nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒10‒30
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The financial consequences of the ’Women & Men 40’ pension scheme concept in pay-as-you-go pension systems By Mihalyi, Peter; Vincze, Laszlo
  2. Long-term care and births timing By Pierre Pestieau; Grégory Ponthière
  3. Does Public Pension Funding Affect Where People Move? By Jean-Pierre Aubry; Caroline V. Crawford
  4. Who suffers during recessions? Economic downturns, job loss, and cardiovascular disease in older Americans By Clemens Noelke; Mauricio Avendano
  5. Longévité différentielle et redistribution : enjeux théoriques et empiriques By Marie-Louise Leroux; Pierre Pestieau; Grégory Ponthière
  6. Retirement and the Marginal Utility of Income By Andrew E. Clark; Yarine Fawaz
  7. The contribution of improved joint survival conditions to living standards: An equivalent consumption approach By Grégory Ponthière
  8. Local Government and Old-Age Support in the New Deal By Daniel K. Fetter
  9. Weak Scale Effects in Overlapping Generations Economy By Bharat Diwakar; Gilad Sorek
  10. Demographics and Tax Competition in Political Economy By MORITA Tadashi; SATO Yasuhiro; YAMAMOTO Kazuhiro
  11. Ageing and Literacy Skills: Evidence from IALS, ALL And PIAAC By Garry Barrett; W. Craig Riddell
  12. Pension Funds and the Principles for Responsible Investment: Multiplying Stakeholder Salience? By Andreas Hoepner; Arleta Majoch
  14. Les disparités sociales de santé perçue au cours de la vie : Le cas de la France (2004-2012) By Bénédicte H. Apouey
  15. Public Transfers and Poverty Reduction: An Evaluation of Program Contribution to the Exit Rate from Poverty to Children and the Elderly By Marisa Bucheli

  1. By: Mihalyi, Peter; Vincze, Laszlo
    Abstract: With the help of five models, this paper analyses pension systems in general and the direct financial effects of the retirement-age-reducing concept mentioned in the title. Th e first part assumes a financially unchanged environment, when earnings are permanent, there is no interest and everyone lives for a predetermined length of time (deterministic models). Taking into consideration actual mortality rates (stochastic model) we give an idealised description of the current pay-as-you-go pension system, which, however, does not significantly diff er from real life. Th e most important consequence of taking mortality into consideration is the life insurance effect. The contribution of individuals who deceased prior to reaching a pensionable age, will increase the sources for the pension of survivors. Every forint the survivors paid themselves is worth 1.5–2 times as much on account of this life-insurance effect. In the second part of the paper incomes are assumed to increase and interest also accounted for. Here we highlight the advantage of funded pension schemes in that for the same amount of pension they require a third to half of the pension insurance contributions of the pay-as-you-go pension system, because half to two-thirds of pension funding comes from the returns on invested payments. Analysis of this reveals the hidden state deficit inherent in the pay-as-you-go pension scheme, and the fact that every active employee pays the interests on it on a monthly basis when paying two to three times more in pension insurance contribution than would be necessary. The third part demonstrates that if both women and men were to retire after 40 years of employment, it would entail pensions cuts of 9–12% for females and males respectively or a general pension cut of 19% for both sexes on average, if the present balance of contributions and pension payments are to be kept in the future.
    Keywords: pension system, early retirement at 40, modelling the pay-as-you-go pension system
    JEL: C88 G22 H55
    Date: 2015
  2. By: Pierre Pestieau (CEPR - Center for Economic Policy Research - CEPR, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics); Grégory Ponthière (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics)
    Abstract: Due to the ageing process, the provision of long-term care (LTC) to the dependent elderly has become a major challenge of our epoch. But at the same time, our societies are characterized, since the 1970s, by a significant postponement of births. This paper aims at examining the impact of those demographic trends on the optimal family policy. We develop a four-period OLG model where individuals, who receive children's informal LTC at the old age, must choose, when being young, how to allocate births along their lifecycle. It is shown that early children provide more LTC to their elderly parents than late children, because of the lower opportunity cost of providing LTC when being retired. In comparison with the social optimum, individuals have, at the laissez-faire, too few children early in their life, and too many later on in their life. The decentralization of the first-best optimum requires thus to subsidize early births. We study also the design of the optimal subsidy on early births in a second-best setting. Its level depends on efficiency and equity issues, as well as on its incidence on the long-run population composition and on LTC provision.
    Keywords: birth timing,childbearing age,family policy,Long term care,OLG models
    Date: 2015–03
  3. By: Jean-Pierre Aubry; Caroline V. Crawford
    Abstract: In prior briefs, the Center has focused on the impact of pensions on state and local finances, including their influence on total budgets, borrowing costs, and the fiscal health of troubled jurisdictions. Overall, this research found that pensions play only a modest role. However, one other way that pensions may impact public finances is through where individuals choose to live. Past research has found that individuals are more likely to move to places with the best “bundle” of amenities and opportunities. Influential factors may include house prices and jobs, as well as government finances, such as taxes and debt. More recently, unfunded pension liabilities have raised concerns about jurisdictions’ ability to manage their finances, as an increasing portion of today’s taxes must be used to cover past shortfalls and future taxes may end up being higher as well. This brief explores the role that unfunded pension liabilities play in migration from state to state. Policymakers care about migration, because it is linked to economic consequences. For example, when many people leave a state, the loss of income tax revenue and consumer spending can hurt the state’s economy. Therefore, understanding the underlying forces that contribute to migration patterns is important. The discussion proceeds as follows. The first section describes broad migration patterns. The second section summarizes the data used for the analysis. The third section explains the methodology for analyzing how state differences in unfunded pension liabilities relate to interstate migration patterns. The fourth section presents the findings. The final section concludes that while economic factors and the distance between locations are the primary drivers of migration, a state’s pension funding also plays a role, albeit small.
    Date: 2016–10
  4. By: Clemens Noelke; Mauricio Avendano
    Abstract: Job loss in the years before retirement has been found to increase risk of cardiovascular disease (CVD), but some studies suggest that CVD mortality among older workers declines during recessions. We hypothesized that recessionary labor market conditions were associated with reduced CVD risk among persons who did not experience job loss and increased CVD risk among persons who lost their jobs. In our analyses, we used longitudinal, nationally representative data from Americans 50 years of age or older who were enrolled in the Health and Retirement Study and surveyed every 2 years from 1992 to 2010 about their employment status and whether they had experienced a stroke or myocardial infarction. To measure local labor market conditions, Health and Retirement Study data were linked to county unemployment rates. Among workers who experienced job loss, recessionary labor market conditions at the time of job loss were associated with a significantly higher CVD risk (hazard ratio = 2.54, 95% confidence interval: 1.39, 4.65). In contrast, among workers who did not experience job loss, recessionary labor market conditions were associated with a lower CVD risk (hazard ratio = 0.50, 95% confidence interval: 0.31, 0.78). These results suggest that recessions might be protective in the absence of job loss but hazardous in the presence of job loss.
    Keywords: business cycles; recession; unemployment; cardiovascular disease
    JEL: R14 J01
    Date: 2015
  5. By: Marie-Louise Leroux (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CIRPEE - Centre interuniversitaire sur le risque, les politiques économiques et l'emploi - Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi); Pierre Pestieau (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CEPR - Center for Economic Policy Research - CEPR, TSE - Toulouse School of Economics - Toulouse School of Economics); Grégory Ponthière (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics, UPE - Université Paris-Est)
    Abstract: Dans cet article, nous étudions l'impact des différences de longévité sur la conception des politiques publiques, en particulier celles liées au départ à la retraite. Nous montrons premièrement qu'alors même que l'espérance de vie a augmenté de manière très importante tout au long du siècle dernier, il subsiste encore de fortes disparités. Deuxièmement, nous étudions d'un point de vue normatif comment les différences de longévité sont généralement prises en compte dans les modèles de cycle de vie et montrons que certaines hypothèses peuvent avoir des implications fortes en terme de redistribution intra-générationnelle. Nous identifions au moins trois arguments en faveur d'une redistribution vers les agents à faible longévité: l'aversion à l'inégalité intertemporelle, l'aversion au risque de mortalité et la compensation pour des caractéristiques dont les agents ne sont pas responsables. Nous étendons ensuite notre analyse de manière à tenir compte du fait que les individus puissent être, en partie, responsables de leur longévité. Finalement, nous lions ces résultats aux débats actuels sur la réforme des systèmes de retraite. Nous montrons qu'en général, parce que les pensions de retraite sont conditionnelles à la survie des bénéficiaires, les systèmes de retraite publics vont redistribuer des ressources des agents dont la durée de vie est courte vers ceux dont la durée de vie est longue. Nous fournissons des pistes de réformes qui viseraient à mieux prendre en compte ces différences de longévité et en particulier, celles relatives à la création d'une "rente longévité" telle que souhaitée par le Comité d'Amours et au développement de l'assurance autonomie, qu'elle soit privée ou publique.
    Keywords: Systèmes de retraite,Mortalité différentielle
    Date: 2014–10
  6. By: Andrew E. Clark (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics); Yarine Fawaz (UAB - Universitat Autònoma de Barcelona [Barcelona])
    Abstract: The individual level of subjective well-being (SWB) has been shown to predict a number of future observable outcomes. Behaviour may however also be affected by the slope of SWB with respect to certain variables. We here use latentclass analysis to model both intercept and slope heterogeneity in the SWB-income relationship, and construct a continuous measure of the marginal utility of income. We show this marginal utility does predict future behaviour: those who value income more (who have a higher income elasticity of well-being) are less likely to retire. This correlation is found conditional on both the level of income and the level of well-being.
    Keywords: Subjective Well-being,Retirement,Marginal Utility of Income,Latent Class Models
    Date: 2015–09
  7. By: Grégory Ponthière (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics)
    Abstract: Individuals care not only about their own survival, but also about the survival of other persons. However, little attention has been paid so far to measuring the contribution of longer coexistence time to living standards. For that purpose, we develop a measure of coexistence time - the joint life expectancy -, which quantifies the average duration of existence for a group of persons. Then, using a lifecycle model with risky lifetime, we construct an equivalent consumption measure incorporating gains in single and joint life expectancies. An empirical application to France (1820-2010) shows that, assuming independent individual mortality risks, the rise in joint life expectancies contributed to improve standards of living significantly. We examine the robustness of that result to the introduction of dependent mortality risks using copulas, and we show that equivalent consumption patterns are robust to introducing risk dependence.
    Keywords: Mortality,Joint survival,Coexistence,Measurement,Standards of living
    Date: 2015–09
  8. By: Daniel K. Fetter
    Abstract: A key question in the design of public assistance to the needy is how allocation of responsibility for funding and decision-making across different levels of government influences the level and type of assistance provided. The New Deal era was a period in which this allocation changed significantly in the United States, as provision of public assistance shifted from local governments to states and the federal government, accompanied by a large increase in government transfer payments. Focusing on assistance to the elderly and using variation in state laws governing the division of funding between local and state governments for the Old Age Assistance (OAA) Program, this paper investigates the responsiveness of OAA payments and recipiency to local government funding shares. Payments per elderly resident were significantly lower in states with higher local funding shares, driven largely by reductions in recipiency. The baseline results suggest that had local governments needed to fund half of OAA payments in 1939, on the lower end of local funding shares prior to the New Deal, the OAA recipiency rate would have been 5 percent rather than 22 percent, and perhaps even lower. More speculative results suggest that greater local funding led to lower representation of blacks among OAA recipients relative to their share of the population, particularly in the South.
    JEL: H75 H77 I38 N32 N42
    Date: 2016–10
  9. By: Bharat Diwakar; Gilad Sorek
    Abstract: We show how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the weak scale effect. We take a textbook R&D-based growth model of infinitely living agents with no life-cycle saving motive and re-analyze it in the Overlapping Generations (OLG) framework, which incorporates both life-cycle and bequest saving motives. We decompose the effect of each saving motive on the sign of the weak scale effect, and show that in the presence of both saving motives it is ambiguous in general, and may also be non-monotonic. Hence, this study contributes to the recent line of research aimed to align modern growth theory with the empirical evidence on the relation between population growth and economic prosperity.
    Keywords: R&D-based Growth, Weak Scale-Effect, Bequests, OLG
    JEL: O31 O40
    Date: 2016–10
  10. By: MORITA Tadashi; SATO Yasuhiro; YAMAMOTO Kazuhiro
    Abstract: We examine the possible impacts of demographics on the outcomes of capital tax competition in political economy. For this purpose, we develop an overlapping generations model wherein public good provision financed by capital tax is determined by majority voting. When a population is growing, younger people represent the majority, whereas when a population is decreasing, older people represent the majority. We show that the race to the bottom is likely to emerge in the economy with growing population whereas the race to the top might emerge in the economy with decreasing population.
    Date: 2016–09
  11. By: Garry Barrett; W. Craig Riddell
    Abstract: This paper examines the relationship between age and literacy using data from the International Adult Literacy Survey (IALS), the Adult Literacy and Life Skills Survey (ALL) and The Survey of Adult Skills, a product of the OECD Programme for the International Assessment of Adult Competencies (PIAAC). A negative partial relationship between literacy and age exists with literacy declining with age, especially after age 45. However, this relationship could reflect some combination of age and birth cohort effects. The analysis shows that in most participating countries the negative literacy-age profile observed in cross-sectional data arises from offsetting ageing and cohort effects. With some exceptions, more recent birth cohorts have lower levels of literacy and individuals from a given birth cohort lose literacy skills after they leave school at a rate greater than indicated by cross-sectional estimates. The results for birth cohort suggest that there is not a general tendency for literacy skills to decline from one generation to the next, but that the majority of the countries examined are doing a poorer job of developing literacy skills in successive generations. Ce document étudie les liens entre l’âge et les compétences à l’écrit, à l’aide de données tirées de l’Enquête internationale sur la littératie des adultes (IALS), de l’Enquête sur la littératie et les compétences des adultes (ALL) et de l’Évaluation des compétences des adultes, lancée dans le cadre du Programme de l’OCDE pour l'évaluation internationale des compétences des adultes (PIAAC). Une corrélation négative partielle entre le niveau à l’écrit et l’âge existe, les compétences dans ce domaine déclinant avec l’âge, surtout après 45 ans, mais cette corrélation pourrait mettre en évidence une combinaison d’effets liés à l’âge et à la cohorte de naissance. L’analyse montre que dans la plupart des pays participants, la corrélation négative observée à partir de données transversales entre les compétences à l’écrit et l’âge est due à des effets de compensation liés au vieillissement et à la cohorte. À certaines exceptions près, les générations plus récentes présentent des niveaux plus faibles à l’écrit et les individus appartenant à une cohorte de naissance donnée perdent leurs compétences à l’écrit après leur scolarité à un rythme plus rapide que ce qu’indiquent les estimations transversales. Les résultats relatifs aux cohortes de naissance semblent indiquer qu’il n’y a pas de déclin général du niveau à l’écrit d’une génération à l’autre, mais que la majorité des pays soumis à l’étude parviennent moins bien à développer les compétences à l’écrit de génération en génération.
    Date: 2016–10–26
  12. By: Andreas Hoepner (Henley Business School, University of Reading); Arleta Majoch (MSCI)
    Abstract: From a simple idea to unite pension funds in their quest for responsible investment at its launch in April 2006, the United Nations supported Principles for Responsible Investment (PRI) have grown in just one decade into an initiative with more than 1,500 fee paying signatories. These signatories consist of asset owners (e.g. pension funds, charities), the asset managers that serve them and service providers to both groups. Jointly, the PRI’s signatories hold over $60 trillion in assets under management, which makes PRI into one of the more prevalent non-for-profit organisations worldwide. This paper undertakes an empirical investigation of the stakeholder relationships PRI and its asset owner signatories during five crucial years of PRI’s emergence: 2007-2011. Guided by stakeholder salience theory, we explore the factors that drive asset owners to subscribe to PRI. Using a variety of public data sources, we overcomes the limitation of self-reported data qualifying the findings of Majoch et al. (2016). We find that for asset owners the most salient factors are utilitarian power, societal and pragmatic legitimacy, management values, and coalition building though the relevance of individual factor is not static but evolves over time with PRI’s emergence.
    Keywords: legitimacy, pension funds, power, principles for responsible investment (PRI), stakeholder salience theory
    Date: 2016–09
  13. By: Nicolas Sirven; Thomas Barnay
    Date: 2016
  14. By: Bénédicte H. Apouey (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))
    Abstract: Introduction. Dans le contexte du vieillissement de la population, il semble important de mieux comprendre comment les inégalités sociales de santé évoluent au cours de la vie. Cet article s’intéresse à la corrélation entre le statut socioéconomique et la santé et au changement de cette corrélation avec l’âge. Matériel-Méthodes. Les données proviennent de l’Enquête sur la Santé et la Protection Sociale entre 2004 et 2012. L’échantillon contient des individus âgés de 20 à 65 ans et compte environ 40000 observations. Le statut socioéconomique est mesuré par le niveau d’éducation et de revenu, tandis que la santé est quantifiée à l’aide de la variable de santé subjective. Les modèles économétriques régressent la santé sur le statut socioéconomique d’une part, et sur un ensemble de termes d’interaction entre le statut socioéconomique et les groupes d’âge d’autre part. Les régressions tiennent compte des caractéristiques démographiques des individus ainsi que de leur cohorte de naissance. Résultats. Le statut socioéconomique est positivement corrélé à l’état de santé. L’association entre revenu et santé commence par se renforcer au début de l’âge adulte, avant d’atteindre un palier, puis de décroître après 55 ans. Discussion-Conclusion. Les inégalités sociales de santé se renforcent, se stabilisent, puis s’affaiblissent à l’âge adulte en France. Ces changements pourraient trouver leur source dans les styles de vie et les conditions de travail.
    Keywords: Inégalités sociales de santé,Santé perçue
    Date: 2015–05
  15. By: Marisa Bucheli (Department of Economics, Universidad de la República in Uruguay)
    Abstract: In Uruguay, social spending reduces poverty. The aim of this paper is to compare its performance for children and the elderly. The main motivation is that in Uruguay, as in the rest of Latin America, poverty affects mostly children, even after the recent period of fall in poverty. The methodological strategy consists on the estimation of the effect of transfers on the poverty exit rate and its decomposition in the coverage effect and the amount effect. The main conclusions are as follows: a) households with children (elder) are the less (more) likely to leave poverty, b) the reason is the per capita amount of the transfer received by each household type and not the coverage, c) the effectiveness of the amount is lower for households with children than with elders because poverty is more intense for the former, d) households in the same poverty conditions are less likely to be lifted out of poverty when they are composed by children than by elders because the conditional transfers directed to children are lower than the assistance pensions for the elders.
    Keywords: poverty, public transfers, social spending, children
    JEL: I32 I38 J13
    Date: 2015

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