nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒10‒09
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Are financial retirement incentives more effective if pension knowledge is high? By Giesecke, Matthias; Yang, Guanzhong
  2. Spousal and Survivor Benefits in Option Value Models of Retirement: An Application to Belgium By Jousten, Alain; Lefèbvre, Mathieu
  3. Why demotion of older workers is a no-go area for managers By van Dalen, Harry; Henkens, Kene
  4. Impact of population aging on household savings and portfolio choice in Japan By Iwaisako, Tokuo; Ono, Arito; Saito, Amane; Tokuda, Hidenobu
  5. Does long-term care subsidisation reduce unnecessary hospitalisations? By Joan Costa-Font; César Jiménez-Martínez; Cristina Vilaplana
  6. Public finances and inflation: the case of Spain By Pablo Hernández de Cos; Samuel Hurtado; Francisco Martí; Javier J. Pérez
  7. Thinking of incentivizing care? The effect of demand subsidies on informal caregiving and intergenerational transfers By Joan Costa-Font; Sergi Jiménez-Martín; Cristina Vilaplana Prieto
  8. The Effects of Demographic Change on GDP Growth in OECD Economies By Jinill Kim
  9. The Impact of Intergenerational Transfers on Household Wealth Inequality in Japan and the United States By Yoko Niimi; Charles Yuji Horioka

  1. By: Giesecke, Matthias; Yang, Guanzhong
    Abstract: We elicit preferences for retirement timing in a laboratory experiment. Subjects make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared to those who only know their pension annuity. We conclude that the financial consequences of retirement choices become more salient to the decision maker once being informed on a forward-looking measure of pension benefits.
    Abstract: Wir untersuchen die Wirkung finanzieller Anreize auf das Rentenalter im Rahmen eines Laborexperiments. Die Teilnehmer wählen ein Renteneintrittsalter, wobei sich die Auszahlungsstruktur hinsichtlich des erwarteten Rentenbarwerts als Funktion des Rentenalters unterscheidet. Konsistent mit der quasi-experimentellen Literatur zeigt sich zunächst eine deutliche Verschiebung des Rentenalters, wenn Frühverrentung finanziell relativ weniger attraktiv ist. Allerdings offenbart sich substantielle Heterogenität in der Wirkungsweise des finanziellen Anreizes, wenn die Menge an verfügbarer Information variiert. Teilnehmer, die explizit über den erwarteten Rentenbarwert für ein entsprechendes Rentenalter informiert sind, reagieren deutlich stärker auf finanzielle Anreize als diejenigen, die lediglich die jeweilige Annuität kennen. Das Ergebnis macht deutlich, dass die finanziellen Konsequenzen von Renteneintrittsentscheidungen in relevantem Ausmaß offensichtlicher werden, wenn Entscheidungsträger über den Barwert als vorausschauendes Maß von periodischen Rentenbezügen informiert sind.
    Keywords: retirement age,financial incentives,information treatment,pension knowledge,financial literacy
    JEL: C91 H55 J26
    Date: 2016
  2. By: Jousten, Alain (University of Liège); Lefèbvre, Mathieu (Université de Strasbourg)
    Abstract: We study retirement incentives with augmented option value model à la Stock and Wise (1990). We propose methodological extensions to better reflect the respective incentives faced by singles and couples. Our results show that a more comprehensive modelling of couples' incentives leads to very different patterns of retirement incentives – particularly for women. We apply the new indicators to data from the Survey of Health, Ageing and retirement in Europe (SHARE) in Belgium and find two key results. First, contrary to several previous studies, we obtain a positive signed income effects. Second, we find very different retirement incentives for men and women, with little flexibility in the retirement decision for men and substantially more flexibility for women as a function of financial incentives and household composition.
    Keywords: retirement, social security, dependent benefits
    JEL: H55 J21 J26
    Date: 2016–09
  3. By: van Dalen, Harry (Tilburg University, School of Economics and Management); Henkens, Kene (Tilburg University, School of Economics and Management)
    Abstract: Demotion – the reduction of an employee’s rank and salary – is often mentioned by managers and policy-makers as a means of increasing the employability of older workers in an ageing labour force. However, so far in practice demotion is rarely applied. This paper is the first empirical investigation of how managers perceive demotion as an instrument of human resource management. By means of a survey and a vignette study among managers in the Netherlands (N = 355), we examine whether managers consider demotion of poorly performing older workers a fair solution. Three contributions stand out. First, based on attribution theory we find support for the hypothesis that managers judge demotion to be fair in those cases where deterioration in task performance is caused by controllable factors (such as work motivation) and unfair when the causes are uncontrollable (such as age). Second, the expectations of managers about the organization-wide consequences of introducing demotion as a human resource policy play a significant role in considering demotion. Most managers perceive negative organizational externalities (e.g. decrease in loyalty and motivation of staff) to arise when introducing demotion and are reluctant to apply demotion in practice. And a third contribution: positive (negative) beliefs of managers about the hard skills – e.g. creativity, willingness to learn, flexibility – of older workers make demotion less (respectively more) likely.
    Date: 2016
  4. By: Iwaisako, Tokuo; Ono, Arito; Saito, Amane; Tokuda, Hidenobu
    Abstract: We examine the impact of population aging on Japanese financial markets, particularly whether households have begun to dissave and reduce their asset holdings of risky assets, such as stocks, as a result. Our main finding is that there is currently no significant decline in stock holdings and that this trend will continue in the near future. While there is little doubt that Japanese household savings have decreased of late, we should view the sharp decline observed in the early 2000s as a deviation from the long-run trend associated with a large income shock. The true trend of savings without a negative income shock in the early 2000s would have been declining more smoothly and moderately, so that any abrupt portfolio shift associated with negative shocks to household savings is unlikely. As found in our previous work, the average share of risky assets in Japanese household portfolios increases with age and barely decreases, even for those aged 60 years and over. The decline in household stock holding will be slower than it could have been with comparable aging in other countries. According to our micro data (Nikkei Radar), the main sources of increasing household wealth are the increasing wealth of the elderly and the increasing proportion of the wealthier elderly population over the period 2000–14. Household portfolio shares have slowly moved from bank deposits to stocks; a change mostly explained by the increase in the proportion of elderly households holding stocks. We also closely consider the effect of aging on the Japanese government bond (JGB) market in the new millennium. Household direct holdings of JGBs peaked around 2008–09. However, direct holdings of JGBs are very limited when compared with the total amount outstanding. Consequently, we expect that population aging will not exert a significant effect on the JGB market
    Date: 2016–09
  5. By: Joan Costa-Font; César Jiménez-Martínez; Cristina Vilaplana
    Abstract: The expansion of long-term care (LTC) coverage may improve health system efficiency by reducing hospitalisations (bed-blocking), and pave the way for the implementation of health and social care coordination plans. We draw upon the quasi-experimental evidence from the main expansion of long term care increase subsidisation in Spain in 2007 to examine the causal effect of the expansion of LTC subsidisation and coordination on hospitalisations (both on the internal and external margin) and the hospital length of stay. In addition, we examine the 2012 austerity budget cuts that reduced the subsidy. We find robust evidence of a reduction in hospitalisations and the length of stay after the expansion of LTC subsidisation. However, the reduction in hospitalisations is heterogeneous to the existence of health and social care coordination plans and type of subsidy. Overall, we estimate savings related to hospitalisations of up to 11% of total hospital costs. Consistently, subsidy reduction is found to attenuate bed-blocking gains.
    Keywords: hospitalisation; long-term care reform; Spain; bed-blocking; hurdle Poisson model
    JEL: H53 I18 J14
    Date: 2016–09
  6. By: Pablo Hernández de Cos (Banco de España); Samuel Hurtado (Banco de España); Francisco Martí (Banco de España); Javier J. Pérez (Banco de España)
    Abstract: We empirically explore the influence of inflation on fiscal variables in the short, medium and long run, for the case of the Spanish economy, in particular to draw policy lessons for the design of the ongoing process of rebalancing of fiscal accounts. We focus on this topic through the lenses of: (i) the government budget constraint, to assess the influence of inflation on changes in public debt; (ii) accounting decompositions of nominal revenue and expenditure items into their real and price parts; (iii) a large-scale macroeconometric model that contains a detailed fiscal policy block; and (iv) a long-run accounting model on pension expenditure
    Keywords: inflation, public finances, public debt, fiscal consolidation
    JEL: E31 E62 H6
    Date: 2016–09
  7. By: Joan Costa-Font; Sergi Jiménez-Martín; Cristina Vilaplana Prieto
    Abstract: We still know little about what motivates the informal care arrangements provided in old age. The introduction of demand-side subsidies such as unconditional caregiving allowances (cash benefits designed either to incentivize the provision of informal care, or compensate for the loss of employment of informal caregivers) provide us with an opportunity to gain a further understanding of the matter. In this paper we exploit a quasi-natural experiment to identify the effects of the inception in 2007 (and its reduction in 2012) of a universal caregiving allowance on both the supply of informal care, and subsequent intergenerational transfer flows. We find evidence of a 30% rise in informal caregiving after the subsidy, and an increase (reduction) in downstream (upstream) intergenerational transfers of 29% (and 15%). Estimates were heterogeneous by income and wealth quantiles. Consistently, the effects were attenuated by a subsequent policy intervention; the reduction of the subsidy amidst austerity cuts in 2012.
    Keywords: caregiving, Intergenerational Transfers, difference-in-differences, long-term care, family transfers, exchange motivation, caregiving allowances, demand-side subsidies
    JEL: I18 D14 G22
    Date: 2016–09
  8. By: Jinill Kim
    Abstract: This note has evaluated the effects of demographic changes on economic growth performance of OECD countries and found that demographic changes account for a significant portion of growth slowdown in several of these economies in recent years.
    Date: 2016–09–28
  9. By: Yoko Niimi; Charles Yuji Horioka
    Abstract: To help shed light on the implications of intergenerational transfers for wealth inequality, this paper examines whether or not individuals who receive intergenerational transfers from their parents are more likely to leave bequests to their children than those who do not using data for Japan and the United States. The estimation results show that the receipt of intergenerational transfers from parents and/or parents-in-law increases the likelihood of individuals’ leaving bequests to their own children in both Japan and the United States, which in turn is likely to contribute to the persistence or widening of wealth disparities. However, such a tendency is found to be stronger among less better-off households in both countries, and this may help alleviate the disequalizing effect of intergenerational transfers on the distribution of wealth, at least to some extent.
    Date: 2016–09

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