nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒07‒23
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The division of inter-vivos parental transfers in Europe By OLIVERA Javier
  2. Trajectories of Positive Ageing in Taiwan By YU-JING GAO
  3. Impacts from Delaying Access to Retirement Benefits on Welfare Receipt and Expenditure: Evidence from a Natural Experiment By Umut Oguzoglu; Cain Polidano; Ha Vu
  4. The Effect of attitude toward aging on ICT adoption: the Readiness of user By Ju-Chuan Wu; Chih-Jou Chen
  5. Demographic Change and Fiscal Sustainability in Asia By Lee, Sang-Hyop; Kim, Jungsuk; Park, Donghyun
  6. Inherited Wealth and Demographic Aging By Onder, Harun; Pestieau, Pierre
  7. Life Cycle Responses to Health Insurance Status By Florian PELGRIN; Pascal ST-AMOUR
  8. Monitoring and Assessment Framework for the European Innovation Partnership on Active and Healthy Ageing (MAFEIP) - Gap analysis By Christian Boehler; Fabienne Abadie
  9. A continuous-time stochastic model for the mortality surface of multiple populations By Peter Jevtic; Luca Regis
  10. Poor-quality data and cohort life tables By Petr Mazouch
  11. Determining retirement intentions: a study of working individuals in the Eastern Cape, South Africa By Bomikazi Zeka; Mtonhodzi Matchaba-Hove
  12. Factors influencing the retirement savings of individuals in the Eastern Cape, South Africa By Bomikazi Zeka
  13. Optimal Long-Term Allocation with Pension Fund Liabilities By Eric JONDEAU; Michael ROCKINGER
  14. Medicaid Insurance in Old Age By Eric French
  16. Critical perceived aging factors in inducing seniors’ online travel shopping behavior By Hyejin Shin; Insin Kim; Kwangsuk Han; Nari Hong
  17. Take-off, Persistence and Sustainability: The Demographic Factor in Chinese Growth By Fang Cai and Yang Lu
  18. Quarterly Report on the Euro Area (QREA), Vol.15, No.1 (2016) By Erik Canton; Jan In't Veld; Romanos Priftis
  19. Pensions and housing wealth: Quantitative data on market conditions for equity release schemes in the EU By Hennecke, Peter; Murro, Pierluigi; Neuberger, Doris; Palmisano, Flaviana

  1. By: OLIVERA Javier
    Abstract: This paper explores the patterns of the division of inter-vivos financial transfers from old parents to adult children in a sample of 14 European countries drawn from two waves of the Survey of Health, Aging, and Retirement in Europe. Contrary to previous research, mostly focused on the US, this study finds a higher number of parents who divide their financial transfers among their adult children equally. On average, 36% of European parents divide equally. These results contrast sharply with the approximately 6.4%-9.2% of American parents giving equal transfers. It is possible that altruistic parents are also concerned with a norm of equal division, and therefore they do not fully offset the differences of income among their children as predicted by the standard model of altruism. The econometric results show that parents are more likely to give equal transfers if, in their view, income inequality among their children is not too high. Furthermore, the analysis is extended by adding variables at the country level. In this regard, income inequality, pension expenditures, the societal level of altruism and inheritance taxes are key to explaining country differences.
    Keywords: Inter-vivos transfers; Altruism; Equal division; Income inequality; Pensions
    JEL: D31 D64 D91 H31 H55 J18
    Date: 2016–06
  2. By: YU-JING GAO (Department of Psychology, Fu Jen Catholic University)
    Abstract: The elderly population in Taiwan increases rapidly. In this study, a dynamic and positive ageing perspective was adopted to explore Taiwanese ageing processes from 1989 to 2015. First, the patterns of positive aging development among mid- and old age was identified by using latent class growth analysis. Life satisfaction as a criterion, the discriminant ability of different patterns of positive ageing and the explanation of differences in gender, educational level and economic status on the probability of belonging to particular positive ageing classes were examined further. Finally, the amount of intraindividual variability in life satisfaction and the role of interindividual differences in classes of positive ageing change in within-person contingencies among life satisfaction, emotional social support and transcendental time perspective were identified.
    Keywords: Positive Aging, transcendental time perspective, intraindividual variability
    JEL: I31
  3. By: Umut Oguzoglu (Department of Economics, University of Manitoba, and; Institute for the Study of Labor (IZA)); Cain Polidano (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Ha Vu (Department of Economics, Deakin University)
    Abstract: Governments are responding to fiscal pressures associated with aging populations by increasing the eligibility age for publicly-funded retirement benefits. However, recent studies show large resulting increases in the receipt of disability and unemployment benefits, which raises concern that welfare savings are offset by increased inflows into alternative payments. Using administrative data to examine the impacts of female eligibility age increases in Australia, we find little evidence of this. Instead, most of the increase is because the delay mechanically extends the receipt time of people already on alternative payments. The implication is that fiscal savings are not jeopardized by opportunistic behaviour.
    Keywords: Welfare substitution, retirement, aging population
    JEL: H53 J26 J01
    Date: 2016–07
  4. By: Ju-Chuan Wu (Department of Business Administration, Feng Chia University); Chih-Jou Chen (Department of Marketing and Logistics Management, National Penghu University of Science and Technology)
    Abstract: Due to progression of modern medication and technology, the average life span is extending, pursuing high-quality, healthy and long life growing to an old age is more desirable than ever. Taiwan is one of the fastest growing aging countries in Asia, in addition to the problem of an aging population; birth rate is also very low, nursing and elderly care might affect our financial and economic development. This research aims to explore the current situation of aging society, the gap between user’s attitude toward aging and the ICT needs for better performance of ICT innovative products and (or) service. In this study, the proposed model is composed the concepts of attitude toward aging, Innovation Diffusion Theory, and User’s Informational-Based Readiness. The research findings show that be helpful to the further application, cross-field cooperation, and long-term development between ICT and elderly service industry.
    Keywords: Aging in Place, Attitude toward aging, Information and Communication Technology (ICT), Service Innovation, Innovation Diffusion Theory Technology Readiness, User’s Informational-Based Readiness
  5. By: Lee, Sang-Hyop (University of Hawaii at Manoa); Kim, Jungsuk (Sogang University); Park, Donghyun (Asian Development Bank)
    Abstract: Changes in the population age structure can have a significant effect on fiscal sustainability since they can affect both government revenues and expenditures. For example, population aging will increase expenditures on the elderly while reducing potential growth and hence revenues. In this paper, we project government revenue, expenditure, and fiscal balance in developing Asia up to 2050. Using a simple stylized model and the National Transfer Accounts data set, we simulate the effect of both demographic changes and economic growth. Rapidly aging economies like the Republic of Korea; Japan; and Taipei,China, are likely to suffer a tangible deterioration of fiscal sustainability under their current tax and expenditure system. On the other hand, rapid economic growth can improve fiscal health in poorer economies with relatively young populations and still-growing working-age populations. Overall, our simulation results indicate that Asia’s population aging will adversely affect its fiscal sustainability, pointing to a need for Asian economies to further examine the impact of demographic shifts on their fiscal health.
    Keywords: Asia; fiscal balance; fiscal projection; population aging; public spending; tax
    JEL: H20 H50 H62 J11 J14
    Date: 2016–04–08
  6. By: Onder, Harun; Pestieau, Pierre
    Abstract: The role of inherited wealth in modern economies has increasingly become under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. We show that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however, could oset and potentially reverse these eects. We also show that aging could increase the size of individual bequests vis-à-vis real wages. However, these bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the eect of increasing longevity on their distribution in non-monotonic.
    Keywords: aging; bequest motives; inherited wealth
    Date: 2016–07
  7. By: Florian PELGRIN (EDHEC Business School); Pascal ST-AMOUR (University of Lausanne and Swiss Finance Institute)
    Abstract: Health insurance status can change over the life cycle for exogenous reasons (e.g. Medicare for the elders, PPACA for younger agents, termination of coverage at retirement in employer-provided plans). Durability of the health capital, endogenous mortality and morbidity, as well as backward induction suggests that these changes should affect the dynamic life cycle beyond the period at which they occur. The purpose of this paper is to study these lifetime effects on the optimal allocation (consumption, leisure, health expenditures), status (health, wealth and survival rates), and welfare. We analyse the impact of young (resp. old) insurance status conditional on old (resp. young) coverage through the structural estimation of a dynamic model with endogenous death and sickness risks. Our results show that young insurees are healthier, wealthier, consume more health care yet are less exposed to OOP risks, and substitute less (more) leisure before (after) retirement. Old insurees show similar patterns, except for lower precautionary wealth balances. Compulsory health insurance is unambiguously optimal for elders, and for young agents, except early in the life cycle. We draw other implications for public policy such as Medicare and PPACA.
    Keywords: Household Finance, Endogenous Morbidity and Mortality Risks, Demand for Health, Medicare and Patient Protection and Affordable Care Act, Simulated Moments Estimation
    JEL: D91 G11 I13
  8. By: Christian Boehler (European Commission – JRC); Fabienne Abadie (European Commission – JRC)
    Abstract: DG JRC-IPTS has been developing a Monitoring and Assessment Framework to assess the health and economic impact of the activities carried out by stakeholders of the European Innovation Partnership on Active and Healthy Ageing (EIP on AHA) within the MAFEIP project. In this context, IPTS has conceptualised a decision analytic model which has been implemented as a web-based tool, the MAFEIP tool. This tool builds up from a variety of surrogate endpoints commonly used across the diverse set of EIP on AHA commitments in order to estimate health and economic outcomes of the Partnership. Stakeholders can access the tool through an intuitive web-based user interface that is linked to a database of country, age and gender specific mortality data. This report offers a review of the issues encountered with the set-up of the model, the usability of the tool, technical issues and further gaps that could be identified in the course of the tool implementation as well as issues related to data collection. It offers recommendations as to what improvements could be undertaken in the future.
    Keywords: EIP, Active and Healthy Ageing, EIP on AHA, indicators, monitoring, framework, health states, markov, model
    Date: 2016–06
  9. By: Peter Jevtic (Department of Mathematics and statistics, McMaster University, Canada); Luca Regis (IMT School for Advanced Studies Lucca)
    Abstract: We formulate, study and calibrate a continuous-time model for the joint evolution of the mortality surface of multiple populations. We model the mortality intensity by age and population as a mixture of stochastic latent factors, that can be either population-specific or common to all populations. These factors are described by affine time-(in)homogenous stochastic processes. Traditional, deterministic mortality laws can be extended to multi-population stochastic counterparts within our framework. We detail the calibration procedure when factors are Gaussian, using centralized data-fusion Kalman filter. We provide an application based on the mortality of UK males and females. Although parsimonious, the specification we calibrate provides a good fit of the observed mortality surface (ages 0-99) of both sexes between 1960 and 2013.
    Keywords: multi-population mortality, mortality surface, continuous-time stochastic mortality, Kalman filter estimation, centralized data fusion
    JEL: C13 C38 G22 J11
    Date: 2016–07
  10. By: Petr Mazouch (University of Economics, Prague)
    Abstract: Data for cohort life tables and its quality is very important information and good data is the basic assumption to construct any model. For cohort life tables information about mortality for 100 years is needed. As is known many regions have problem with some short time periods with weak or no information about mortality patterns in detailed structure. Aim of the paper is to describe possible way how to solve the problem with short periods with low quality data and to evaluate impact of this to the total cohort mortality. Information about cohort mortality is very important for many institutions as pension funds, government and others.
    Keywords: Cohort, Mortality, Life tables, Estimate
    JEL: C80 J10
  11. By: Bomikazi Zeka (Nelson Mandela Metropolitan University); Mtonhodzi Matchaba-Hove (Nelson Mandela Metropolitan University)
    Abstract: Many South Africans reach retirement age without adequate retirement provisions. Prior research has indicated that only 6% of the South African population can afford to retire. The rest of the population are forced to continue working past the normal retirement age. Alternatively, South Africans have to depend on their family, friends and the South African government for income during retirement. This is possibly caused by the fact that planning for retirement is a priority only later in one’s life. Therefore, the purpose of this paper is to investigate the factors that influence the retirement intentions of working individuals. A hypothesised model for aiding this investigation was constructed and included variables identified through a thorough review of the literature. The variables illustrated in the hypothesised model were grouped as follows:•independent variables (financial planner’s role, retirement knowledge; personal and financial circumstances) and •dependent variable (retirement intentions).An exploratory factor analysis was undertaken and Cronbach’s Alpha coefficients were calculated to assess the validity and the reliability of the measuring instrument. A regression analysis was undertaken to test the hypothesised relationships. Based on the results of the exploratory factor analysis, all the independent variables retained their original definitions, however, the dependent variable (retirement intentions) was re-operationalised to retirement planning intentions. The findings of this study revealed that the role of a financial planner is instrumental in determining the retirement planning intentions of individuals and their retirement knowledge has a significantly positive influence on their intention to plan for their retirement. It is recommended that individuals seek the advice of a professional financial planner regarding their retirement planning to ensure that individuals meet their personal retirement goals and objectives. Through the guidance of a financial planner, individuals may also gain more confidence and knowledge about their financial situation at retirement, which may also assist in determining when they intend to retire and to ensure they are not financially destitute at retirement.
    Keywords: financial circumstances; financial planner’s role; personal circumstances; retirement intentions; retirement knowledge
    JEL: J26
  12. By: Bomikazi Zeka (Nelson Mandela Metropolitan University)
    Abstract: The state of saving in South Africa is known to be far from adequate. Prior research has shown that few South Africans have access to an affordable retirement funding vehicle and that more than half of the individuals contributing to retirement funds will have less than 28% of their final salary at retirement age (Nicholson 2013; National Treasury 2012:7). Through previous research, it has been shown that due to inadequate retirement savings, individuals are compelled to re-join the work force even once they have reached retirement age. Therefore, the purpose of this paper is to investigate the factors that influence the retirement savings of individuals. A hypothesised model for aiding this investigation was constructed and included variables identified through a thorough review of the literature. The variables illustrated in the hypothesised model were grouped as follows:•independent variables (financial literacy, future time perspective; level of retirement planning and sources of financial advice) •dependent variable (retirement savings).To determine the validity of the measuring instrument, an Exploratory Factor Analysis (EFA) was undertaken and to assess the reliability of the measuring instrument, Cronbach’s Alpha coefficients were calculated. Pearson’s Product Moment Correlation coefficients were also calculated to determine the correlations between the variables. Pearson’s Product Moment Correlation coefficients were also calculated to ensure that multicollinearity was not present in the study. A regression analysis was undertaken to test the hypothesised relationships. Based on the results of the EFA, the independent variables (level of retirement planning and sources of financial advice) and the dependent variable (retirement savings) retained their original definitions. However, the EFA also revealed that several of the items originally intended to measure the independent variables (financial literacy and future time perspective) as two separate constructs, loaded together onto one factor. The findings of this study revealed that if an individual is financial literate and is mindful of the future, the greater the likelihood that an individual will save for retirement. Therefore, it is recommended that institutions such as schools and places of employment offer educational programmes geared towards improving individuals’ financial literacy. Furthermore, the study found that individuals that actively plan for their retirement are more likely to save for their retirement. It is therefore recommended that individuals save as soon as possible for their retirement as individuals that plan for retirement have more control over their finances and are also more likely to be financially independent at retirement.
    Keywords: financial advice; financial literacy, future time perspective, level of retirement planning; retirement savings
    JEL: J26
  13. By: Eric JONDEAU (University of Lausanne and Swiss Finance Institute); Michael ROCKINGER (University of Lausanne and Swiss Finance Institute)
    Abstract: We build a macroeconomic model for Switzerland, the Euro Area, and the USA that drives the dynamics of several asset classes and the liabilities of a representative Swiss (defined-contribution) pension fund. This encompassing approach allows us to generate correlations between returns on assets and liabilities. We calibrate the economy using quarterly data between 1985:Q1 and 2013:Q2. Using a certainty equivalent approach, we demonstrate that a liabilities hedging portfolio outperforms an assets-only strategy by between 5% and 15% per year. The main reason for such a large improvement is that the optimal assets-only portfolio is typically long in cash, whereas hedging liabilities require the pension fund to be short in cash. It follows that imposing positivity restrictions in the construction of the portfolio also results in a large cost, between 4% and 8% per year. This estimate suggests that allowing pension funds to hedge their liabilities through borrowing cash and investing in a diversified bond portfolio helps to enhance the global portfolio return.
    Keywords: Asset Liability Management, Defined Contributions, Surplus maximization
    JEL: E43 C53 G23 G28
  14. By: Eric French (University College London)
    Abstract: The old age provisions of the Medicaid program were designed to insure re- tirees against medical expenses. We estimate a structural model of savings and medical spending and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across currently single retirees. Compensat- ing variation calculations indicate that current retirees value Medicaid insur- ance at more than its actuarial cost, but that most would value an expansion of the current Medicaid program at less than its cost. These findings suggest that for current single retirees, the Medicaid program may be of the approximately right size.
    Date: 2016
  15. By: Gurkan Tuna (Trakya University); Resul Daş (Fırat University)
    Abstract: As a result of the increasing awareness about common daily problems of the elderly and disabled in recent years, novel technology solutions have been designed and developed. Thanks to smart homes which involve a set of various sensors and devices to make the daily lives of the elderly and disabled easier and provide remote monitoring ability to the family members, nowadays the elderly and disabled stay in their houses instead of assisted-living centres. On the other hand, elderly and disabled people living alone may be exposed to potential security threats. In this study, a framework is proposed in order to achieve secure communication over the Internet. In the proposed framework, information to be transferred is first encrypted using RSA algorithm and then sent to the recipient. For security reasons, after the recipient reads the encrypted information, traces of the communication should be removed. For this objective, before the transfer, the sender determines how many seconds the message will be available to the recipient via a link. When the recipient receives the link, he/she can open the message with the secret key. After the predefined time, the message is deleted from the database used by the framework. The framework can be used to enable confidential messaging between smart home inhabitants and people they would like to communicate. The framework can easily be integrated into smart home control panels or web-based interfaces of smart home systems.
    Keywords: Smart homes; web-based communication; information security; the disabled; the elderly.
    JEL: C88 L86 L63
  16. By: Hyejin Shin (Pusan National University); Insin Kim (Pusan National University); Kwangsuk Han (Pusan National University); Nari Hong (Pusan National University)
    Abstract: The aims of this paper were to 1) investigate important age identity factors in developing seniors’ favourable attitude toward online travel shopping, and 2) verify whether seniors’ attitude toward online travel shopping has a positive effect on revisit intention. Based on the literature focused on aging, which includes psychological, physical and social age, a structural model was proposed. The data gathered from seniors who had ever purchased travel goods via online shopping in U.S. were analysed utilizing structural equation modelling (SEM) in order to test the conceptual model empirically. The results of this study demonstrated that the younger the seniors’ psychological and social age are, the more favorable their attitude toward online travel shopping is. However physical age does not have impact on seniors’ attitude to online travel shopping. Moreover, seniors’ online travel shopping attitude has a significant and positive effect on revisit intention. This study provides academic implications to researchers on online consumer behavior and several useful implications are discussed for e-marketers.
    Keywords: Seniors; Online travel shopping, Revisit intention
  17. By: Fang Cai and Yang Lu
    Abstract: With the reduction of the working-age population and the increase of the population dependency ratio as the main indicators of the diminishing demographic dividend, China's potential growth rate is decreasing. Our results suggest that the demographic dividend contributed to nearly one fourth of the economic growth in China in the past three decades, while total factor productive growth explains another third and capital accumulation explaining the remaining growth (nearly half). China's potential growth rate will continue to slow—it was nearly 10 per cent during 1980–2010 but 6.65 per cent on average during 2016–2020—because of the diminishing demographic dividend, but reform measures are conductive to clearing the institutional barriers to the supply of factors and productivity, buffering the potential growth rate. The aggregate reform dividend could reach to 1–2 per cent on average during 2016–2050.
    Keywords: population, demography, China, intergenerational, economy policy
    Date: 2016–07–01
  18. By: Erik Canton; Jan In't Veld; Romanos Priftis
    Abstract: Structural reform measures underway in Italy, France, Spain and Portugal could have significant economic benefits and raise GDP, model simulations presented in this edition of the QREA show. Other chapters in this edition look at the effects of population ageing and slowing total factor productivity growth on GDP, inflation and interest rates; and the drivers of total factor productivity growth.
    JEL: A10 C10 C23 C54 D24 E00 E61 F15 F45 J21
    Date: 2016–04
  19. By: Hennecke, Peter; Murro, Pierluigi; Neuberger, Doris; Palmisano, Flaviana
    Abstract: This paper examines the available data on market conditions for equity release schemes (ERS) in all EU member states to cluster Member States for subsequent extrapolation of the findings from six EU Member States (DE, IT, NL, IE, HU, and the UK) to the EU as a whole. It aggregates various indicators to an overall index for ERS need and feasibility, using equal weights for all indicators. A comparison of overall need and feasibility shows a very diverse situation in the six member states and the EU as a whole. Among the six member states, Netherlands and UK have favourable ERS conditions, Hungary, Ireland and Italy have (lower) medium ERS conditions, while Germany has unfavourable conditions. An extrapolation to the EU as a whole is feasible as the six countries are good proxies for EU wide diversity.
    Keywords: ageing,equity release,pensions,homeownership,housing,reverse mortgage
    JEL: D1 G1 J1 R2 R3
    Date: 2016

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