nep-age New Economics Papers
on Economics of Ageing
Issue of 2016‒11‒27
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Affordable Care Act as Retiree Health Insurance: Implications for Retirement and Social Security Claiming By Alan L. Gustman; Thomas L. Steinmeier; Nahid Tabatabai
  2. THE AGE-OLD PROBLEM OF OLD AGE POVERTY IN PORTUGAL, 2006 – 14 By Carlos Farinha Rodrigues; Isabel Andrade
  3. National Insurance Scheme Reforms in the Caribbean By Koffie Ben Nassar; Joel Chiedu Okwuokei; Mike Li; Timothy Robinson; Saji Thomas
  4. How Does Pension Eligibility Affect Labor Supply in Couples? By Lalive, Rafael; Parrotta, Pierpaolo
  5. Is it Better to Work When We Are Older? An Empirical Comparison Between France and Great Britain By Kadija Charni
  6. Aggregate Fluctuations in a Quantitative Overlapping Generations Economy with Unemployment Risk By Aubhik Khan
  7. Pension fund investments in infrastructure and the global financial regulation By Javier Alonso; Alfonso Arellano; David Tuesta
  8. Pay less, consume more? Estimating the price elasticity of demand for home care services of the disabled elderly By Quitterie Roquebert; Marianne Tenand
  9. New Developments in Social Investing by Public Pensions By Alicia H. Munnell; Anqi Chen
  10. Fading Ricardian Equivalence in Ageing Japan By Ikuo Saito
  11. The Costs and Benefits of Migration into the European Union: Debunking Contemporary Myths with Facts By Asongu, Simplice; Leke, Ivo
  12. On the spread of social protection systems By Peter Egger; Doina Radulescu; Nora Strecker
  13. Age-Specific Adjustment of Graduated Mortality By Yahia Salhi; Pierre-Emmanuel Thérond

  1. By: Alan L. Gustman; Thomas L. Steinmeier; Nahid Tabatabai
    Abstract: Using data from the Health and Retirement Study, we examine the effects of the Affordable Care Act (ACA) on retirement. We first calculate retirements (and in related analyses changes in expected ages of retirement and/or Social Security claiming) between 2010, before ACA, and 2014, after ACA, for those with health insurance at work but not in retirement. This group experienced the sharpest change in retirement incentives from ACA. We then compare retirement measures for those with health insurance at work but not in retirement with retirement measures for two other groups, those who, before ACA, had employer provided health insurance both at work and in retirement, and those who had no health insurance either at work or in retirement. To complete a difference-in-difference analysis, we make the same calculations for members of an older cohort over the same age span. We find no evidence that ACA increases the propensity to retire or changes the retirement expectations of those who, before ACA, had coverage when working but not when retired. An analysis based on a structural retirement model suggests that eventually ACA will increase the probability of retirement by those who initially had health insurance on the job but did not have employer provided retiree health insurance. But the retirement increase is quite small, only about half a percentage point at each year of age. The model also suggests that much of the effect of ACA on retirement will be realized within a few years of the change in the law.
    JEL: D91 E21 H55 I13 J14 J18 J26 J32
    Date: 2016–11
  2. By: Carlos Farinha Rodrigues; Isabel Andrade
    Abstract: The elderly poverty rate has decreased significantly in Portugal in recent years with rising elderly incomes and inequality and material deprivation levels converging to national levels. There is also growing evidence of heterogeneity amongst the elderly poor, with marked differences between the higher average incomes of the younger elderly generations versus the older ones. For example, the poverty rate of the elderly aged 75+ and living alone was equal to 27% in 2014, identifying this group as one of great economic and social vulnerability. These results are even more significant when the ageing of the population is taken into account: the ageing index rose from 45% in 1980 to over 90% in late 1990s and 141.3% in 2014, implying that the decreasing elderly poverty has an increasing effect on the national poverty levels. The aim of this paper in to investigate whether the austerity policies implemented in the post-2010 period had a strong impact on the monetary resources and what was their effect on the elderly using the most recent available EU-SILC data. It concludes that the decrease in the ‘official’ elderly poverty indicators in 2009-14 is connected with the drop in the poverty threshold caused by the decrease in the average median income of the whole population, and that if its effect is removed from the analysis through the usage of the anchored poverty line, the elderly poverty indicators actually increased, rather than decreased, during the economic crisis. Key Words : Social Policy, Income Distribution, Inequality, Poverty Alleviation, Demographic Economics, Portugal
    JEL: D63 I32 I38 J1
    Date: 2016–11
  3. By: Koffie Ben Nassar; Joel Chiedu Okwuokei; Mike Li; Timothy Robinson; Saji Thomas
    Abstract: Weighed down by population aging, slow economic growth, and high unemployment, National Insurance Schemes in the Caribbean are projected to run substantial deficits and deplete their assets in the next decades, raising the prospects of government intervention. With the region highly indebted, this paper quantifies the impact of three parametric reforms—freezing pension benefits for two years, raising the retirement age and increasing the contribution rate by one percentage point—that, if implemented, would put the pension schemes on a stronger financial footing. While the appropriate combination of reforms necessary to eliminate the actuarial deficits varies depending on each country’s circumstances, most countries need to undertake reforms now or risk even higher taxes, lower growth and unsustainable debt dynamics.
    Keywords: Insurance;Caribbean;Old age pensions;Aging;Retirement;Social security;Pension reforms;Social Security, Old Age Pensions, Public Debt, Contingent Liabilities
    Date: 2016–10–17
  4. By: Lalive, Rafael (University of Lausanne); Parrotta, Pierpaolo (ICN Business School)
    Abstract: Many OECD countries are reforming their pension systems. We investigate how pension eligibility affects labor supply in couples. Inspired by a theoretical framework, we measure how the sharp change in the pension eligibility of both partners affects labor force participation. We find that both partners leave the labor force as they become eligible for a pension. The effect of their own pension eligibility is 12 percentage points for women and 28 percentage points for men. Women also reduce their labor force participation by 2 to 3 percentage points as their partner reaches pension eligibility. For men, the effect of their partner's eligibility is smaller and not significantly different from zero. For women and men with low education, the effect of their own eligibility is strong. Regardless of education level, the partner eligibility effect is strong in homogamous couples. Studying joint labor supply, we find that pension eligibility reduces labor supply in couples by 44 percentage points, approximately 4 percentage points more than in a model that ignores partner eligibility effects.
    Keywords: couple labor supply, pension eligibility, full retirement age, household decisions
    JEL: J26 J14 C40 D10
    Date: 2016–11
  5. By: Kadija Charni (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: Classical literature uses the cross-sectional age-earnings profile to describe how the earnings evolve over the life cycle. Using a cohort analysis, I argue that this interpretation of age-earnings profile is not correct. I show that the cohort effects largely explain the decline observed at older ages. I illustrate this point by using a rotating panel data from France and a British longitudinal panel dataset for the period 1991 to 2007. I find no clear evidence that the earnings decline at older age, although the profiles are different between countries. Earnings for French workers rise linearly with age, with a further increase at the end of career, while it becomes flat for older workers in Great Britain. Overlapping cohorts provide an explanation of the observed decline of earnings for older workers in cross-sectional data. This suggests that cross-section age-earnings profile fails to represent the individual age-earnings profile.
    Keywords: age-earnings profile, older workers, cohort analysis
    JEL: J3 J14 J24
    Date: 2016–10
  6. By: Aubhik Khan (Ohio State University)
    Abstract: We explore business cycles in a quantitative overlapping generations economy where households face both unemployment risk and, conditional on employment, income risk. In this environment, we examine the effect of aggregate shocks on the distribution of consumption, income and wealth across households and how this distribution shapes the aggregate response to these shocks. While TFP fell relatively little, in the recent US recession, there was a large fall in hours worked. Consistency with these observations, in the model, requires a substantial and persistent increase in unemployment risk that disproportionately affects younger working households. Conversely, explaining the reduction in aggregate consumption implies a financial shock to households' net return on assets. This drives a non-monotonic welfare cost of the recession, over generations, varying by the share of income derived from capital and labour. Overall, young workers, and older workers near retirement, suffer the most from the increase in unemployment and the fall in the return on wealth, respectively. Inequality in wealth also shapes the aggregate response of the economy. Aggregate investment falls by more when households face little income risk, holds less precautionary savings, and are more responsive to changes in real interest rates.
    Date: 2016
  7. By: Javier Alonso; Alfonso Arellano; David Tuesta
    Abstract: One common denominator observed in global financial regulation is the tendency to allow pension funds to invest more in infrastructure. Considering this, our study analyses what regulatory changes are currently taking place from a global perspective and what are the relevant factors that impacts on pension fund’s decisions to invest in infrastructure.
    Keywords: Financial Inclusion , Global , Pension , Working Paper
    JEL: G23 G28 H54 C38 C24
    Date: 2016–11
  8. By: Quitterie Roquebert (UP1 - Université Paris 1, Panthéon-Sorbonne - Université Paris I - Panthéon-Sorbonne - Pres Hesam); Marianne Tenand (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))
    Abstract: Although the consumption of home care is increasing with population ageing, little is known about its price sensitivity. This paper estimates the price elasticity of the demand for home care of the disabled elderly, using the French home care subsidy program ("APA"). We use an original dataset collected from a French District Council with administrative records of APA out-of-pocket payments and home care consumption. Identification primarily relies on inter-individual variations in producer prices. We use the unequal spatial distribution of producers to address the potential price endogeneity arising from non-random selection into a producer. Our results point to a price elasticity around -0.4: a 10% increase in the out-of-pocket price is predicted to lower consumption by 4%, or 37 minutes per month for the median consumer. Copayment rates thus matter for allocative and dynamic efficiencies, while the generosity of home care subsidies also entails redistributive effects.
    Keywords: Long-term Care,Price elasticity,Public policies,Disabled elderly,Censored regression,Dépendance chez la personne âgée,Elasticité-prix,Politiques publiques,Régression censurée
    Date: 2016–08
  9. By: Alicia H. Munnell; Anqi Chen
    Abstract: Social investing is the pursuit of environmental, social, and governance (ESG) goals through investment decisions. Public pension funds have been active in this arena since the 1970s, when many divested from apartheid South Africa. They have also aimed to achieve domestic goals, such as promoting union workers, economic development, and homeownership. In the mid-2000s, the focus shifted to preventing terrorism and gun violence. This effort included “terror-free” investing in response to the Darfur genocide and to weapons proliferation in Iran. And, after mass shootings in Aurora, CO, and Newtown, CT, some public funds shed their holdings in gun manufacturers. Most recently, states have renewed the call to divest from Iran and have increasingly targeted fossil fuels to combat climate change. This brief provides an update of social investing developments and assesses whether, in this changing environment, public funds should engage in this practice. This assessment addresses two questions: 1) can ESG-screened portfolios meet the same return/ risk objectives as non-screened portfolios; and 2) are public plans the right vehicle for advancing ESG goals? The discussion proceeds as follows. The first section explores trends in social investing and the U.S. Department of Labor’s guidance on this activity. The second section examines recent state divestment efforts. The third section analyzes the economics of social investing. The fourth section outlines the economic, political, and legal complications. The final section concludes that although social investing may be worthwhile for private investors, lower returns and fiduciary concerns make public pension funds unsuited for advancing ESG goals.
    Date: 2016–11
  10. By: Ikuo Saito
    Abstract: Japan seems to be turning less Ricardian, a trend set to continue. First, the discount wedge seems to have risen, suggesting that consumers have become more myopic. Second, some evidence points to the possibility that an increasing number of households are liquidity constrained. If these developments continue, the impact of fiscal policy on the economy will gradually rise. While this will facilitate using fiscal policy to manage the economic cycle, it also calls for starting fiscal consolidation soon and in a gradual and steady manner, given the unsustainable public debt and the likely increasing challenges in funding the government's rising debt domestically.
    Keywords: Aging;Japan;Population;Household consumption;Private savings;Liquidity;Public debt;Fiscal policy;Fiscal consolidation;Fiscal stimulus and multipliers;Japan, ageing, Ricardian equivalence, myopia, liquidity constraints, multipliers, fiscal policy, public debt.
    Date: 2016–09–27
  11. By: Asongu, Simplice; Leke, Ivo
    Abstract: The purpose of this study is to dispel some myths associated with migrants in order to improve socio-economic appraisal of the consequences of the recent surge of migrants into Europe. We argue that: (i) the concern about loss of Christian cultural values is lacking in substance because compared to a relatively near historical epoch or era, very few European citizens do go to Church in contemporary Europe; (ii) the threat to European liberal institutions is falsifiable and statistically fragile because it is not substantiated with significant evidence; (iii) the insignificant proportion of the Moslem population that is aligned with Islamic fundamentalism invalidates the hypothesis on importation of radical Islamic fundamentalism and (iv) the concern about social security burden is relevant only in the short-term because of Europe’s ageing population.
    Keywords: Migration; the European Union; Development
    JEL: F20 J61 J83 K31 O15
    Date: 2016–11
  12. By: Peter Egger; Doina Radulescu; Nora Strecker
    Abstract: This paper undertakes an empirical analysis of the adoption of various components of social security systems as well as contribution rates. Apart from economic determinants of the adoption, the empirical analysis features determinants relating to countries’ political systems and contagion. We analyse to which extent a country’s integration into the international network of economic and political cooperation, the similarity of political systems, and economic interdependence facilitate the adoption of social security system components between economies. We study the heterogeneous responses of high and middle to low income economies to country-specific as well as foreign countries’ fundamentals.
    Keywords: social security systems, taxation, international comparisons, panel data analysis, principal component analysis
  13. By: Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1); Pierre-Emmanuel Thérond (Galea & Associés, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: Recently, there has been an increasing interest of life insurers to assess their portfolios own mortality risk. The new European prudential regulation, namely Solvency II, emphasized the need to use mortality and life tables that best capture and reflect the experienced mortality, and thus policyholders' proper risk profile, in order to adequately quantify the underlying risk. Therefore, building a mortality table based on the experience from the portfolio is highly recommended and, for this purpose, various approaches have been introduced in the literature. Although, such approaches succeed in capturing the main feature, it remains difficult to assess the mortality when the underlying portfolio lacks of sufficient exposure. In this paper, we propose to graduate the mortality curve using an adaptive procedure based on the local likelihood, which has the ability to model the mortality patterns even in presence of complex structures and avoid to rely on experts opinion. However, such a technique fails at proposing a consistent yet regular structure when for portfolios with limited deaths. Although the technique borrows the information from the adjacent ages, it is sometimes not sufficient to produce a robust life tables. In presence of such a bias, we propose to adjust the corresponding curve, at the age level, based on a credibility approach. This consists on reviewing, as new observations arrive, the assumption on the mortality curve. We derive the updating procedure and investigate the benefits of using the latter instead of a sole graduation based on real datasets. Moreover, we look at the divergences in the mortality forecasts generated by the classical credibility approaches including Hardy-Panjer, the Poisson-Gamma model and Makeham framework on portfolios originating from various French insurance companies.
    Keywords: Smoothing,Graduation,Life Insurance,Credibility,Mortality,Local Likelihood,Prediction
    Date: 2016–10–20

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