nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒07‒30
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. On the Heterogeneity in Longevity among Socioeconomic Groups: Scope, Trends, and Implications for Earnings-Related Pension Schemes By Ayuso, Mercedes; Bravo, Jorge Miguel; Holzmann, Robert
  2. Retirement and cognitive abilities By Tumino, Alberto
  3. Pro-elderly welfare states within pro-child societies : Incorporating family cash and time into intergenerational transfers analysis By Gál, Róbert Iván; Vanhuysse, Pieter; Vargha, Lili
  4. Why is the real interest rate so high in Brazil? The role of pensions By Brian Bolarinwa Ogundairo; Mauro Rodrigues
  5. Aging and Health Financing in the US:A General Equilibrium Analysis By Juergen Jung; Chung Tran; Matthew Chambers
  6. A Life Course Perspective on the Income-to-Health Relationship: Macro-Empirical Evidence from Two Centuries By Nagel, Korbinian
  7. Smoking for the poor and vaping for the rich? Distributional concerns of new smoking methods By Motegi, H.; Nishimura, Y.; Oikawa, M.
  8. Life-Cycle Consumption Patterns at Older Ages in the US and the UK: Can Medical Expenditures Explain the Difference? By Banks, James; Blundell, Richard; Levell, Peter; Smith, James P.
  9. Grandparental Availability for Child Care and Maternal Employment: Pension Reform Evidence from Italy By Massimiliano Bratti; Tommaso Frattini; Francesco Scervini
  10. Height and cognition at older age: Irish evidence By Irene Mosca; Robert E Wright
  11. The Determinants of Dropouts from Voluntary Pension Scheme: Evidence from Sri Lanka By Heenkenda, Shirantha
  12. Performance appraisal of Croatian mandatory pension funds By Pierre Matek; Marko Lukač; Vedrana Repač
  13. Pensions and Late Career Teacher Retention By Dongwoo Kim; Cory Koedel; Shawn Ni; Michael Podgursky; Weiwei Wu
  14. Technische Unterstützung für mehr Gesundheit und Lebensqualität im Alter: Herausforderungen und Chancen By Merkel, Sebastian
  15. Determinants and Learning Effects of Adult Education-Training: a Cross-National Comparison Using PIAAC Data By Andrea Cegolon

  1. By: Ayuso, Mercedes (University of Barcelona); Bravo, Jorge Miguel (Universidade Nova de Lisboa); Holzmann, Robert (University of New South Wales)
    Abstract: Heterogeneity in longevity between socioeconomic groups is increasingly documented for developed economies and is reviewed in the paper. Heterogeneity in life expectancy disaggregated by main socioeconomic characteristics – such as age, gender, race, health, education, profession, income, and wealth – is sizable and has not declined in recent decades. The prospects for future decline are not strong, either; perhaps even to the contrary. As heterogeneity is closely linked to income or earnings (i.e., the contribution base of earnings‐related social programs such as pensions) and as heterogeneity is empirically sizable, the result is major implicit taxes for some groups – particularly the less educated and low earners –and major subsidies for other groups – particularly highly educated individuals and high‐income earners. The implications for pension reform and scheme design are substantial as taxes/subsidies counteract the envisaged effects of (i) a closer contribution‐benefit link, (ii) a later formal retirement age to address population aging, and (iii) more individual funding and private annuities to compensate for reduced public generosity.
    Keywords: implicit tax, lifetime income, gender, life expectancy, implicit subsidy
    JEL: D9 G22 H55 J13 J14 J16
    Date: 2016–07
  2. By: Tumino, Alberto
    Abstract: This paper investigates how retirement influences the cognitive abilities of British older workers. The analysis employs data from Understanding Society and relies on an instrumental variable approach to address endogeneity bias. Consistent with the "use it or lose it" hypothesis, we show that retirement induces cognitive decline, although the relationship is weaker for women employed in routine occupations. Disregarding potentially offsetting effects on other dimensions of health, we conclude that extending the working life has a beneficial effect on the cognitive capital of older workers and that maintaining a mentally engaging and stimulating life-style during retirement contributes to the cognitive health of the mature population.
    Date: 2016–07–01
  3. By: Gál, Róbert Iván; Vanhuysse, Pieter; Vargha, Lili
    Abstract: Households and welfare states both serve as vehicles of lifecycle financing through intergenerational transfers. Working-age people are net contributors, children and the elderly are net beneficiaries. However, there is a marked asymmetry in the socialization of intergenerational transfers. Working-age people pay taxes and social security contributions to care for the elderly as a generation, but they individually spend cash and contribute time to raise their own children. This results in asymmetric visibility of intergenerational transfers. Resources flowing to the elderly are near-fully observed in National Accounts (NA), but inter- and intra-household transfers are not registered there. Using data for ten European countries representing 70 percent of the population of the EU, we employ National Transfer Accounts (NTA) to include private transfers as well. In addition, as an extension of NTA, we use National Time Transfer Accounts (NTTA) to quantify the value of time transferred within and between households in the form of unpaid labor. Only a fifth of all resource transfers to children is registered in NA; another third is made visible by NTA, but nearly half is made visible only by NTTA. Contrary to much perceived wisdom, once intra-familial transfers of cash and time are incorporated, European societies transfer more resources to children than to the elderly.
    Keywords: household economy, young and old, care work, child rearing, families, National Transfer Accounts
    Date: 2016–06
  4. By: Brian Bolarinwa Ogundairo; Mauro Rodrigues
    Abstract: This paper studies how Brazil’s high real interest rate is related to the country’s pay-as-you-go (PAYG) pension system, which features exceptionally large expenses. We use a standard version of the overlapping generations model, with a mixed pension system (part PAYG part fully funded). We calibrate the model to the Brazilian economy between 2000 and 2014. We consider a steady state which reproduces the average real interest rate in this period, with a PAYG system. We then simulate a pension reform to replicate Chile’s pension expenses. Like Brazil, Chile is a Latin American middle income country, but its pension system is mostly of the fully-funded type. In our preferred specification, the model predicts a 1 percentage point decrease in the long-run annual real interest rate. This corresponds to 18% of the average interest differential between Brazil and Chile during the 2000-2014 period.
    Keywords: real interest rate, pensions, Brazil, overlapping generations
    JEL: E21 E43 H55
    Date: 2016–07–25
  5. By: Juergen Jung; Chung Tran; Matthew Chambers
    Abstract: We quantify the effects of population aging on the US healthcare system. Our analysis is based on a stochastic general equilibrium overlapping generations model of endogenous health accumulation calibrated to match pre-2010 U.S. data. We find that population aging not only leads to large increases in medical spending but also a large shift in the relative size of public vs. private insurance. Without the Affordable Care Act (ACA), aging itself leads to a 36:6 percent increase in health expenditures by 2060 and a 5 percent increase in GDP which is driven by the expansion of the healthcare sector. The group-based health insurance (GHI) market shrinks, while the individual-based health insurance (IHI) market and Medicaid expand significantly. Additional funds equivalent to roughly 4 percent of GDP are required to finance Medicare in 2060 as the elderly dependency ratio increases. The introduction of the ACA increases the fraction of insured workers to 99 percent by 2060, compared to 81 percent without the ACA. This additional increase is mainly driven by the further expansion of Medicaid and the IHI market and the stabilization of the GHI market. Interestingly, the ACA reduces aggregate health care spending by enrolling uninsured workers into Medicaid which pays lower prices for medical services. Overall, the ACA adds to the fiscal cost of population aging mainly via the Medicare and Medicaid expansion.
    Keywords: Population aging, calibrated general equilibrium OLG model, health expenditures, Medicare & Medicaid, Affordable Care Act 2010, Grossman model of health capital, endogenous health spending and financing.
    JEL: H51 I13 J11 E21 E62
    Date: 2016–07
  6. By: Nagel, Korbinian (Helmut Schmidt University, Hamburg)
    Abstract: The epidemiological literature discusses two contrary hypotheses that describe life course variations in the income-to-health relationship: the cumulative advantage and the age as leveller hypothesis. Since related micro level studies are criticised due to an income-rank effect, this study transfers the investigation of both hypotheses to a macro level with a long time horizon. It asks whether increases in per capita income improve population health and whether the improvements differ across population age groups. The analysis uses an unbalanced panel data set with 20 countries and up to 211 years, and relies on an error correction and common factor framework to investigate the long-run equlibrium relationship between income and selected measures of age specific population health. A significant effect of per capita income on survival rates is found for middle ages but not for very young and for old ages. From this it can be concluded that while the cumulative advantage theory describes the transition from young to middle ages, the transition from middle to old ages corresponds to the age as leveller mechanism.
    Keywords: Population Health; Economic Development; Panel Time Series Analysis; Cumulative Advantage; Age as Leveller
    JEL: C22 I15 J11
    Date: 2016–07–26
  7. By: Motegi, H.; Nishimura, Y.; Oikawa, M.
    Abstract: This paper analyzes the effect of retirement on cognitive function in two ways. First, we analyze this effect by using cross-country variation of pension eligibility age, a method is used in the literature. The results suggest that the country heterogeneity largely influences the estimated result, which, in turn, can lead to the opposite interpretation depending on the analyzed countries. We show that the cross-country estimation is not appropriate when analyzing the effect of retirement on cognitive function. Second, we analyze the same effect in the U.S. and other countries by controlling for individual heterogeneity and endogeneity of the retirement behavior. Prior to empirically analyzing the effect, we clarify the effect of retirement on cognitive ability by using a simple economic model with two types of endogenous cognitive investment behaviors and an endogenous retirement. Our estimates indicate that retirement has a weak or no effect on cognitive ability immediately after retirement. However, the results depend on the analyzed countries and the type of cognitive scores employed. Additionally, we investigate the heterogeneity of this effect. For example, we find that the elderly with higher BMI (Body Mass Index) and fat intake experience a negative effect of retirement on cognitive function. When considering the retirement duration, the effect of retirement on cognitive function becomes negative as the retirement duration increases.
    Keywords: mental retirement; cognitive function; social security; pension eligibility age; cross-country instruments; global aging data;
    JEL: I10 I12 J24 J26
    Date: 2016–07
  8. By: Banks, James; Blundell, Richard; Levell, Peter; Smith, James P.
    Abstract: Our data indicate significantly steeper declines in nondurable expenditures in the UK compared to the US in spite of income paths at older ages exhibiting similar declines. We examine several possible causes, including different employment paths, housing ownership and expenses, levels and paths of health status, and out-of -pocket medical expenditures. Among all the factors we considered, we find that differences in levels, age paths, and uncertainty in medical expenses is the most likely reason for the steeper declines in nondurable expenses in the US compared to the UK.
    JEL: D12 D14 D91
    Date: 2015–04
  9. By: Massimiliano Bratti (Università degli Studi di Milano, IZA and Centro Studi Luca d’Agliano); Tommaso Frattini (Università degli Studi di Milano, CReAM, IZA, Centro Studi Luca d’Agliano and Dondena); Francesco Scervini (HDCP, Istituto Universitario di Studi Superiori di Pavia)
    Abstract: In this paper, we exploit pension reform-induced changes in retirement eligibility requirements to assess the role of grandparental child care availability in the employment of women who have children under 15. We focus on Italy for two reasons: first, it has low rates of female employment and little formal child care provision, and second, it has undergone several pension reforms in a relatively short time span. Our analysis shows that, among the women studied, those whose own mothers are retirement eligible have a 13 percent higher probability of being employed than those whose mothers are ineligible. The pension eligibility of maternal grandfathers and paternal grandparents, however, has no significant effect on the women’s employment probability. We also demonstrate that the eligibility of maternal grandmothers mainly captures the effect of their availability for child care. Hence, pension reforms, by potentially robbing households of an important source of flexible, low-cost child care, could have unintended negative consequences for the employment rates of women with children.
    Keywords: Grandparental child care, maternal employment, pension reform, retirement.
    JEL: J13 J22
    Date: 2016–05–07
  10. By: Irene Mosca (TILDA, Trinity College Dublin); Robert E Wright (Department of Economics, University of Strathclyde)
    Abstract: Previous research suggests that taller individuals have greater cognitive ability. The aim of this paper is to empirically investigate whether the relationship between height and cognition holds in later-life using data from the first wave of The Irish Longitudinal Study on Ageing. Seven novel measures of cognition are used. These measures capture important aspects of cognition which are more likely to decline in old age, such as cognitive flexibility, processing speed, concentration and attention. It is found that height is positively and significantly associated with cognition in later-life also when education and early-life indicators are controlled for. The finding that adult height is a marker for nutrition and health environment experienced in early-life is widely accepted in the literature. The findings of this paper suggest that height might have a greater value added, as it appears to be a useful measure of unobserved childhood experiences.
    Keywords: cognition, height, ageing, early-life
    JEL: I1 J0 J1
    Date: 2016–07
  11. By: Heenkenda, Shirantha
    Abstract: This paper seeks to investigate the determinants of dropouts from the voluntary pension scheme (VPS) introduced by the social security board of Sri Lanka. A face-to-face questionnaire distribution was administered to clients of the social security board who subscribed to the VPS. Systematic random sampling techniques were used to survey the dropped out individuals and active members. A multivariate logistic regression model was used to examine associations between the independent variables and factors associated with the dropout decision. The empirical results show that most individuals lack awareness and knowledge of the pension scheme, even if they were active members of the VPS. Some significant factors are highlighted in the results explaining dropout. A higher number of household dependents has a positive contribution to the dropout. The study also highlighted that the income, assets, financial inclusion, financial literacy, and social capital factors have a significant influence for the discontinuation of their pension scheme. Strengthening service quality and extending the comfortable premium collection mechanism is a valuable strategy to increase the popularity of the pension scheme.
    Keywords: Financial Inclusion, Dropout, Social Security, Voluntary Pension Scheme
    JEL: G2 G21
    Date: 2016–06–30
  12. By: Pierre Matek (Croatian Financial Services Supervisory Agency); Marko Lukač (Effectus - University Collage for Law and Finance); Vedrana Repač (Effectus - University Collage for Law and Finance)
    Abstract: The goal of this paper is to determine whether managers of Croatian mandatory pension funds have displayed investment skill on a risk-adjusted basis during the 2005-2014 period. We have calculated various risk-adjusted investment performance measures and have then used a number of statistical tools to test the significance of the results. Evidence from our analysis suggests that Croatian mandatory pension funds have reached their investment targets in terms of risk-free rates or benchmarks. Evidence of investment skill was found in some of the funds analysed.
    Keywords: pension funds, risk-adjusted return, performance appraisal
    JEL: G11 G18 G19 G23
    Date: 2015–02
  13. By: Dongwoo Kim (University of Missouri); Cory Koedel (University of Missouri); Shawn Ni (University of Missouri); Michael Podgursky (University of Missouri); Weiwei Wu (University of Missouri)
    Abstract: A vast research literature is devoted to analyzing causes of and potential remedies for early-career teacher attrition. However, much less attention has been paid to late-career attrition among experienced teachers, which is driven primarily by retirement plan incentives. Although there is some variation across states, it is generally the case that late-career teachers retire at much younger ages than their professional counterparts. Moreover, given the well-documented returns to teaching experience, late-career exits are on average more costly to students in K-12 schools than early-career exits. This study uses structural estimates from a dynamic retirement model to simulate the effect of targeted retention bonuses for senior teachers rated as effective or teaching in high-need fields. While the cost per incremental year of instruction is expensive in the short run, it declines over time. Moreover, because labor supply decisions are forward-looking, a temporary bonus has much smaller effects than a permanent one. These findings highlight the value of stability in policies aimed at extending teachers’ careers. Overall our results suggest that carefully-targeted retention bonuses can be useful tool in raising the quality of the teaching workforce and closing achievement gaps.
    Keywords: public pensions, retirement, worker retention, teacher retention
    JEL: H5 J2 J3
    Date: 2016–07
  14. By: Merkel, Sebastian
    Abstract: Die Seniorenwirtschaft (Silver Economy) bekommt aktuell neuen Fahrtwind durch Entwicklungen im Bereich der Informations- und Kommunikationstechnologien (IKT). Es besteht jedoch eine Diskrepanz zwischen Aufwendungen für Forschung und Entwicklung einerseits und Markterfolg auf der anderen Seite. Die Gründe hierfür sind vielfältig und reichen von technischen und rechtlichen Herausforderungen über Fragen der Finanzierbarkeit bis hin zu mangelnder Akzeptanz der Nutzerinnen und Nutzer. Im europäischen Projekt "MoPAct - Mobilizing the Potential of Active Ageing in Europe" wurden diese Barrieren beschrieben und analysiert.
    Date: 2016
  15. By: Andrea Cegolon (UCL Institute of Education)
    Abstract: Lifelong learning over the life course is becoming important in order to compete in a knowledge-based global economy. Adult education and Training (AET) are a possible strategy of adjusting the skills of the adult population to the needs of either the changing occupational structure and aging societies. Nevertheless, despite the importance of AET, empirical evidence on the topic is still scarce, particularly as regards the cross-national comparative research. In this sense, this paper aims to contribute to this field of studies by gaining a better understanding of how AET can influence the level of skills in individuals. In view of this, I use data from Programme for the International Assessment of Adult Competencies (PIAAC) to investigate four different countries - Italy, France, UK and Sweden - the influence of individual characteristics on participation in formal and non-formal AET on one side and, on the other, the effect of both different types of AET on the skills (literacy and numeracy) of adult individuals. The results from the four countries show that participation in both types of AET, on average, increases skills levels. I also found that, for both literacy and numeracy, on average the formal AET has a smaller impact on skills compared to non-formal AET. Another important finding is how the effect of learning activities varies across skills distribution: both of them take different trajectories in each of the countries selected. In conservative and southern countries, such as Italy and France, the effect of AET tend to be a bit unequal, being more efficient for groups of people at the top of the skill distributions, whereas, in Nordic and liberal countries, such as Sweden and the UK, the differences are less marked across all distributions, suggesting a fairer effect of both types of AET.
    Keywords: Adult Education and Training, Skills, Economics of Education, Cross-National Comparisons, PIAAC
    JEL: I26
    Date: 2016–01–16

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