nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒02‒26
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Does raising the retirement age increase older workers' activity? The case of the 2010 french pension reform By Y. DUBOIS; M. KOUBI
  2. Private wealth and retirement in France By T. BLANCHET; Y. DUBOIS; A. MARINO; M. ROGER
  3. How taxes impact the choice between an annuity and the lump sum at retirement By Bütler, Monika; Ramsden, Alma
  4. Après nous le déluge? Direct democracy and intergenerational conflicts in aging societies By Maennig, Wolfgang; Ahlfeldt, Gabriel M.; Steenbeck, Malte
  5. Retirement, intergenerational time transfers and fertility By Eibich, Peter; Siedler, Thomas
  6. Is Governance Related to Investment Performance and Asset Allocation? Empirical Evidence from Swiss Pension Funds By Ammann, Manuel; Ehmann, Christian
  7. Leisure and Housing Consumption after Retirement: New Evidence on the Life-Cycle Hypothesis By Schreiber, Sven; Beblo, Miriam
  8. The Returns to Nursing: Evidence from a Parental Leave Program By Benjamin U. Friedrich; Martin B. Hackmann
  9. The Great Recession and Life Satisfaction: The Unique Decline for Americans Approaching Retirement Age By Ifcher, John; Zarghamee, Homa; Cabacungan, Amanda
  10. Maybe "Honor thy Father and thy Mother": Uncertain Family Aid and the Design of Social Long Term Care Insurance By Canta, Chiara; Cremer, Helmuth; Gahvari, Firouz
  11. The dynamics of informal care provision in an Australian household panel survey: previous work characteristics and future care provision. By Ha Trong Nguyen; Luke B Connelly
  12. Effect of Caregiving on Employment for Retiring Japanese Individuals By Tomoki Kitamura; Yoshimi Adachi; Toshiyuki Uemura
  13. Going from Bad to Worse: Adaptation to Poor Health, Health Spending, Longevity, and the Value of Life By Schünemann, Johannes; Strulik, Holger; Trimborn, Timo
  14. Health, Health Insurance, and Retirement: A Survey By French, Eric; Jones, John Bailey
  15. How the Baby Boomers' Retirement Wave Distorts Model-Based Output Gap Estimates By Wolters, Maik Hendrik
  16. Older entrepreneurs-by-necessity using fuzzy set methods: differences between developed and developing countries By Molina, Jose Alberto; Ortega, Raquel; Velilla, Jorge
  17. How taxes impact the choice between an annuity and the lump sum at retirement By Fengler, Matthias; Melnikov, Alexander
  18. La pression de la population dans les Pays Sahéliens Francophones : Analyse des estimations et projections de population 1950-2100 By Michel GARENNE
  19. Reforming the Social Security Earnings Cap: The Role of Endogenous Human Capital By Adam Blandin

  1. By: Y. DUBOIS (Insee); M. KOUBI (Insee)
    Abstract: We examine the consequences on older workers activity of the 2010 French pension reform that increased the legal age of retirement from 60 to 62 years. Globally, the activity rate of workers affected by the reform is by 19 to 22 percentage points higher than that of workers of the same age but belonging to generations not affected by the reform. This result is consistent with an ex-ante evaluation using the microsimulation model Destinie managed by the Insee. Moreover, microsimulation allows to first quantify and then sweep out possible interactions between the reform on ages and the other ongoing reforms: the increase in the qualifying period for full pension on the one hand and the so-called long careers reform on the other hand, which allows people with sufficient years of service to retire earlier than the legal age with full pension. The declining number of pensioners at ages affected by the reform results in a higher employment rate for older workers, but also raises unemployment and, to a lesser extent, inactivity (other than retirement).
    Keywords: Retirement age ; Policy reform; Labor supply; Older workers
    JEL: J14 J21 J26 H55
    Date: 2016
  2. By: T. BLANCHET (Ensae-PSE); Y. DUBOIS (Insee); A. MARINO (Insee); M. ROGER (CES Université Paris 1 Panthéon Sorbonne,Banque de France)
    Abstract: This document relies on the 2009-2010 French wealth survey (enquête Patrimoine) and the dynamic microsimulation model Destinie to reevaluate substitution effects between pension entitlements and private savings for French Households. Savings behavior is modeled after Gale (1998). Our results highlight the existence of a substitution effect between household savings and their pension. The magnitude of these effects is sensitive to the discount rate of agents. An increase in public pensions leads to a decrease in complementary pension products and real estate investment. It is this latter effect that dominates.
    Keywords: Wealth, Social Security, Pensions, Life Cycle
    JEL: D31 D91 H55
    Date: 2016
  3. By: Bütler, Monika; Ramsden, Alma
    Abstract: We analyze the role of taxation in individual annuitization decisions in an environment that shows large di?erences in relative taxation between the one-o? lump sum payment and the life-long annuity. For each individual whose retirement choice is recorded in an administrative dataset from a large Swiss pension fund we impute taxes for both options. We show that taxes can explain a signi?cant part of the variation in annuity rates. Exploiting kinks in the tax schedule we also ?nd evidence for tax optimization strategies by individuals. Our ?ndings suggest that individuals react strongly to tax incentives when making retirement choices.
    Keywords: Annuity Puzzle, Taxation, Occupational Pension
    JEL: D81 D91 H24 J26
    Date: 2017–01
  4. By: Maennig, Wolfgang; Ahlfeldt, Gabriel M.; Steenbeck, Malte
    Abstract: To assess the likely effects of population ageing on the outcomes of direct democracy, we analyze the effect of age on voting decisions in public referenda. To this end, we provide the first quantitative review of the literature and a case study of the Stuttgart 21 referendum on one of the largest infrastructure projects in Germany. The evidence suggests that intergenerational conflicts arising from population ageing will likely be limited to areas in which the net present value differs particularly strongly across generations, such as education and health spending, green energy, and major transport projects. In such instances, however, the effect can be quantitatively relevant, raising the question of whether, as population ageing progresses, decisions should be based on social cost-benefit anal-yses, instead of referenda.
    JEL: D61 D62 H41
    Date: 2016
  5. By: Eibich, Peter; Siedler, Thomas
    Abstract: Retirement increases the amount of leisure time. Retired parents might choose to invest some of their time into their adult children, e.g. by providing childcare. Such intergenerational time transfers can have important implications for retirement and family policies. This paper estimates the effects of parental retirement on their adult children’s fertility and labor supply. We use a representative household panel dataset from Germany to link observations on parents and adult children, and we exploit eligibility ages for early retirement using a regression discontinuity design for identification. The results show that early parental retirement induces a significant and considerable increase in (adult) children’s fertility. It also decreases labor supply of daughters. The analysis of time use data shows that retired parents provide childcare and assist their children with domestic duties. The findings suggest that early retirement policies can have important spillover effects on younger generations.
    JEL: J13 J22 J26
    Date: 2016
  6. By: Ammann, Manuel; Ehmann, Christian
    Abstract: This study investigates the relationship between governance, investment performance and asset allocation of pension funds in Switzerland. Our sample includes survey data from 139 Swiss occupational pension plans for which we develop a governance metric comprising attributes of organisational design, management incentives, target setting, investment strategy, investment processes, risk management, monitoring, and transparency. We find empirical evidence that pension fund governance is positively related to excess returns, benchmark outperformance and Sharpe ratios. Pension funds in the top governance quartile outperform those in the bottom quartile by approximately 1% in terms of average excess returns and benchmark deviation. Furthermore, our study results indicate that asset allocation decisions are not related to governance, but rather to institutional factors.
    Keywords: Pension Fund Governance, Investment Performance, Swiss Occupational Pension Plans
    JEL: G11 G19 G23 J32
    Date: 2016–09
  7. By: Schreiber, Sven; Beblo, Miriam
    Abstract: We revisit the alleged retirement consumption puzzle. According to the life-cycle theory, foreseeable income reductions such as those around retirement should not affect consumption. However, we first recall that given higher leisure endowments after retirement, the theory does predict a fall of total market consumption expenditures. In order not to mistake this predicted drop for a puzzle we focus on housing consumption which can be plausibly regarded as complementary to leisure, and we control for the leisure change in our empirical specifications, using micro data for Germany (SOEP), where housing expenditures are observable as rents for the majority (60%), as well as dwelling relocations. We still find significant negative impacts of the retirement status on housing consumption, which is hard to reconcile with the life-cycle theory. For retirees we also find significant effects of the income reduction at retirement on housing. However, the effects are small in quantitative terms, given the lock-in nature of past housing decisions.
    JEL: D91 E21 J22
    Date: 2016
  8. By: Benjamin U. Friedrich; Martin B. Hackmann
    Abstract: Nurses comprise the largest health profession. In this paper, we measure the effect of nurses on health care delivery and patient health outcomes across sectors. Our empirical strategy takes advantage of a parental leave program, which led to a sudden, unintended, and persistent 12% reduction in nurse employment. Our findings indicate detrimental effects on hospital care delivery as indicated by an increase in 30-day readmission rates and a distortion of technology utilization. The effects for nursing home care are more drastic. We estimate a persistent 13% increase in nursing home mortality among the elderly aged 85 and older. Our results also highlight an unintended negative consequence of parental leave programs borne by providers and patients.
    JEL: D22 H75 I10 I11 J13
    Date: 2017–02
  9. By: Ifcher, John (Santa Clara University); Zarghamee, Homa (Barnard College); Cabacungan, Amanda (Santa Clara University)
    Abstract: Using data from the U.S. Centers for Disease Control and Prevention's Behavioral Risk Factor Surveillance System, we examine the impact of the Great Recession on subjective well-being (as measured by life satisfaction) and attempt to identify disparate effects by age. We find that those approaching retirement age (aged 55 to 64) experienced reduced life-satisfaction after the recession, whereas younger working-aged adults did not. The disparate effects by age cannot be explained by income or unemployment trends, but may be explained by wealth effects. For example, we find that the life satisfaction of those approaching retirement age, but not of younger working-age adults, is closely correlated with wealth indices (e.g., the Case-Shiller Housing Price Index and the S&P 500 Index).
    Keywords: subjective well-being, life satisfaction, Great Recession, wealth effect, retirement, and happiness
    JEL: G01 D14 D91 D6 I31
    Date: 2016–12
  10. By: Canta, Chiara (Norwegian School of Economics); Cremer, Helmuth (Toulouse School of Economics); Gahvari, Firouz (University of Illinois at Urbana-Champaign)
    Abstract: We study the role and design of private and public insurance programs when informal care is uncertain. Children's degree of altruism is randomly distributed over some interval. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider three types of LTC policies: (i) a topping up (TU) scheme providing a transfer which is non exclusive and can be supplemented; (ii) an opting out (OO) scheme which is exclusive and cannot be topped up and (iii), a mixed policy combining these two schemes. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out informal care solely at the extensive margin. However, OO is not necessarily the dominant policy as it may exacerbate crowding out at the extensive margin. The distortions of both policies can be mitigated by using an appropriately designed mixed policy.
    Keywords: long term care, uncertain altruism, private insurance, public insurance, topping up, opting out
    JEL: H2 H5
    Date: 2016–12
  11. By: Ha Trong Nguyen (Bankwest Curtin Economics Centre, Curtin University); Luke B Connelly (The University of Queensland)
    Abstract: This study contributes to a small literature on the dynamics of informal care by examining the informal care provision choices of working age Australians. We focus on the impact of previous work characteristics (including work security and flexibility) on subsequent care provision decisions and distinguish between care that is provided to people who cohabit and people who reside elsewhere, as well as between the provision of care as the primary caregiver, or in a secondary caring role. Our dynamic framework of informal care provision accounts for state-dependence, unobserved heterogeneity and initial conditions. For both males and females, we find the existence of positive state-dependence in all care states in both the short- and medium-term. Furthermore, the inertia in care provision appears to be stronger for more intensive care. We also find previous employment status has a significant deterrent effect on current care provision decisions. The effects on employment, however, differ according to the type of previous work, the type of care currently provided, and the gender of the caregiver. We also find that workers with perceptions of greater job security are nevertheless less likely to provide subsequent care. Our results also suggest that workers’ perceptions about work flexibility and their stated overall satisfaction with work actually have no impact on their subsequent decisions to provide care in any capacity.
    Keywords: informal care, labour supply, dynamic multinomial choice models, panel data.
    JEL: C21 J14
    Date: 2016–12
  12. By: Tomoki Kitamura (Finance Research Group, NLI-Research Institute); Yoshimi Adachi (Department of Economics, Konan University); Toshiyuki Uemura (School of Economics, Kwansei Gakuin University)
    Abstract: We examined employment and caregiving behavior at retiring age in Japan, considering the marital status, living-with-parent status, spouse employment, spouse income, and net financial assets. We found that the labor participation rate for caregiving married females living with parents was lowest when husbands work full-time, indicating that opportunity cost is an important factor. Net financial assets had a mixed impact. For married female caregivers, a lower amount of net financial assets decreases the labor participation rate. This tendency is reversed for married males. We also found that a flexible work style prevents a fall in labor participation rate due to caregiving. The government should introduce policies for drastic improvement in balancing nursing care and employment.
    Keywords: Elderly caregiving, labor participation rate, retirement, panel data
    JEL: D12 I10 J14 J26
    Date: 2017–02
  13. By: Schünemann, Johannes; Strulik, Holger; Trimborn, Timo
    Abstract: Unhealthy persons adapt to their bad state of health and persons in bad health are usually happier than estimated by healthy persons. In this paper we investigate how adaptation to a deteriorating state of health affects health spending, life expectancy, and the value of life. We set up a life cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and compare behavior and outcomes of adapting and non-adapting individuals. While adaptation generally increases the life-time utility (by about 2 percent), its impact on health behavior and longevity depends crucially on whether individuals are aware of their adaptive behavior, i.e. whether they adapt in a naive or sophisticated way. We also compute the QALY change implied by health shocks and discuss whether and how adaptation influences results and the desireability of positive health innovations.
    JEL: I12 D91 J17
    Date: 2016
  14. By: French, Eric; Jones, John Bailey (Federal Reserve Bank of Richmond)
    Abstract: The degree to which retirement decisions are driven by health is a key concern for both academics and policymakers. In this paper we survey the economic literature on the health-retirement link in developed countries. We describe the mechanisms through which health affects labor supply and discuss how they interact with public pensions and public health insurance. The historical evidence suggests that health is not the primary source of variation in retirement across countries and over time. Furthermore, declining health with age can only explain a small share of the decline in employment near retirement age. Health considerations nonetheless play an important role, especially in explaining cross-sectional variation in employment and other outcomes within countries. We review the mechanisms through which health affects retirement and discuss recent empirical analyses.
    Keywords: disability; elderly; health; retirement; Social Security
    Date: 2017–02–17
  15. By: Wolters, Maik Hendrik
    Abstract: Hours per capita measures based on the private sector as usually included in the set of observables for estimating macroeconomic models are affected by low-frequent demographic trends and sectoral shifts that cannot be explained by standard models. Further, model-based output gap estimates are closely linked to the observable hours per capita series. Hence, hours per capita that are not measured in concordance with the model assumptions can distort output gap estimates. This paper shows that sectoral shifts in hours and the changing share of prime age individuals in the working-age population lead indeed to erroneous output gap dynamics. Regarding the aftermath of the global financial crisis model-based output gaps estimated using standard hours per capita series are persistently negative for the US economy. This is not caused by a permanently depressed economy, but by the retirement wave of baby boomers which lowers aggregate hours per capita. After adjusting hours for changes in the age composition to bring them in line with the model assumptions, the estimated output gap gradually closes in the years following the global financial crisis.
    JEL: J11 C54 E32
    Date: 2016
  16. By: Molina, Jose Alberto; Ortega, Raquel; Velilla, Jorge
    Abstract: In this paper, we empirically analyze the individual characteristics that drive older workers to become entrepreneurs, more by necessity than desire, providing evidence of the differences between developed and developing countries. While OLS models do not provide any meaningful conclusions, Qualitative Comparative Analysis and fuzzy set logic, at the country level, using GEM 2014 Global Individual micro-data, show the importance of the various combinations of high and/or low values of skills, opportunities, entrepreneurial perceptions, peer effects, and satisfaction with life and income. This indicates how entrepreneurship may be a potential source of income for older workers, in a range of contexts. Further, we find that all the possible combinations of higher values of the latter features are necessity conditions.
    Keywords: Entrepreneurship, Older individuals, Fuzzy Set Qualitative Comparative Analysis, GEM data.
    JEL: L26 O10 O57
    Date: 2017–02–20
  17. By: Fengler, Matthias; Melnikov, Alexander
    Abstract: The paper presents GARCH option pricing models with Meixner-distributed innovations. The risk-neutral dynamics are derived by means of the conditional Esscher transform. Assessing the option pricing performance both in-sample and out-of-sample, we find that the models compare favorably against the benchmark models. Simulations suggest that the driver of these results is the impact of conditional skewness and conditional excess kurtosis on option prices.
    Keywords: GARCH models, Meixner distribution, Esscher transform, option pricing
    JEL: G13 C22
    Date: 2017–02
  18. By: Michel GARENNE (Institut Pasteur)
    Abstract: L’étude analyse les estimations et les projections de population des six pays francophones du Sahel : Sénégal, Mali, Burkina Faso, Niger, Tchad et Mauritanie. Pour la période antérieure à 2015, les estimations de population faites par les Nations Unies tendent à être quelque peu supérieures aux résultats des recensements, probablement du fait d’une sous-estimation des migrations nettes. Dans plusieurs cas, le pic de fécondité est un peu sous-estimé, et par conséquent la baisse de la natalité aussi. Dans pratiquement tous les cas les estimations des niveaux et tendances de la mortalité correspondent aux résultats d’enquêtes démographiques. Par contre, les estimations de l’émigration semblent nettement en-dessous des estimations faites par d’autres sources. L’urbanisation rapide semble bien prise en compte par les projections des Nations Unies. Par contre, les prévisions à long terme semblent hasardeuses, du fait de l’incertitude sur l’évolution des principaux paramètres. En termes de densité de population par surface de terre arable, on obtiendrait rapidement, pour les six pays considérés, des situations pour lesquelles on ne voit pas de solution viable évidente, compte tenu de l’état actuel de l’économie, de l’agriculture, et de l’environnement physique. Il est donc vraisemblable que les six pays du Sahel continueront à recourir à l’émigration massive pour répondre à la pression de la population.
    Date: 2016–10
  19. By: Adam Blandin (Department of Economics, Virginia Commonwealth University)
    Abstract: Old age Social Security benefits in the US are funded by a 10.6% payroll tax up to a cap, currently set at $118,500. Despite calls from policy circles to eliminate the cap on taxable earnings, there has been little work examining the likely outcomes of such a policy change. I use a life-cycle human capital model with heterogeneous individuals to investigate the aggregate and distributional steady state impacts of several policy changes to the earnings cap. I find: (1) Eliminating the earnings cap generates large reductions in aggregate output and consumption, between 2.1- 3.1%. (2) The role of endogenous human capital is first order: when I do not allow the life-cycle human capital profiles of workers to adjust across policy regimes, the change in economic aggregates is roughly cut in half. (3) While eliminating the earnings cap increases revenues from the payroll tax by 12%, the decline in output lowers tax revenues from other sources, so that total federal tax revenues never increase by more than 1.2%. (4) Eliminating the earnings cap produces modest welfare gains for about 2/3 of workers, while about 1/3 of workers experience welfare losses, which are typically large. (5) Lowering the earnings cap to a level near the mean of earnings increases aggregate output by 1.3%, and also increases welfare for the vast majority of workers.

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