.; Bontemps-Chanel A.-L.
    Abstract: Au quatrième trimestre 2015, la collecte nette en assurance vie des douze principaux assureurs-vie sous-revue1 est restée stable par rapport au trimestre précédent à 2,6 milliards d’euros, mais nettement supérieure (+44%) aux montants collectés sur la même période en 2014. La bonne tenue de cette collecte nette s’explique par une augmentation des primes plus marquée que celle des rachats et autres prestations. Alors que les unités de compte (UC) avaient renforcé leur proportion dans la collecte nette au cours des deux trimestres précédents, celle-ci baisse au dernier trimestre 2015, passant de 64% à 44% au profit des contrats en euros. D’une année sur l’autre, la collecte en euro passe de 6,2 milliards d’euros à 4,4 milliards d’euros et la collecte en UC de 3,1 milliards d’euros à 6,5 milliards d’euros. Les encours de placements en valeur nette comptable progressent pour leur part de 2,2% au dernier trimestre (1 402 milliards d’euros en raison d’un changement de périmètre). La répartition des placements par type de contrepartie des 12 principaux assureurs vie évolue très lentement. La tendance observée les trimestres précédents est cependant confirmée : l’exposition aux placements souverains et aux obligations bancaires diminuent (resp. -1,3 points et -0,6 point sur une année glissante) au profit des autres obligations et titres assimilés (+1,6 points) des entreprises non financières. Le stock de plus-values latentes des douze principaux assureurs-vie français repart à la hausse (+5%) après deux trimestres de baisse, tirée par les plus-values sur les actions et titres assimilés (+50%) et sur les titres immobiliers (+13%). Les plus-values réalisées continuent leur repli (baisse de 36% par rapport au trimestre précédent). La valeur de réalisation de l’encours de placements progresse de 2,4% (et atteint 1 551 milliards d’euros après mise en transparence des titres détenus dans les organismes de placement collectif). La part investie en titres souverains de l’Union européenne et la répartition par pays au sein de l’UE restent stables par rapport au trimestre précédent de même que le stock de plus-values latentes sur ces titres (70 milliards d’euros en décembre 2015). On note toutefois sur l’ensemble de l’année une augmentation de la valeur de réalisation des placements souverains des pays dits périphériques de la zone euro, principalement causée par les titres italiens (+2,4% sur le dernier trimestre) dont les plus-values latentes ont augmenté de 8,3% au quatrième trimestre 2015 (+7,5% pour l’ensemble des pays dits périphériques). En 2015, le poids des titres souverains français dans le stock de PVL sur l’ensemble des placements obligataires souverains diminue légèrement (63% contre 66% en janvier). Enfin, au quatrième trimestre 2015, l’exposition des 12 principaux assureurs vie au secteur bancaire continue de baisser de -5,2 milliards d’euros, alors même que le montant des titres mis en pension par les 12 principaux assureurs atteint un niveau record à 57,1 milliards (soir +6%) et que les dépôts bancaires augmentent de 23% (7,5 milliards d’euros).
    Keywords: assurance-vie, rachats, patrimoine.
    JEL: G22
    Date: 2016

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