nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒01‒22
eighteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Spanish public pension system: current situation, challenges and reform alternatives By Pablo Hernández de Cos; Juan Francisco Jimeno; Roberto Ramos
  2. Public pensions and unmet medical need among older people: cross-national analysis of 16 European countries, 2004–2010 By Aaron Reeves; Martin McKee; Johan P. Mackenbach; Margaret Whitehead; David Stuckler
  3. Hyperbolic discounting can be good for your health By Strulik, Holger; Trimborn, Timo
  4. The potential costs of Longevity Risk on Public Pensions. Evidence from Italian data By Benedetta Frassi; Fabio Pammolli; Luca Regis
  5. Cognitive Aging and the Capacity to Manage Money By Anek Belbase; Geoffrey T. Sanzenbacher
  6. Cohort Changes in Social Security Benefits and Pension Wealth By Chichun Fang; Charles Brown; David Weir
  7. Optimal social security claiming behavior under lump sum incentives: Theory and evidence By Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana
  8. Retirement Behavior in the U.S. and Europe By Jochem de Bresser; Raquel Fonseca; Pierre-Carl Michaud
  9. Retirement and Cognitive Functioning: International Evidence By Raquel Fonseca; Arie Kapteyn; Gema Zamarro
  10. The efficiency of Italian pension funds: costs, membership, assets By Di Gialleonardo, Luca; Mare, Mauro
  11. Do State Laws Protecting Older Workers from Discrimination Reduce Age Discrimination in Hiring? Experimental (and Nonexperimental) Evidence By David Neumark; Ian Burn; Patrick Button; Nanneh Chehras
  12. Inequalities in longevity by education in OECD countries: Insights from new OECD estimates By Fabrice Murtin; Johan Mackenbach; Domantas Jasilionis; Marco Mira d’Ercole
  13. Job retention among older workers in Central and Eastern Europe By Piotr Lewandowski; Wojciech Hardy; Aneta Kielczewska
  14. The Costs and Benefits of Migration into the European Union: Debunking Contemporary Myths with Facts By Ivo J. Leke; Simplice Asongu
  15. The impact of financial crisis on savings decisions: evidences from Italian pension funds By Di Gialleonardo, Luca; Marè, Mauro; Motroni, Antonello; Porcelli, Francesco
  16. Dynamic Changes in Determinants of Inequalities in Health in Europe with Focus on Retired - with Particular Regard to Retired Danes By Christiansen, Terkel; Lauridsen, Jørgen T.
  17. Measuring the Effect of the Polygenic Risk Score on the Aging Rate By Effraimidis, Georgios; Levine, Morgan; Crimmins, Eileen
  18. Is there additional value attached to health gains at the end-of-life? A re-visit By Gyrd-Hansen, Dorte

  1. By: Pablo Hernández de Cos (Banco de España); Juan Francisco Jimeno (Banco de España); Roberto Ramos (Banco de España)
    Abstract: The Spanish Social Security System’s deficit rose to 1.5% of GDP in 2015, in contrast to a pre-crisis surplus of 2.2% of GDP in 2007. This deterioration is primarily due to an increase in contributory pension spending (as a % of GDP), as a result of the rise in the dependency ratio, the increase in the pension replacement rate and the decline in the employment rate. Beyond this short-term situation, the Spanish public pension system, as is the case in other developed countries, faces major challenges arising from expectations of significant longevity gains and the attendant growth of the retirement-age population. In this context, this paper aims to contribute to the debate on the situation of the pension system through an analysis of its recent evolution, forward-looking projections that include the impact of the latest reforms and the challenges outstanding.
    Keywords: pension systems, pension reforms, population ageing
    JEL: H55
    Date: 2017–01
  2. By: Aaron Reeves; Martin McKee; Johan P. Mackenbach; Margaret Whitehead; David Stuckler
    Abstract: Background Since the onset of the Great Recession in Europe, unmet need for medical care has been increasing, especially in persons aged 65 or older. It is possible that public pensions buffer access to healthcare in older persons during times of economic crisis, but to our knowledge, this has not been tested empirically in Europe. Methods We integrated panel data on 16 European countries for years 2004–2010 with indicators of public pension, unemployment insurance and sickness insurance entitlement from the Comparative Welfare Entitlements Dataset and unmet need (due to cost) prevalence rates from EuroStat 2014 edition. Using country-level fixed-effects regression models, we evaluate whether greater public pension entitlement, which helps reduce old-age poverty, reduces the prevalence of unmet medical need in older persons and whether it reduces inequalities in unmet medical need across the income distribution. Results We found that each 1-unit increase in public pension entitlement is associated with a 1.11 percentage-point decline in unmet medical need due to cost among over 65s (95% CI −0.55 to −1.66). This association is strongest for the lowest income quintile (1.65 percentage points, 95% CI −1.19 to −2.10). Importantly, we found consistent evidence that out-of-pocket payments were linked with greater unmet needs, but that this association was mitigated by greater public pension entitlement (β=−1.21 percentage points, 95% CI −0.37 to −2.06). Conclusions Greater public pension entitlement plays a crucial role in reducing inequalities in unmet medical need among older persons, especially in healthcare systems which rely heavily on out-of-pocket payments.
    JEL: N0
    Date: 2016–12–13
  3. By: Strulik, Holger; Trimborn, Timo
    Abstract: It has been argued that hyperbolic discounting of future gains and losses leads to time-inconsistent behavior and thereby, in the context of health economics, not enough investment in health and too much indulgence of unhealthy consumption. Here, we challenge this view. We set up a life-cycle model of human aging and longevity in which individuals discount the future hyperbolically and make time-consistent decisions. This allows us to disentangle the role of discounting from the time consistency issue. We show that hyperbolically discounting individuals, under a reasonable normalization, invest more in their health than they would if they had a constant rate of time preference. Using a calibrated life-cycle model of human aging, we predict that the average U.S. American lives about 4 years longer with hyperbolic discounting than he would if he had applied a constant discount rate. The reason is that, under hyperbolic discounting, experiences in old age receive a relatively high weight in life time utility. In an extension we show that the introduction of health-dependent survival probability motivates an increasing discount rate for the elderly and, in the aggregate, a u-shaped pattern of the discount rate with respect to age.
    Keywords: discount rates,present bias,health behavior,aging,longevity
    JEL: D03 D11 D91 I10 I12
    Date: 2016
  4. By: Benedetta Frassi (IMT School for advanced studies); Fabio Pammolli (Politecnico di Milano, Dipartimento di ingegneria gestionale); Luca Regis (University of Siena, Department of economics and statistics)
    Abstract: In this article, we assess, through an empirical investigation based on Italian data, how uncertainty regarding future mortality may affect public pension expenditure. Based on a representative sample of Italian pensioners from 1985 to 2011, we find a consistent underestimation of improvements seen in mortality and life expectancy when forecasts are based on expectations. The pension expenditure estimated using realized mortality rates is shown to be consistently higher than that obtained by using average forecasted scenarios, produced with well-known stochastic mortality models. The paper highlights the importance of considering the uncertainty regarding future pension benfits, i.e. of evaluating and managing the longevity risk in public pension plans.
    Keywords: longevity risk, mortality model, pension, retirement
    JEL: C15 C32 J11 J26
    Date: 2017–01
  5. By: Anek Belbase; Geoffrey T. Sanzenbacher
    Abstract: While Americans often worry about not having enough money in retirement, they seldom worry about their capacity to manage that money.1 At first glance, this lack of concern appears justified because many financial activities are so routine – like paying the monthly bills on time. Such activities draw on “crystallized” intelligence, which is accumulated knowledge that increases with age. But normal cognitive aging can lead to financial mistakes because people lose much of their “fluid” intelligence – the capacity to process new information – by the time they reach their 70s or 80s. And a minority develop a cognitive impairment that severely erodes financial capacity. This brief, the third in a series of three, reviews the literature to assess how cognitive aging affects the capacity to manage money during ages 70-90. The first brief provided a primer on cognitive aging, and the second brief assessed its effects on the ability to work during ages 50-70. The discussion proceeds as follows. The first section explains how cognitive aging could potentially affect the ability to manage personal finances. The second section examines the impact of normal cognitive aging on financial capacity. The third section explores the effects of cognitive impairment on financial capacity. The final section concludes that: 1) most people who experience normal cognitive aging can continue managing their money in their 70s and 80s, but some, especially financial novices who take over money management after the death of a spouse, will need help; 2) most people with a cognitive impairment will need help managing their money to prevent fraud or abuse; and 3) providing this assistance effectively will require overcoming several obstacles.
    Date: 2017–01
  6. By: Chichun Fang (University of Michigan); Charles Brown (University of Michigan); David Weir (University of Michigan)
    Abstract: We utilize three sets of data resources—the Health and Retirement Study (HRS), linked Social Security earnings records of the HRS respondents, and publicly available pension plan descriptions—to study pension wealth accumulations among the recent HRS cohorts. We document the trends in pension wealth over time and across cohorts during a period in which the economic consequences of the Great Recession were significant. However, given that pension wealth of many respondents were imputed in earlier waves due to the lack of information about pension plan provisions, there is the question of how much of the changes in pension wealth should be attributed to errors in imputation. The recently available pension plan descriptions from private employers’ Form 5500 filings and public employers’ websites, which improve the respondent-plan linkage over what was available in previous waves, allow us to examine this exact question. In particular, we show that the newly available sets of information not only reduce the need for imputation, but also enable us to identify the plans not reported by HRS respondents in the survey and the retirement wealth associated with these plans. Finally, we also test the validity of the earnings projection methods used to produce Social Security and pension wealth estimates in the HRS, and we end our report with a discussion over the pros and cons among the projection methods.
    Date: 2016–09
  7. By: Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana
    Abstract: People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.
    Keywords: annuity,delayed retirement,lifetime income,pension,early retirement,social security
    JEL: G11 G22 H55 J26 J32
    Date: 2017
  8. By: Jochem de Bresser; Raquel Fonseca; Pierre-Carl Michaud
    Abstract: We develop a retirement model featuring various labor market exit routes: unemployment, disability, private and public pensions. The model allows for saving and uncertainty along several dimensions, including health and mortality. Individuals’ preferences are estimated on data from the U.S. and Europe using institutional variation across countries. We analyze the roles of preferences and institutions in explaining international heterogeneity in retirement behavior. Preliminary estimates suggest that a single set of preferences for individuals from the U.S., the Netherlands and Spain does not fit the data well. Were Europeans to have the same preferences as Americans, they would save less than they actually do. Furthermore, the Dutch and Spanish would work more hours than is observed in the data.
    Keywords: Retirement; saving; institutions; structural estimation
    JEL: D91 J14 J26 H31
    Date: 2016
  9. By: Raquel Fonseca; Arie Kapteyn; Gema Zamarro
    Abstract: We survey the recent literature on the effects of retirement on cognitive functioning at older ages around the world. We describe results from studies using similar data, definitions and methods to capture causal effects. The studies yield widely varying results. Most papers find that being retired leads to a decline of cognition. However, the size and significance of the estimated effects vary dramatically depending on methods. We replicate several of these results using the same data sets. We discuss the factors that are likely causing the differences observed, and find that results are sensitive to the inclusion of “country effects”, suggesting a key role for unobserved differences across countries that affect both retirement ages and cognitive decline.
    Keywords: cognition, retirement, aging, country fixed effects
    JEL: C26 I14 J14 J26
    Date: 2016
  10. By: Di Gialleonardo, Luca; Mare, Mauro
    Abstract: The scope of the supplementary pension funds is to provide workers with a satisfactory standard of living at retirement. An efficient and affordable system of pension funds is therefore an important factor to realize the workers’ aims of maximizing the value of their pension wealth. A rationalization of the industry structure, leading to the creation of bigger pension funds, that should be better able to take advantage of economies of scale, might contain the costs sustained by participants. In this paper, and for the first time (to the best of our knowledge), we attempt to carry out an econometric study of the principal factors which determine the costs level and the efficiency of Italian pension funds. Based on an original dataset of Italian closed pension funds in the 2007-2013 period, this work runs a panel estimate of the impact of dimension (the number of participants) on administrative costs. Our results highlight the existence of important overall economies of scale and that in those funds characterized by the outsourcing of some activities, the administrative costs result smaller. We adopt the same dataset also for the open pension funds, in order to evaluate the link between financial costs and the sum of resources under management. The estimates do not confirm the existence of particular economies of scale, probably due to the distinctive traits of the complementary pension funds industry in Italy. The commission fees of the financial management of pension funds, in particular of closed type, are much lower than those relative to other financial services and also to other types of foreign pension funds. This situation, fuelled by competition among financial managers, has gone on for some time, thus further limiting the ways in which savings can be made through an increase in the volume of the assets managed.
    Keywords: social security, pension funds, efficiency
    JEL: G23 H55
    Date: 2016–06
  11. By: David Neumark (University of California-Irvine); Ian Burn (University of California-Irvine); Patrick Button (Tulane University); Nanneh Chehras (University of California-Irvine)
    Abstract: We provide evidence from a field experiment — a correspondence study — on age discrimination in hiring for retail sales jobs. We collect experimental data in all 50 states and then relate measured age discrimination — the difference in callback rates between old and young applicants — to variation across states in antidiscrimination laws offering protections to older workers that are stronger than the federal age and disability discrimination laws. We do a similar analysis for nonexperimental data on differences across states in hiring rates of older versus younger workers. The experimental evidence points consistently to evidence of hiring discrimination against older men and more so against older women. However, the evidence on the relationship between hiring discrimination against older workers and state variation in age and disability discrimination laws is not so clear; at a minimum, there is not a compelling case that stronger state protections reduce hiring discrimination against older workers. In contrast, the nonexperimental evidence suggests that stronger disability discrimination protections increase the relative hiring of older workers.
    Date: 2016–09
  12. By: Fabrice Murtin; Johan Mackenbach (Erasmus University Rotterdam); Domantas Jasilionis; Marco Mira d’Ercole
    Abstract: This paper assesses inequality in longevity across education and gender groups in 23 OECD countries around 2011. Data on mortality rates by age, gender, educationals attainment and for, 17 countries, cause of death, were collected from national sources, with similar treatment applied to all countries in order to derive comparable measures of longevity at age 25 and 65 by gender and education. These estimates show that, on average, the gap in life expectancy between high and low-educationed people is 8 years for men and 5 years for women at age 25 years, and 3.5 years for men and 2.5 years for women at age 65. Other measures of inequalities in longevity by education (such as country averages of age-standardised mortality rates and the slope index of inequality) do not significantly change the inequality ranking of countries relative to one based on life expectancy measures. While significant, differences in longevity between groups with low and high educational attainment account, on average, for around 10% of overall differences in ages of death. Cardio-vascular diseases are the first cause of death for all gender and education groups after age 65 years, and the first cause of mortality inequality between the high and low-education elderly. Ce document estime les inégalités de longévité par genre et niveaux d’éducation pour 23 pays de l’OCDE aux alentours de 2011. Des données de taux de mortalité par âge, sexe, éducation et, pour 17 pays, par cause de mortalité, ont été collectées à partir de sources statistiques nationales. Un traitement identique a été appliqué à toutes ces données afin d'obtenir des mesures comparables de longévité à 25 et 65 ans par sexe et niveau d’éducation. Ces estimations montrent que, en moyenne, les différences d’espérance de vie à 25 ans entre les personnes à haut et faible niveaux d’éducation sont de 8 ans pour les hommes et de 5 ans pour les femmes, alors que ces différences sont de 3.5 ans pour les hommes et de 2.5 ans pour les femmes à l’âge de 65 ans. D'autres mesures d’inégalité de longévité par niveau d’éducation (tels que les taux moyens de mortalité standardisés ou les indices de pente d’inégalité) fournissent globalement le même classement de pays en termes d’inégalité, par rapport aux indices basés sur l’espérance de vie. Toutefois les différences de longévité entre haut et faible niveaux d’éducation expliquent seulement 10% des differences d’âge à la mort parmi les personnes. Les maladies cardio-vasculaires sont la première cause de mortalité pour tous les groupes d’éducation et de genre après 65 ans, et la première cause d’inégalité de mortalité entre les seniors à haut et faible niveaux d’éducation.
    Keywords: cause of death, health, inequality, life expectancy, longevity, mortality, socioeconomic gradient
    JEL: I14 I18
    Date: 2017–01–14
  13. By: Piotr Lewandowski; Wojciech Hardy; Aneta Kielczewska
    Abstract: We study job retention among older workers in Czechia, Hungary, Poland, and Slovakia, using EU-LFS data for the 1998-2013 period. We find that, on average, about 30% of workers aged 55-59 were in the same job over five years. Job retention rates were higher among men than among women. Between 2003 and 2013, retention rates increased for both men and women in Poland and for men in Czechia, fluctuated for both men and women in Slovakia, and decreased noticeably for both men and women in Hungary. We estimate bivariate probit models of job retention and non-retirement among 60-64-year-olds. Workers with tertiary education, in high-skilled jobs, in the education and health sectors, and who were living with a working partner were more likely to remain in their job over a five-year period. Changes in retention rates over time were driven more by changes in overall conditions than by changes in job-related and personal characteristics.
    Keywords: job retention, retirement, transition to retirement, pension system, bivariate probit
    JEL: J21 J26 J63
    Date: 2016–12
  14. By: Ivo J. Leke (Heverlee, Belgium); Simplice Asongu (Yaoundé, Cameroon)
    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
  15. By: Di Gialleonardo, Luca; Marè, Mauro; Motroni, Antonello; Porcelli, Francesco
    Abstract: This paper provides an empirical analysis of the impact of the financial crisis on households’ saving decisions in private pension schemes. We base our study on an original dataset made up of three sample surveys collected in 2008, in 2012 and in 2015 by Mefop. Each survey has been conducted interviewing by phone more than 10000 people in order to construct a representative sample of roughly 1000 individual for each survey, which includes both members and not members of Italian pension funds. Each wave allows us to map saving decisions and personal characteristics (income, type of occupation, political orientation, financial literacy, etc.) in two distinct moment: before the crisis and after the crisis. Therefore we can identify the impact of the financial turmoil simply introducing a dummy variable. Results shows that the probability to invest in a private pension scheme has been barely touched and in some cases it is also possible to register an increase.
    Keywords: financial crisis, saving decision, pension funds, sample survey
    JEL: G11 G23 H55
    Date: 2016–08
  16. By: Christiansen, Terkel (COHERE); Lauridsen, Jørgen T. (COHERE)
    Abstract: Earlier studies of health inequality across European countries have shown intriguing results, in particular with respect to retirement status as one of the determinants of health inequality. A priori, one would expect that inequality in health and income would be associated. Theory suggests that health deteriorates with age, in particular for low income groups. Moreover, as income declines after retirement, elderly people tend to rank lower in the relative income ranking. Consequently, retirement status, and in particular early retirement due to health problems, is expected to contribute to inequalities in income-related inequalities in health. The present paper contributes to previous knowledge by looking further into the contribution by retired Europeans to income-related inequalities in health and the development in this contribution over time. The study is based on data from the first and the fourth waves of the Survey of Health, Ageing and Retirement in Europe (SHARE), including individuals born in 1954 or earlier (wave 1) and 1960 or earlier (wave 2) from 10 European countries. Income-related inequality in health is measured using the concentration index. A decomposition of the index into its determinants allows a calculation of the contribution of each determinant’s separate contribution to inequality in health. The results presented here indicate that retirement status contributes substantially to income-related inequality in health across European countries, and that the variation can be explained by income differences as well as health differences, depending on the country considered. Furthermore, it is indicated that the contribution from retirement status falls for certain countries due to improved socioeconomic status as well as improved health of the retired.
    Keywords: Health inequality; retirement; SHARE data
    JEL: I14 J26
    Date: 2016–10–01
  17. By: Effraimidis, Georgios (COHERE); Levine, Morgan (Department of Human Genetics); Crimmins, Eileen (USC Davis School of Gerontology)
    Abstract: Population aging has emerged as a major demographic trend around the globe. Aging is a process that is determined by millions of genetic factors. The identification of the set of genetic factors that has a significant role in the aging process is a highly challenging task. This paper studies the association between genetic factors and the aging rate. We first calculate the so-called polygenic risk score (PRS) by following a well-designed algorithm for the selection of the significant single nucleotide polymorphisms (SNPs) and subsequently considering a weighted sum of those significant SNPs. Next, we construct a new mortality model, which allows the aging rate to depend on the PRS. Our statistical analysis is based on a rich dataset from the Health and Retirement Study.
    Keywords: Aging rate; Genome-wide association study; Mortality rate; Polygenic risk score
    JEL: C14
    Date: 2016–09–18
  18. By: Gyrd-Hansen, Dorte (COHERE)
    Abstract: Researchers have in recent years sought to establish whether the general public value treatment at the end-of-life (EOL) more highly than other treatments. Results are mixed, with social preferences most often exhibiting lack of preferences for EOL treatments. This nul-result may be driven by the often applied study design, where respondents are to choose between treatments targeting patients with varying fixed life-expectancies. When remaining life is certain and salient, a rule-of-rescue sentiment may drive preferences across all scenarios. This study presents a different design, where the comparator is a preventive intervention. We study preferences from both an individual and social perspective, and find no preference for an EOL premium when age is held constant. We test the interaction between age and EOL treatment, and finder stronger preferences when patients face premature death.
    Keywords: Stated preferences; priority setting; end-of-life treatment
    JEL: D61 I13 I14 I28
    Date: 2017–01–16

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