nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒05‒07
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. How Do Unemployed Workers Behave Prior to Retirement? A Multi-State Multiple-Spell Approach By Gałecka-Burdziak, Ewa; Góra, Marek
  2. 고령화시대 주요국 금융시장 구조변화 분석과 정책적 시사점 (The Impact of Population Ageing on Financial Market Structures and Policy Implications) By Yoon , Deok Ryong; Rhee , Dong Eun
  3. Explaining low employment rates among older women in urban China By Wenchao (Michelle) Jin
  4. Closing Routes to Retirement: How Do People Respond? By Geyer, Johannes; Welteke, Clara
  5. The possible impact of pension age changes on Malta’s potential output By Aaron G Grech
  6. Who receives medicaid in old age? Rules and reality By Margherita Borella; Mariacristina De Nardi; Eric French
  7. The Relationship Between Time Preference and Depressive Tendency By Reona Fujino
  8. Macroeconomic Effects of Medicare By Conesa, Juan Carlos; Costa, Daniela; Kamali, Parisa; Kehoe, Timothy J.; Nygard, Vegard; Raveendranathan, Gajen; Saxena, Akshar
  9. Life-cycle consumption patterns at older ages in the US and the UK: can medical expenditures explain the difference? By James Banks; Richard Blundell; Peter Levell; James Smith
  10. What happens when employers are obliged to nudge? Automatic enrolment and pension saving in the UK By Jonathan Cribb; Carl Emmerson
  11. Who Contributes to Individual Retirement Accounts? By Anqi Chen; Alicia H. Munnell
  12. Factors Contributing to Poor Satisfaction with Sleep and Healthcare Seeking Behavior in Older Adults By Abraham Olufunmilola; Jia Pu; Loren J. Schleiden; Steven M. Albert

  1. By: Gałecka-Burdziak, Ewa (Warsaw School of Economics); Góra, Marek (Warsaw School of Economics)
    Abstract: We examine the behaviour of unemployed older workers up to five years prior to the point at which they can transition out of unemployment because they become eligible to receive pension benefits. We use a unique dataset covering the unemployment histories (longitudinal data) of individuals born between 1940 and 1965 who were registered with any of the public employment offices in Poland. Thus, we study a whole population of individuals who experienced this type of transition over the time period 1996-2015. We examine the transition from unemployment to retirement as a multi-year process. We analyse multiple unemployment spells, identify transition pathways, and look for patterns in these transitions. Moreover, we estimate a conditional risk set model (a stratified Cox model). Our research proves that being close to the point at which they are eligible to receive pension benefits leads individuals 'wait' to fulfil these eligibility criteria.
    Keywords: elder workers unemployment, retirement, transition pathways, multiple unemployment spells, recurrent event data, longitudinal analysis
    JEL: C14 C41 H55 J14 J22 J26 J64
    Date: 2017–03
  2. By: Yoon , Deok Ryong (Korea Institute for International Economic Policy); Rhee , Dong Eun (Myongji University)
    Abstract: Korean Abstract: 본 연구에서는 우리나라의 고령화가 야기하게될 금융시장관련 변화를 실증연구와 해외사례를 바탕으로 분석하였다. 연구결과는 고령화가 금융정책의 유효성을 약화시키고 저성장, 저물가, 저투자를 야기하게될 것임을 확인하고 있다. 사례연구에서는 고령화 대책은 경기적 대응보다 노동시장적 대응이 더 효과적이며 노령층에 주안한 연금상품의 개발과 도입을 지원하는 정책적 노력이 필요한 것으로 나타났다. 특히 한국의 낮은 연금수령비중과 사회조장체제 수준을 고려할 때 조속하고 포괄적인 정책대응이 요구된다. English Abstract: Korea is aging at a rapid pace, causing concern about the resulting socio-economic impacts. This study analyzes the expected changes in the financial markets resulting from aging and seeks possible policy measures to mitigate the negative impacts of aging stemming from these changes. Chapter 2 reviews the current status of Korea's aging process. Even though the country remains yet at the stage of an aging society, it is expected to become an aged society in 2017 and then a super-aged society in 2026, a mere nine years later. The aging of the Korean population is proceeding at an unprecedented pace. The fundamental reason for this fast pace of aging is the rapid drop in birth rate and growing life expectancy. However, Korea's socio-economic systems are not well prepared to absorb the shocks for aged people. More and more aged people are facing poverty and the rate of suicide is highest among the elderly. Rent beneficiaries occupy just a part of the old population. The social security system does not guarantee a stable livelihood for old people. This problem will become more serious in the near future because the baby boom generation has started to retire recently. The aging problem will lead to low growth, low inflation and low investment throughout the whole Korean economy, making structural changes inevitable in the financial market. Chapter 3 undertakes empirical analysis to examine whether monetary policies can maintain their effectiveness even after aging has proceeded further. We performed a panel-VAR analysis using the OECD data for 25 member countries for 20 years, from 1995 to 2014. The empirical analysis showed that monetary policies lose their effectiveness considerably in an aged society. This result implies a possible change in the effectiveness of Korea’s monetary policies, especially if the aging of Korea’s population proceeds further. As of yet aging has not progressed significantly in Korea. However, the Bank of Korea should restructure its monetary policies in the long term, considering the change of policy effectiveness according to the progress of aging. The government may utilize fiscal policies to a more intensive extent to respond to cyclical depression while it sets monetary policies to manage the financial market and inflation pressure. For instance, if the government employs monetary policies to control cyclical changes, they would have to apply greater and faster interest rate changes than before to achieve the same effect. Research on the relation between aging and monetary policy has only begun to be discussed recently. However, it may become one of the main research topics in the near future due to its importance. Further and more detailed studies will be needed to allow adjustment of monetary policies in an aged society. Chapter 4 reviews the theories regarding the relation between aging and the financial market and undertakes case studies with Japan, Germany and the U.S. In addition to a theoretical review, the countries' money flow charts and international investment position tables were analyzed to discover the impacts of aging on the financial market. Japan has shown macroeconomic and financial changes very close to theoretical predictions. However, Germany is not showing considerable changes in its financial market due to active labor market reforms. The U.S. as well does not reveal the characteristics of an aged society because aging in the U.S. is still at an initial stage and the financial market functions as a global market rather than a domestic market. Even though the countries show different levels of change, they all have introduced some policy measures focused on aging. Examples of successful policies include the Japanese current account policies and NISA, German labor market reform and competition policies, and the U.S.' introduction of annuities such as its 401(k) plan. Chapter 5 draws policy implications based on the analyses above. The recommended policy directions are as follows: explore new roles for monetary policies, use labor market approaches and financial market approaches to respond to aging, and employ strategies using the income account to maintain current account balance, etc. Finally, this study emphasizes the need for fast and comprehensive countermeasures against the negative macroeconomic and financial impacts of ageing.
    Date: 2016–12–30
  3. By: Wenchao (Michelle) Jin (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: In China, the employment rate among middle-aged and older urban residents is exceptionally low. For example, 27% of 55-64-year-old urban women were in work in 2013, compared to more than 50% in UK, Thailand and Philippines. This paper investigates potential explanations of this low level of employment in urban China. I document the stylized fact that a majority of individuals stop working as soon as they qualify for a public pension, which most often happens at age 50 for women. I also highlight the presence of signi cant amounts of financial and time transfers between generations. I provide descriptive evidence that transfers from children are responsive to parental incomes, and that mother's labour supply is aff ected by the expectation of transfers from her children. I then built and calibrate a life-cycle model of labour supply and saving. I fi nd that both the pension system and transfers from children have large eff ects on female labour supply. Increasing the female pension age from the status-quo to 60 would raise the employment rate of 50-59 year old women by 28 percentage points.
    Keywords: employment, employment rates, China
    Date: 2016–12–05
  4. By: Geyer, Johannes (DIW Berlin); Welteke, Clara (DIW Berlin)
    Abstract: We present quasi-experimental evidence on the employment effects of an unprecedented large increase in the early retirement age (ERA). Raising the ERA has the potential to extend contribution periods and to reduce the number of pension beneficiaries at the same time, if employment exits are successfully delayed. However, workers may not be able to work longer or may choose other social support programs as exit routes from employment. We study the effects of the ERA increase on employment and potential program substitution in a regression-discontinuity framework. Germany abolished an important early retirement program for women born after 1951, effectively raising the ERA for women by three years. We analyze the effects of this huge increase on employment, unemployment, disability pensions, and inactivity rates. Our results suggest that the reform increased both employment and unemployment rates of women age 60 and over. However, we do not find evidence for active program substitution from employment into alternative social support programs. Instead employed women remained employed and unemployed women remained unemployed. The results suggest an increase in inequality within the affected cohorts.
    Keywords: retirement age, early retirement, regression discontinuity, pension reform, unemployment, labor supply, disability pension
    JEL: J14 J18 J22 J26
    Date: 2017–03
  5. By: Aaron G Grech
    Abstract: As from 2012, the pension age in Malta started rising from 61 for men and 60 for women to eventually reach 65 for both genders in 2026. This paper evaluates the effects of the first change in the eligibility age, using employment and beneficiaries data covering that period.
    JEL: E37 J26 H55
  6. By: Margherita Borella (Institute for Fiscal Studies); Mariacristina De Nardi (Institute for Fiscal Studies and UCL, Federal Reserve Bank of Chicago, and NBER); Eric French (Institute for Fiscal Studies and IFS and UCL)
    Abstract: Medicaid is a government program that also provides health insurance to the old who have little assets and either low income or catastrophic health care expenses. We ask how the Medicaid rules map into the reality of Medicaid recipiency and what other observable characteristics are important to determine who ends up on Medicaid. The data show that both singles and couples with high retirement income can end up on Medicaid at very advanced ages. We find that, conditioning on a large number of observable characteristics, including those that directly relate to Medicaid eligibility criteria, single women are more likely to end up on Medicaid. So are non-whites, but, surprisingly, their higher recipiency is concentrated in the higher income percentiles. We also find that low-income people with a high school diploma or higher are much less likely to end up on Medicaid than their less educated counterparts. All of these effects are large and depend on retirement income in a very non-linear way.
    Keywords: Medicaid, elderly, permanent income
    JEL: H51 I13 I1
    Date: 2017–04–12
  7. By: Reona Fujino (Graduate School of Economics, Keio University)
    Abstract: In this study, we examined the relationship between time preference and depression tendency using two types of questionnaire data, which are Japan Household Panel Survey (JHPS) and Japanese Study of Aging and Retirement (JSTAR). For the empirical analysis, we applied the cross-lagged effect model and the synchronous effect model discussed in Finkel (1995), and we tested the Granger causality using the vector autoregressive model. The result showed that there was Granger causality in the direction of depression tendency to time discount rate in JHPS data. Moreover, in JHPS data, if the sample is divided by age, this causal relation was confirmed only with respect to over 50's. This result suggests that depression tendency influences time preference, which means that coping with the depression tendency makes it possible to change the time preference. Recently, approaches to depression tendency are progressing, and in particular, therapies called mindfulness are also adopted in general corporations and others. In other words, it can be interpreted that the analysis results showed that mindfulness leads to a change in time preference, that is, a decrease in time discount rate. With regard to such time preference changes, it can be said that it is desirable to use the viewpoint of virtue ethics in the framework of Bhatt et al. (2015).
    Keywords: time discount rate, depression, causal relation
    JEL: D3 D4
    Date: 2017–03–23
  8. By: Conesa, Juan Carlos (Stony Brook University); Costa, Daniela (Federal Reserve Bank of Minneapolis); Kamali, Parisa (Federal Reserve Bank of Minneapolis); Kehoe, Timothy J. (Federal Reserve Bank of Minneapolis); Nygard, Vegard (Federal Reserve Bank of Minneapolis); Raveendranathan, Gajen (Federal Reserve Bank of Minneapolis); Saxena, Akshar (Harvard University)
    Abstract: This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.
    Keywords: Medicare; Medicaid; Overlapping generations; Steady state; Transition path
    JEL: E21 E62 H51 I13
    Date: 2017–04–27
  9. By: James Banks (Institute for Fiscal Studies and University of Manchester); Richard Blundell (Institute for Fiscal Studies and IFS and UCL); Peter Levell (Institute for Fiscal Studies and Institute for Fiscal Studies); James Smith (Institute for Fiscal Studies and RAND)
    Abstract: In this paper we document significantly steeper declines in nondurable expenditures in the UK compared to the US, in spite of income paths being similar. We explore several possible causes, including different employment paths, housing ownership and expenses, levels and paths of health status, number of household members, and out-of -pocket medical expenditures. Among all the potential explanations considered, we find that those to do with healthcare—differences in levels and age paths in medical expenses—can fully account for the steeper declines in nondurable consumption in the UK compared to the US.
    Keywords: Life-Cycle, Consumption, Medical Expenditures
    JEL: D10 D11 D12 D14 D91
    Date: 2016–09–09
  10. By: Jonathan Cribb (Institute for Fiscal Studies and Institute for Fiscal Studies); Carl Emmerson (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: This paper studies the first nationwide introduction of automatic enrolment, in which employers in the United Kingdom are obliged to enrol employees into a workplace pension scheme, which employees can then choose to leave if they wish. We exploit the phased rollout of automatic enrolment since 2012 to estimate its effect on pension saving. As a result of automatic enrolment, participation in workplace pensions among eligible private sector workers is estimated to have increased by 37 percentage points, and workplace pension membership reached 88% amongst those affected by April 2015. Automatic enrolment significantly increased the average pension contribution rate, in part because some newlyenrolled employees received an employer contribution well above the minimum mandated by the government. Furthermore, many employees who did not have to be automatically enrolled were nonetheless brought into a workplace pension scheme as a result of the policy. We find no evidence of employers reducing employer contributions for newly-hired employees or existing members of workplace pensions.
    Keywords: Auto-enrolment, nudge. retirement, saving, private pensions; non-wage benefits
    Date: 2016–11–17
  11. By: Anqi Chen; Alicia H. Munnell
    Abstract: Individual Retirement Accounts (IRAs) now hold nearly half of total private retirement assets. Although almost all of the growth in IRA assets is driven by rollovers from employer-sponsored retirement plans, individuals’ contributions represent 13 percent of the new money flowing into IRAs each year. This brief uses data from the Survey of Income and Program Participation to examine the characteristics of those who contribute to an IRA. The discussion proceeds as follows. The first section provides a brief history of IRAs and discusses the difference between traditional and Roth IRAs. The second section describes the enormous importance of IRAs among private sector retirement plans and the relative unimportance of contributions to the buildup of assets in IRAs. The third section, using latent class analysis, shows that IRA contributors fall into three distinct groups: 1) higher-income individuals in two-earner couples who often currently contribute to a 401(k); 2) individuals in middle-income, one-earner households who also tend to contribute to a 401(k); and 3) higher earners who are self-employed. The final section concludes that only a tiny fraction of all households use IRAs to gain access to tax-preferred retirement saving – the original intent behind the introduction of IRAs. Automatically enrolling those without an employer plan into IRAs would be an effective use of a retirement savings vehicle that today serves primarily as a passive receptacle for rollovers.
    Date: 2017–04
  12. By: Abraham Olufunmilola; Jia Pu; Loren J. Schleiden; Steven M. Albert
    Abstract: To identify factors influencing older adults' poor satisfaction with sleep and their current healthcare seeking behaviors.
    Keywords: Poor sleep satisfaction, Sleep health, Sleep disturbance, Sleep complaints, Healthcare seeking behaviors, Older adults
    JEL: I

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