nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒09‒04
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Social security wealth and household asset holdings: new evidence from Belgium. By Mathieu Lefebvre; Sergio Perelman
  2. Population Aging in India: Facts, Issues, and Options By Agarwal, Arunika; Lubet, Alyssa; Mitgang, Elizabeth; Mohanty, Sanjay; Bloom, David E.
  3. The Effect of Population Aging on Economic Growth, the Labor Force and Productivity By Maestas, Nicole; Mullen, Kathleen J.; Powell, David
  4. The Effects of the Early Retirement Age on Retirement Decisions By Dayanand S. Manoli; Andrea Weber
  5. Demography of Global Aging By Bloom, David E.; Mitgang, Elizabeth; Osher, Benjamin
  6. The Global Demography of Aging: Facts, Explanations, Future By Bloom, David E.; Luca, Dara Lee
  7. Pension reforms in Chile and social security principles, 1981–2015 By Mesa-Lago, Carmelo; Bertranou, Fabio
  8. Development of Labour Market Participation Until 2030 With Respect to Changes in Education Participation and Recent Pension Reforms. Update By Thomas Horvath; Helmut Mahringer
  9. Does Socioeconomic Status Lead People to Retire Too Soon? By Alicia H. Munnell; Anthony Webb; Anqi Chen
  10. Population Decline in Lithuania: Who Lives in Declining Regions and Who Leaves? By Ubarevičienė, Rūta; van Ham, Maarten
  11. Accounting for Low Take-up Rates and High Rejection Rates in the U.S. Long-Term Care Insurance Market By Tatyana Koreshkova; Karen Kopecky; R. Anton Braun
  12. Life-Cycle Consumption Patterns at Older Ages in the US and the UK: Can Medical Expenditures Explain the Difference? By Banks, James; Blundell, Richard William; Levell, Peter; Smith, James P
  13. Assessing the effects of unconventional monetary policy on pension funds risk incentives By Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos

  1. By: Mathieu Lefebvre; Sergio Perelman
    Abstract: It has been long suggested that public pension wealth may crowd out household savings. However, there remains controversy about the extent of this displacement effect. In this paper we use an original microsimulation model based on retrospective survey data collected through the third wave of the Survey of Health, Ageing and Retirement in Europe (SHARE) to estimate the displacement effect of public pension wealth on other wealth in Belgium. Combining this rich dataset with an accurate estimation of the individual pension entitlements allows us to circumvent some of the main measurement errors problems faced by previous studies. We estimate that an extra euro of public pension wealth is associated with about 14-25 cent decline in non-pension wealth.
    Keywords: Social security, saving, microsimulation, crowding-out effect.
    JEL: D91 H55 E21 J14
    Date: 2016
  2. By: Agarwal, Arunika (Harvard School of Public Health); Lubet, Alyssa (Harvard School of Public Health); Mitgang, Elizabeth (Harvard School of Public Health); Mohanty, Sanjay (International Institute for Population Sciences); Bloom, David E. (Harvard University)
    Abstract: India, one of the world's two population superpowers, is undergoing unprecedented demographic changes. Increasing longevity and falling fertility have resulted in a dramatic increase in the population of adults aged 60 and up, in both absolute and relative terms. This change presents wide-ranging and complex health, social, and economic challenges, both current and future, to which this diverse and heterogeneous country must rapidly adapt. This chapter first lays out the context, scope, and magnitude of India's demographic changes. It then details the major challenges these shifts pose in the interconnected areas of health, especially the massive challenges of a growing burden of noncommunicable diseases; gender, particularly the needs and vulnerabilities of an increasingly female older adult population; and income security. This chapter also presents an overview of India's recent and ongoing initiatives to adapt to population aging and provide support to older adults and their families. It concludes with policy recommendations that may serve as a productive next step forward, keeping in mind the need for urgent and timely action on the part of government, private companies, researchers, and general population.
    Keywords: population aging, economic demography, longevity
    JEL: J11 J14 N30
    Date: 2016–08
  3. By: Maestas, Nicole; Mullen, Kathleen J.; Powell, David
    Abstract: Population aging is widely assumed to have detrimental effects on economic growth yet there is little empirical evidence about the magnitude of its effects. This paper starts from the observation that many U.S. states have already experienced substantial growth in the size of their older population and much of this growth was predetermined by historical trends in fertility. We use predicted variation in the rate of population aging across U.S. states over the period 1980-2010 to estimate the economic impact of aging on state output per capita. We find that a 10% increase in the fraction of the population ages 60+ decreases the growth rate of GDP per capita by 5.5%. Two-thirds of the reduction is due to slower growth in the labor productivity of workers across the age distribution, while one-third arises from slower labor force growth. Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.
    Keywords: population aging, GDP growth, demographic transitions
    JEL: J11 J14 J23 J26 O47
    Date: 2016–08
  4. By: Dayanand S. Manoli; Andrea Weber
    Abstract: We present quasi-experimental evidence on the effects of increasing the Early Retirement Age (ERA) on older workers' retirement decisions. The analysis is based on social security reforms in Austria in 2000 and 2004, and administrative data allows us to distinguish between pension claims and job exits. Using a Regression Kink Design, we estimate that, within a birth cohort, a 1.0-year increase in the ERA leads to a 0.4-year increase in the average job exiting age and a 0.5-year increase in the average pension claiming age. When the ERA increases, many older workers remain in their jobs longer.
    JEL: H55 J21 J26
    Date: 2016–08
  5. By: Bloom, David E. (Harvard University); Mitgang, Elizabeth (Harvard School of Public Health); Osher, Benjamin (Harvard School of Public Health)
    Abstract: Individuals aged 65 years and older currently make up a larger share of the population than ever before, and this group is predicted to continue growing both in absolute terms and relative to the rest of the population. This chapter begins by introducing the facts, figures, and forecasts surrounding the aging of populations across different countries at varying levels of development. In light of these trends, we examine challenges facing graying societies through the lenses of health, economics, and policy development. The chapter concludes with a selection of adaptable strategies that countries might consider to mitigate the strain – and to harness the full potential – of aging populations worldwide.
    Keywords: health economics, health policy, noncommunicable diseases (NCDs), population aging, demography
    JEL: J10 J11 J14
    Date: 2016–08
  6. By: Bloom, David E. (Harvard University); Luca, Dara Lee (Mathematica Policy Research)
    Abstract: Population ageing is the 21st century's dominant demographic phenomenon. Declining fertility, increasing longevity, and the progression of large-sized cohorts to the older ages are causing elder shares to rise throughout the world. The phenomenon of population ageing, which is unprecedented in human history, brings with it sweeping changes in population needs and capacities, with potentially significant implications for employment, savings, consumption, economic growth, asset values, and fiscal balance. This chapter provides a broad overview of the global demography of aging. It reviews patterns, trends, and projections involving various indicators of population aging and their demographic antecedents and sequelae. The chapter also reviews theories economists use to explain the behavioral changes driving the most prominent demographic shifts. Finally, it discusses the changing nature of aging, the future of longevity, and associated policy implications, highlighting some key research issues that require further examination.
    Keywords: population aging, economic demography, longevity
    JEL: J11 J14 N30
    Date: 2016–08
  7. By: Mesa-Lago, Carmelo; Bertranou, Fabio
    Abstract: Chile pioneered in Latin America not only the introduction of social security pensions, but the structural reform that privatized them and a process of “re-reform” implementing key improvements. A Presidential Commission in Chile, appointed in 2014 to evaluate reform progress and remaining problems in the pension system, released its report in September 2015. In light of the Commission’s findings, the article assesses Chile’s compliance with International Labour Organization social security guiding principles: social dialogue, universal coverage, equal treatment, social solidarity, gender equity, adequacy of benefits, efficiency and affordable administrative cost, social participation in management, state role and supervision, and financial sustainability. The exercise follows three stages: the structural reform (1981–2008), the re-reform (2008–2015), and the Presidential Commission proposals (2015).
    Keywords: pension scheme, social security reform, ILO Convention, Chile, pensions
    JEL: H55 J18
    Date: 2015–12
  8. By: Thomas Horvath (WIFO); Helmut Mahringer (WIFO)
    Abstract: The Austrian population will continue to grow over the next decades. At the same time the working age population is projected to increase until 2020 before declining again until 2030. In how far this demographic change will translate into changes in the actual labour force will mainly depend on the labour market attachment of the persons involved. This project analyses the development of labour force participation rates, explicitly accounting for changes in the educational structure, long-term trends in participation rates and recent tightening in pension law. These factors substantially affect labour force participation rates. Taking account of new population forecasts, this project works out new projections of labour force participation until 2030.
    Keywords: Arbeitskräfteangebot, Demographie, Bildungsbeteiligung, Pensionsreform
    Date: 2016–08–29
  9. By: Alicia H. Munnell; Anthony Webb; Anqi Chen
    Abstract: Working longer is a powerful lever to enhance retire­ment security. Individuals, on average, are healthier, live longer, and face less physically demanding jobs, so they should be able to extend the number of years worked. But averages are misleading when differ­ences in health, job prospects, and life expectancy have widened between individuals with low and high socioeconomic status (SES). Thus, a single prescrip­tion for all no longer seems appropriate. Rather, it is important to know: 1) how long individuals in differ­ent SES groups have to work to maintain their pre-retirement standard of living; 2) how long they plan to work; and 3) what explains any gap between the two. This brief, based on an earlier paper, uses the Health and Retirement Study (HRS) to document the disparities across SES quartiles both in the ages at which households will meet their retirement income targets and in their planned retirement ages. It then uses regression analysis to determine the extent to which any gap between the target and planned ages is associated with SES, as opposed to demographic/financial characteristics or health, marital, wealth, or employment shocks that occur before the HRS inter­view but too late for the household to adjust its saving (between ages 50-58). The analysis uses education as the SES metric, because educational attainment is de­termined early in life and affects, but is unaffected by, the focus of this research – late-career labor market activity. The discussion proceeds as follows. The first sec­tion calculates how long individuals in various SES categories have to work to maintain their standard of living. The second section discusses their planned retirement ages and determines the extent to which gaps between planned and target retirement ages exist by SES category. The third section uses regres­sion analysis to assess how SES category is related to the gaps, controlling for both demographic/financial characteristics and shocks. The final section con­cludes that households in lower-SES quartiles have larger retirement gaps than their higher-income coun­terparts, even after controlling for other household characteristics and shocks.
    Date: 2016–08
  10. By: Ubarevičienė, Rūta (Lithuanian Social Research Centre); van Ham, Maarten (Delft University of Technology)
    Abstract: Since the 1990s, Lithuania lost almost a quarter of its population, and some regions within the country lost more than 50% of their residents. Such a sharp population decline poses major challenges to politicians, policy makers and planners. This study aims to get more insight into the recent processes of socio-spatial change and the role of selective migration in Lithuania. The main focus is on understanding who lives in those regions which are rapidly losing population, and who is most likely to leave these regions. This is one of the first studies to use individual level Lithuanian census data from 2001 and 2011. We found that low socio-economic status residents and older residents dominate the population of shrinking regions, and unsurprisingly we found that the most "successful" people are the most likely to leave such regions. This process of selective migration reinforces the negative downward spiral of declining regions. As a result, socio-spatial polarisation is growing within the country, where people with higher socio-economic status are increasingly overrepresented in the largest city-regions, while the elderly and residents with a lower socioeconomic status are overrepresented in declining rural regions. This paper provides empirical evidence of selective migration and increasing regional disparities in Lithuania. While the socio-spatial changes are obvious in Lithuania, there is no clear strategy on how to cope with extreme population decline and increasing regional inequalities within the country.
    Keywords: population decline, shrinking regions, internal migration, socio-spatial polarisation, Lithuania
    JEL: R23 O15 J11 P20
    Date: 2016–08
  11. By: Tatyana Koreshkova (Concordia University); Karen Kopecky (Federal Reserve Bank of Atlanta); R. Anton Braun (Federal Reserve Bank of Atlanta)
    Abstract: A protracted stay in a nursing home towards the end of life is one of the biggest risks faced by individuals. The annual cost of a nursing home stay in 2010 was $84,000. At age of 50, the probability of a nursing home stay ranges from 50 to 59 percent and among those who have a stay, 20 percent spend more 3 years. Yet, only about 10 percent of U.S. retirees purchase private long-term-care (LTC) insurance. Previous research has emphasized that Medicaid crowds out the demand for private LTC insurance. However, rejection rates are also high. Nearly 40 percent of the potential pool of purchasers would be rejected if they applied for private LTC insurance using current screening guidelines. We explore the possibility that high rejection rates are due to adverse selection. We propose a model which features agents who have private information about their risk exposure, a private LTC insurer and a government who provides public insurance (Medicaid). Our model accounts for low coverage rates and high rejection rates of private LTC insurance and is used to consider welfare-enhancing reforms of private and public provision of LTC insurance.
    Date: 2016
  12. By: Banks, James; Blundell, Richard William; Levell, Peter; Smith, James P
    Abstract: In this paper we document significantly steeper declines in nondurable expenditures in the UK compared to the US, in spite of income paths being similar. We explore several possible causes, including different employment paths, housing ownership and expenses, levels and paths of health status, number of household members, and out-of-pocket medical expenditures. Among all the potential explanations considered, we find that those to do with healthcare -differences in levels and age paths in medical expenses- can fully account for the steeper declines in nondurable consumption in the UK compared to the US.
    JEL: D10 D11 D12 D14 D91
    Date: 2016–08
  13. By: Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos
    Abstract: US public pension funds deficits remain stubbornly high even though market conditions have improved in the post-crisis period. This article examines the role of lower short- and long-term interest rates imposed by the use of unconventional monetary policy on pension funds risk taking and asset allocation behavior. We quantify the effects of the Zero Lower Bound policy and the launch of unconventional monetary policy measures by using two structural Vector AutoRegression (VAR) models, a Bayesian VAR and a Markov switching-structural VAR. We provide the first comprehensive evidence showing that persistently low interest rates and falling Treasury yields cause a substantial increase in pension funds risk and portfolios beta. Additionally, we document that the severe funding shortfall in many pension schemes is, to a large extent, associated with and prompted by changes in the monetary policy framework.
    Keywords: Pension funds; Unconventional monetary policy; Asset allocation; Zero lower bound
    JEL: E52 G11 G23
    Date: 2015–05

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