nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒10‒16
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Parental age and offspring mortality: negative effects of reproductive aging are outweighed by secular increases in longevity By Kieron Barclay; Mikko Myrskylä
  2. Internet and the elderly in Spain: Time dedicated to search and communications By Molina, Jose Alberto; Campaña, Juan Carlos; Ortega, Raquel
  3. Do Savings Increase in Response to Salient Information about Retirement and Expected Pensions? By Mathias Dolls; Philipp Doerrenberg; Andreas Peichl; Holger Stichnoth
  4. Towards a Lifelong Active Society: Coping with Japan's Changing Population By Atsushi Seike
  5. Will Pensions and OPEBs Break State and Local Budgets? By Alicia H. Munnell; Jean-Pierre Aubry
  6. Teaching, Teachers Pensions and Retirement across Recent Cohorts of College Graduate Women By Maria D. Fitzpatrick
  7. The Impact of Medical Marijuana Laws on the Labor Supply and Health of Older Adults: Evidence from the Health and Retirement Study By Lauren Hersch Nicholas; Johanna Catherine Maclean
  8. An Overview of the Pension/OPEB Landscape By Alicia H. Munnell; Jean-Pierre Aubry
  9. Structural changes in the labor market and the rise of early retirement in Europe By Anna Batyra; David de la Croix; Olivier Pierrard; Henri Sneessens
  10. Differential Mortality and the Progressivity of Social Security By Shantanu Bagchi
  11. Implicit contracts and acquisitions: An econometric case study of the nineteenth century Australian banking industry By Andrew J. Seltzer
  12. Does long-term care subsidisation reduce unnecessary hospitalisations? By Joan Costa-Font; Sergi Jiménez-Martín; Cristina Vilaplana
  13. 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
  14. Social protection systems in Latin America : an assessment By Ocampo, José Antonio.; Gómez-Arteaga, Natalie.

  1. By: Kieron Barclay (Max Planck Institute for Demographic Research, Rostock, Germany); Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: As parental ages at birth continue to rise, concerns about the effects of fertility postponement on offspring are increasing as well. Advanced maternal and paternal ages have been associated with a range of negative health outcomes for offspring, including decreased longevity. The literature, however, has neglected to examine the benefits of being born at a later date. We analyse mortality among 1.9 million Swedish men and women born in 1938-1960, and use a sibling comparison design that accounts for all time invariant factors shared by the siblings. We show that there are no adverse effects of childbearing at advanced maternal ages, and that offspring mortality declines monotonically with advancing paternal age. This positive effect is attributable to the increase in life expectancy over successive birth cohorts, which dominates over individual-level factors that may have negative effects on offspring longevity, such as reproductive ageing.
    Keywords: Sweden, ageing, longevity, mortality, parents, reproduction
    JEL: J1 Z0
    Date: 2016–10
  2. By: Molina, Jose Alberto; Campaña, Juan Carlos; Ortega, Raquel
    Abstract: Internet use reduces the isolation or exclusion of individuals in specific socio-economic groups and, consequently, increases the quality of life, with this being especially the case for the elderly. Knowing that the elderly are becoming particularly active in dedicating time to the Internet, we provide evidence of the time that Spanish individuals aged 65 and older dedicate to two online activities: search and communications. Thus, our work contributes to the central objective of the Digital Agenda for Europa, which sets out to ensure universal broadband coverage across the European Union. We estimate a simultaneous SUR model with data from the 4,036 individuals aged 65 years (inclusive) and older from the Spanish Time Use Survey for 2009-2010. Results indicate that being male has a positive influence on the time devoted to search on the Internet, whereas age has a negative effect. Time devoted to both Internet activities increases with higher levels of education and at the highest level of individual health. By contrast, a greater number of family members has a negative influence on the time spent on search and, more so, on communications. Finally, living in a larger city produces a positive effect on the time dedicated to search.
    Keywords: Elderly, Internet, Time use, SUR model, Digital Agenda for Europa
    JEL: D12 J14 J22
    Date: 2016–10–10
  3. By: Mathias Dolls; Philipp Doerrenberg; Andreas Peichl; Holger Stichnoth
    Abstract: How can retirement savings be increased? We explore a unique policy change in the context of the German pension system to study this question. As of 2004, the German pension authority started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected pension payments. This reform did not change the level of pensions, but only manipulated the knowledge about and salience of expected pension payments. Using German tax return data, we exploit two discontinuities in the age cutoffs of receiving such a letter to study their effects on private retirement savings. Our results show that the letters increase private retirement savings. The effects are fairly sizable and persistent over several years. We further show that the letter increases labor earnings, and that the increase in savings partly crowds out charitable donations. Moreover, we present evidence suggesting that both information and salience drive the savings effect. Our paper adds to a recent literature showing that policies that go beyond the traditional neoclassical reasoning can be powerful to increase savings rates.
    JEL: D14 H24 H55 J26
    Date: 2016–09
  4. By: Atsushi Seike
    Abstract: In order to cope with Japan's globally unprecedented ageing population, it is extremely important to promote the employment of older people. By taking advantage of the strong motivation among Japanese older people to continue working, Japan will be able to establish a lifelong active society in which the will and ability of older people can be fully utilized. In order to promote a lifelong active society we need to revise our public pension scheme so as not to discourage older workers to continue working. The mandatory retirement practice should also be revised along with the seniority based wage system to promote the employment of older workers. The creation of a lifelong active society should substantially reduce the burden on future generations, and in particular the social security burden. If Japan can establish a lifelong active society, it will have valuable implications for other countries facing population ageing.
    Keywords: demographics, economic policy, intergenerational, Japan
  5. By: Alicia H. Munnell; Jean-Pierre Aubry
    Abstract: The costs of state pension plans are much in the news. Generally, people lump together these unfunded liabilities and make alarming claims that all state plans are about to go bankrupt. The evidence, though, suggests otherwise. On the other hand, looking just at pension plans and just at states doesn’t give the full picture of costs facing states and localities. This brief, based on a recent paper, provides a comprehensive accounting of state and local government liabilities for pensions and other post-employment benefits (OPEB) and the fiscal burden that they pose. In accordance with new accounting guidelines, the analysis apportions the relevant liabilities of state-administered cost-sharing plans to local governments for a more accurate picture of where the burden lies. It also includes debt service costs to provide a full picture of government revenue commitments to long-term liabilities. To gauge the level of the burden, pension, OPEB, and debt service costs are compared to each jurisdiction’s own-source revenue. The discussion proceeds as follows. The first section describes the scope of the analysis. The second section explains the methodology used for calculating the costs and choosing the revenue base. The third section presents the results for states, counties, and cities. The final section concludes that the outlook at the state and local level is extremely heterogeneous; a small minority face dire circumstances, but many jurisdictions appear to have their costs under control.
    Date: 2016–10
  6. By: Maria D. Fitzpatrick
    Abstract: Labor force participation rates of college-educated women ages 60 to 64 increased by 20 percent (10 percentage points) between 2000 and 2010. One potential explanation for this change stems from the fact that fewer college-educated women in the more recent cohorts were ever teachers. This occupational shift could affect the length of women’s careers because teaching is a profession where workers are covered by defined benefit pensions and, generally, defined benefit pensions allow workers to retire earlier than Social Security. I provide evidence supporting the hypothesis and show that older college-educated women who worked as teachers do not experience increases in labor force participation as large as their counterparts who never taught.
    JEL: H55 J2
    Date: 2016–09
  7. By: Lauren Hersch Nicholas; Johanna Catherine Maclean
    Abstract: We study the effect of state medical marijuana laws (MMLs) on labor supply and health outcomes among older adults; the demographic group with the highest rates of many chronic conditions for which marijuana may be an effective treatment. Using 1992 - 2012 Health and Retirement Study data to estimate differences-in-differences models, we find that MML implementation leads to increases in labor supply among older adults along with improvement in health for older men and mixed health effects for women. These effects should be considered as policymakers determine how best to regulate access to medical marijuana.
    JEL: I10 I18 J20
    Date: 2016–09
  8. By: Alicia H. Munnell; Jean-Pierre Aubry
    Abstract: It is impossible to discuss municipal finance without considering the cost of pensions and other post-retirement employee benefits (OPEB), largest of which is retiree health insurance. These costs have received enormous press coverage, usually incorporating sweeping generalities about the burden of employee post-retirement benefits for the nation as a whole. Much is made of the bankruptcies in Vallejo, California (2008), Prichard, Alabama (2010), Central Falls, Rhode Island (2011), Stockton, California (2015), and Detroit, Michigan (2015). At the state level, the pension situation in Illinois, New Jersey, and Connecticut is often described as typical. No one mentions Delaware, Florida, Georgia, Tennessee, and North Carolina – states that have done a good job of providing reasonable benefits, paying their required contributions, and accumulating assets. The point is that the picture at the state and local level is extremely heterogeneous, so it is crucial to look at the numbers state by state and locality by locality. This paper provides a comprehensive accounting of pension and OPEB liabilities for state and local governments and the fiscal burden that they pose. The analysis includes plans serving more than 800 entities: 50 states, 178 counties, 173 major cities, and 415 school districts related to the sample of cities and counties. The analysis apportions the liabilities of state-administered cost-sharing plans to participating local governments for a more accurate picture of which governmental entity is actually responsible for funding pension and OPEB liabilities. The cost analysis calculates, separately, pension and OPEB costs as a percentage of own-source revenue for states, cities, and counties. It then combines pension and OPEB costs to obtain the overall burden of these programs. Finally, it adds debt service costs to provide a comprehensive picture of government revenue commitments to long-term liabilities.
    Date: 2016–10
  9. By: Anna Batyra (Bogazici University); David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Olivier Pierrard (Banque centrale du Luxembourg); Henri Sneessens (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Université du Luxembourg, CREA)
    Abstract: The rise of early retirement in Europe is typically attributed to the European system of taxes and transfers. Contrary to a purely neoclassical framework, a model with imperfectly competitive labor market also allows to consider the effect of the bargaining power of labor and matching efficiency on preretirement. We find that lower bargaining power of workers and less efficient labor markets characterized by the declining matching efficiency have been an important determinant of early retirement in France and Germany. These structural changes, combined with early-retirement transfers and population ageing, are also consistent with the joint evolution of employment and unemployment rates, the labor share and the seniority premium.
    Keywords: Overlapping Generations, Search Unemployment, Labor Force Participation, Aging, Labor Market Policy and Institutions
    JEL: E24 H55 J26 J64
    Date: 2016–03–31
  10. By: Shantanu Bagchi (Towson University)
    Abstract: I examine if the positive correlation between wealth and survivorship has any implications for the progressivity of Social Security’s current benefit-earnings rule. Using a general-equilibrium macroeconomic model calibrated to the U.S. economy, I show that the optimal benefit-earnings link for Social Security is largely insensitive to wealth-dependent mortality risk. This is because while a more progressive benefit-earnings rule provides increased insurance for households with relatively unfavorable earnings histories, and therefore lower savings and survivorship, their relatively high mortality risk heavily discounts the utility from old-age consumption. I find that these two effects roughly offset each other, yielding nearly identical optimal benefit-earnings rules both with and without differential mortality.
    Keywords: differential mortality, Social Security, mortality risk, labor income risk, incomplete markets, social insurance; general equilibrium
    JEL: E21 E62 H55
    Date: 2016–09
  11. By: Andrew J. Seltzer
    Abstract: It has been argued that hostile takeovers redistribute wealth from workers to shareholders by enabling the acquiring firm to revoke implicit contracts. This paper uses micro-data from personnel records to examine the consequences of the Union Bank of Australia’s 1892 takeover of the Bank of South Australia. The evidence confirms that the lifetime earnings of older workers at the BSA declined because of the merger. They faced a high probability of losing their jobs immediately following the merger, lost specific human capital due to the closure of branches, faced a flatter salary profile over the remainder of their career, and received a reduced pension.
    Date: 2016–10
  12. By: Joan Costa-Font; Sergi Jiménez-Martín; 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: I18 J14 H53
    Date: 2016–09
  13. 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
  14. By: Ocampo, José Antonio.; Gómez-Arteaga, Natalie.
    Keywords: social protection, social security, poverty alleviation, equal rights, economic development, Latin America
    Date: 2016

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