nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒01‒29
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labour market segmentation and the financial situation of the pension system in Poland By Piotr Lewandowski; Jakub Sawulski; Kamil Stronski
  2. Population Aging, Unfunded Social Security and Economic Growth By Ken Tabata
  3. Does postponing minimum retirement age improve healthy behaviours before retirement? Evidence from middle-aged Italian workers? By Bertoni, Marco; Brunello, Giorgio; Mazzarella, Gianluca
  4. The causal effects of retirement on mental health: Looking beyond the mean effects By Kolodziej, Ingo W.K.; García-Gómez, Pilar
  5. Occupational Transitions at Older Ages: What Moves are People Making? By Amanda Sonnega; Brooke Helppie McFall; Robert J. Willis
  6. Randomized Evaluation of the Unconditional Cash Transfer Scheme for the Elderly in Ekiti State Nigeria By Damilola Olajide; Maria Laura Alzua; Ana Dammert; Olusegun Sotola; Thompson Ayodele
  7. Retirement and Cognitive Decline: Evidence from Global Aging Data By Motegi, Hiroyuki; Nishimura, Yoshinori; Oikawa, Masato
  8. Implicit Motivation Makes the Brain Grow Younger: Improving Executive Functions of Older Adults By Shira Cohen-Zimerman; Ran R. Hassin
  9. Old Teachers, Old Ideas, and the Effect of Population Aging on Economic Growth By Jillian Berk; David N. Weil
  10. The Effects of Collecting Income Taxes on Social Security Benefits By Jones, John Bailey; Li, Yue
  11. Research note: Illustrating the Distributional Implications of Measures from the 2016 Budget for Malta By Bugeja, Simon; Mifsud, Godwin; Saliba, Pauline
  12. Aging and Property Prices: A Theory of Very Long Run Portfolio Choice and Its Predictions on Japanese Municipalities in the 2040s By Tamai, Yoshihiro; Shimizu, Chihiro; Nishimura, Kiyohiko G.

  1. By: Piotr Lewandowski; Jakub Sawulski; Kamil Stronski
    Abstract: Since 2014 Poland is the country with the highest share of temporary workers in the EU. Civil law contracts, a type of temporary contracts, allow payment of lower retirement pension contributions than implied by employment contracts. We use a cohort pension model to quantify the impact of civil law contract use on revenue from contributions and spending on pensions in Poland. Between 2005 and 2015, the rising incidence of civil law contracts reduced the revenue from contributions in the general pension system by PLN 2.4 billion per year on average. This widened the pension fund deficit by approx. 5%. In the future (2016-2050), the impact of civil law contracts on the revenue from contributions will wane because of demographic changes and rising educational attainment of the workforce. However, its impact on pension spending will increase with time, although it will be weaker than the effect on revenue from contributions. Hence, labour market segmentation will deteriorate the pension system balance. The obligation to pay contributions on all contracts of mandate from at least the minimum wage level, introduced in 2016, is not sufficient to balance out the impact of segmentation on the pension system balance.
    Keywords: labour market, pensions, public finance
    JEL: H55 H60 J26 J41 J42
    Date: 2016–12
  2. By: Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how population aging caused by a decline in the birth rate or a reduction in the mortality rate affects economic growth in an overlapping generations model with a general demographic structure and a sizable unfunded social security system. Through numerical simulations, we show that a decline in the birth rate has non-monotonic effects on economic growth, yielding a hump-shaped relationship between the population growth rate and the economic growth rate, whereas a reduction in the mortality rate has a monotonic positive effect on economic growth, yielding a monotonic positive relationship between the population growth rate and the economic growth rate. We also use our model to study how predicted and occurring demographic changes in Japan affect that country’s economic growth rate. We show that the growth effect of the predicted demographic changes in Japan is initially positive but it may turn out to be negative from the mid 2030s forward. This paper also examines the growth and welfare effects of a reduction in pension payments or an extension of the retirement age, and shows that the pension payment reduction policy is better than the retirement extension policy for both growth and welfare in response to population aging.
    Keywords: Population aging, Unfunded social security, Retirement age, Economic growth
    JEL: D91 H55 O41
    Date: 2017–01
  3. By: Bertoni, Marco (university of padova); Brunello, Giorgio (university of padova); Mazzarella, Gianluca (university of padova)
    Abstract: By increasing the residual working horizon of employed individuals, pension reforms that raise minimum retirement age are likely to affect the returns to investments in health-promoting behaviours before retirement, with consequences for individual health. Using the exogenous variation in minimum retirement age induced by a sequence of Italian pension reforms during the 1990s and 2000s, we show that Italian males aged 40 to 49 reacted to the longer time to retirement by raising regular exercise and by reducing smoking and regular alcohol consumption. Dietary habits were also affected, with positive consequences on obesity and self-reported satisfaction with health.
    JEL: H55 I12 J26
    Date: 2016
  4. By: Kolodziej, Ingo W.K.; García-Gómez, Pilar
    Abstract: We analyze the causal effect of retirement on mental health, exploiting differences in retirement eligibility ages across countries and over time using data from the Survey of Health, Ageing and Retirement in Europe. We estimate not only average effects, but also use distributional regression to examine whether these effects are unequally distributed across the mental health distribution. We find unequally distributed protective effects of retirement on mental health. These gains are larger among those above the clinically defined threshold of being at risk of depression. The preserving effects are larger for women, blue collar workers and those in social networks.
    Keywords: retirement,mental health,economics of the elderly,distributional regression
    JEL: I10 J14 J26
    Date: 2017
  5. By: Amanda Sonnega (University of Michigan); Brooke Helppie McFall (University of Michigan); Robert J. Willis (University of Michigan)
    Abstract: Given the clear benefit for both public and private finances of extending work lives, many policymakers are interested in finding and promoting ways to accomplish this objective while balancing concerns for work ability at older ages. At the same time, retirement itself is transforming from a simple transition from full-time work to full and permanent retirement to more of a process, potentially occurring in several stages over a number of years. We consider a set of work transitions at ages when the largest numbers of people are retiring and potentially pursuing different paths to full and permanent retirement. Among workers who transition between occupations, the most common transitions are between those that are closely related. However, even within closely related occupations, there are no large pipelines between any two. By age 62, 57 percent of workers are no longer in the labor force, 26 percent are still in their “career” occupation, and 17 percent have changed from their career occupation to another occupation. Beginning at age 66, however, the percentages in different occupations, which may be bridge employment or unretirement, are very similar to the percentages remaining in career occupations. Occupational changes later in life tend to be accompanied by decreases in hourly earnings, suggesting that if workers are seeking flexible or part-time bridge employment, it may come at a cost.
    Date: 2016–09
  6. By: Damilola Olajide; Maria Laura Alzua; Ana Dammert; Olusegun Sotola; Thompson Ayodele
    Abstract: Many countries in the developing world have implemented non-contributory old age pensions. However, evidence of the impacts on the elderly in Sub-Saharan Africa is scarce. This paper provides the first evidence from a randomized evaluation of an unconditional and non-contributory pension scheme targeted at the elderly and implemented in Ekiti State, Nigeria. The goal is to examine the extent to which such a scheme can serve as an instrument to improve the wellbeing of the beneficiaries in terms of improving their quality of life and reducing household vulnerability. The data used were collected over two six-month follow-up intervals from 6,326 eligible beneficiaries and 18,954 household members across 112 electoral wards in Ekiti State. The randomization of beneficiaries into treatment and control groups is done at the ward level, where 3,178 beneficiaries are eligible to receive an unconditional and non-contributory cash transfer and 3,148 beneficiaries are kept as controls. Treated beneficiaries self-report better overall quality of life, mainly in terms of more stable mental health, higher perceptions of happiness and capabilities, improvement in personal relationships, enhancing their community activities, and better health rating. However, the significant contributors to these results differ between the first and second follow-ups. Also, these effects are incremental in nature, suggesting that they are potentially sustainable over time. The findings provide evidence-based support for demand side interventions to improve the welfare of poor households, but also raise important policy implications for implementing countries. For Nigeria, there is scope for scaling-up to the national level targeting poor households. However, a successful and sustainable national social security scheme requires more equitable eligibility criteria, strong political will and commitment by the government.
    Keywords: randomized control trial, aging challenge, non-contributory elderly pensions, unconditional cash transfer, Ekiti State, Nigeria.
    JEL: C21 C93 H31 H55 H75 I38
    Date: 2016
  7. By: Motegi, Hiroyuki; Nishimura, Yoshinori; Oikawa, Masato
    Abstract: This study analyzes the effect of retirement on cognitive function. According to the human capital theory, we can hypothesize that workers invest in their cognitive ability more than retirees because cognitive investment increases a worker’s wage. As a result, it is possible that the cognitive ability decreases after retirement, a hypothesis analyzed in this study. In health economics, this hypothesis has been examined especially after 2000. First, we show that an analysis method used in some related studies is not valid for estimating this effect. Furthermore, we analyze this effect by using our method. Our estimates indicate that the workers’ mathematical scores decrease after retirement in a wide range of analyzed countries and heterogeneous groups. However, retirement has a weak effect on cognitive ability. Additionally, we investigate the heterogeneity of this effect. For example, we find that the elderly with higher body mass indexs and fat intake experience a negative effect of retirement on cognitive function.
    Keywords: mental retirement, cognitive function, social security, pension eligibility age, cross- country instruments, global aging data
    JEL: I12 I18 J24 J26
    Date: 2017–01–26
  8. By: Shira Cohen-Zimerman; Ran R. Hassin
    Abstract: The dominant view of cognitive aging holds that while controlled processes (e.g., working memory and executive functions) decline with age, implicit (automatic) processes do not. In this paper we challenge this view by arguing that high-level automatic processes (e.g., implicit motivation) decline with age, and that this decline plays an important and as yet unappreciated role in cognitive aging. Specifically, we hypothesized that due to their decline, high-level automatic processes are less likely to be spontaneously activated in old age, and so their subtle, external activation should have stronger effects on older (vs. younger) adults. In two experiments we used different methods of implicitly activating motivation, and measured executive functions of younger and older adults via the Wisconsin Card Sorting Test. In Experiment 1 we used goal priming to subtly increase achievement motivation. In Experiment 2 motivation was manipulated by subtly increasing engagement in the task. More specifically, we introduce the Jerusalem Face Sorting Test (JFST), a modified version of the WCST that uses cards with faces instead of geometric shapes. In both experiments, implicitly induced changes in motivation improved older- but not younger- adults’ executive functioning. The framework we propose is general, and it has implications as to how we view and test cognitive functions. Our case study of older adults offers a new look at various aspects of cognitive aging. Applications of this view to other special populations (e.g., ADHD, schizophrenia) and possible interventions are discussed.
    Date: 2017–01
  9. By: Jillian Berk; David N. Weil
    Abstract: As populations age, the degree to which workers human capital reflects the cutting edge of technology falls because education took place further in the past.
    Keywords: Population aging , Human capital , Vintage technology
    JEL: J
  10. By: Jones, John Bailey (Federal Reserve Bank of Richmond); Li, Yue (University at Albany)
    Abstract: Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent increase in the payroll tax would significantly increase labor supply, consumption and welfare. From an ex-ante perspective an even more desirable reform would be to make the portion of benefits subject to income taxes completely independent of other income.
    Keywords: Social Security; Labor Supply; Taxation
    JEL: E21 H24 H55 I38
    Date: 2017–01–12
  11. By: Bugeja, Simon; Mifsud, Godwin; Saliba, Pauline
    Abstract: This paper examines the main measures as announced in the 2016 Budget for Malta and their redistributive impact. The measures considered include the minimum pension measure, the in-work benefit and the income tax measure. EUROMOD, a tax-benefit micro-simulation model was used to simulate these measures and arrive at the results by looking at deciles of equivalised household disposable incomes. The overall result shows that the combined effect of these measures, redistribute income from higher to lower and middle income groups whilst lowering the at-risk-of-poverty rate. Whilst the retirement pension benefitted the bottom three decile groups, the income tax reform benefitted mostly the fourth, fifth and sixth decile groups. The in-work benefit, which was an extension of an existing benefit, mostly affected the lower income groups.
    Date: 2016–12–30
  12. By: Tamai, Yoshihiro; Shimizu, Chihiro; Nishimura, Kiyohiko G.
    Abstract: This paper investigates the effect of aging population on property (land) prices. A theory of very long run portfolio choice is developed for a transition economy from young and growing to rapidly aging population and applied to estimate property price inflation in Japanese municipal markets. The results are stunning. The simulation results in which income factors are assumed to be fixed at the 2005-2010 growth level suggest that the average residential property price (land price) in the Japanese municipalities may decrease as much as 19 percent from the present to 2020, 24 percent to 2030, and 32 percent to 2040.
    Keywords: Aging, Asset Prices, Long Run Portfolio Choice, Constant Monetary Quantity (CMQ), Inflation Target (IT), Price Stability
    JEL: G11 G12 J11
    Date: 2017–01

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