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on Economics of Ageing |
| By: | Chen, Xi (Yale University); Eggleston, Karen (Stanford University); Sun, Ang (Central University of Finance and Economics) |
| Abstract: | China launched a new rural pension scheme (hereafter NRPS) for rural residents in 2009, now covering almost all counties with over 400 million people enrolled. This implementation of the largest social pension program in the world offers a unique setting for studying the economics of intergenerational relationships during development, given the rapidity of China's population aging, traditions of filial piety and co-residence, decreasing number of children, and dearth of formal social security, at a relatively low income level. We draw on rich household surveys from two provinces at distinct development stages – impoverished Guizhou and relatively well-off Shandong – to better understand heterogeneity in the impact of pension benefits. Employing a fuzzy regression discontinuity design, we find that around the pension eligibility age cut-off, the NRPS significantly reduces intergenerational co-residence, especially between elderly parents and their adults sons; promotes pensioners' healthcare service consumption; and weakens (but does not supplant) nonpecuniary and pecuniary transfers across three generations. These effects are much larger in less developed Guizhou province. |
| Keywords: | social pensions, intergenerational relationships, regional comparisons, coresidence, old-age care, service consumption, transfers |
| JEL: | H55 I18 J14 R28 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10731&r=age |
| By: | Alessandro Tondini; Cally Ardington (SALDRU, University of Cape Town); Ingrid Woolard (SALDRU, University of Cape Town) |
| Abstract: | We investigate the impact of a reform of the public, non-contributory pension system in South Africa, which lowered the age of retirement from 65 to 60 for men only. Despite no explicit requirement to stop working when the public pension is received, we provide clear evidence that this reform triggered a large drop in old-age male employment. We show that this drop comes entirely from informal employment, while formal jobs, even if not covered by private pension schemes, are not affected. These results are consistent with the view that a significant portion of informal employment occurs out of "necessity", and that, in particular at an old-age, workers choose not to work informally when they receive other income support. Simple back-of-the-envelope calculations reveal that the public pension alone can explain up to 10% less informal employment at the national level. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ldr:wpaper:206&r=age |
| By: | Pilar García-Goméz (Erasmus University); Titus Galama (University of Southern California); Eddy van Doorslaer (Erasmus University); Ángel López-Nicholás (Universidad Politécnica de Cartagena) |
| Abstract: | We present a theory of the relation between health and retirement that generates testable predictions regarding the interaction of health, wealth and financial incentives in retirement decisions. The theory predicts (i) that wealthier individuals (compared to poorer individuals) are more likely to retire for health reasons (affordability proposition), and (ii) that health problems make older workers more responsive to nancial incentives encouraging retirement (reinforcement proposition). We test these predictions using administrative data on older employees in the Dutch healthcare sector for whom we link adverse health events, proxied by unanticipated hospitalizations, to information on retirement decisions and actual incentives from administrative records of the pension funds. Exploiting unexpected health shocks and quasi-exogenous variation in nancial incentives for retirement due to reforms, we account for the endogeneity of health and nancial incentives. Making use of the actual individual pension rights diminishes downward bias in estimates of the effect of pension incentives. We find support for our affordability and reinforcement propositions. Both propositions require the bene ts function to be convex, as in our data. Our theory and empirical findings highlight the importance of assessing nancial incentives for their potential reinforcement of health shocks and point to the possibility that di erences in responses to nancial incentives and health shocks across countries may relate to whether the benefit function is concave or convex. |
| Keywords: | pensions, Health, retirement, disability, health investment, lifecycle model, health capital, optimal control |
| JEL: | C33 D91 H55 I10 I12 J00 J24 J26 J45 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-038&r=age |
| By: | Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova) |
| Abstract: | Pension reforms that raise minimum retirement age increase the pool of senior individuals aged 50+ who are not eligible to retire from the labour market. Using data from Italian provinces and regions and an instrumental variable strategy, we estimate the effects of local changes in the supply of workers aged between 50 and minimum retirement age on youth, prime age and senior employment. Results based on provincial data from 2004 to 2015, a period characterized by declining real GDP, indicate that adding one thousand additional senior individuals to the local labour supply reduces employment in the age group 16-34 by 189 units. Estimates based on longer regional data covering the period 1996 to 2015, that includes also a period of growing real GDP, show smaller negative effects for young workers, suggesting that the employment costs of pension reforms may be lower when the economy is growing. |
| Keywords: | pension reforms, lump of labour, youth employment, local labour markets |
| JEL: | J26 H55 J21 J14 J11 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10733&r=age |
| By: | Heer, Burkhard; Polito, Vito; Wickens, Michael R. |
| Abstract: | We study the sustainability of pension systems using a life-cycle model with distortionary taxation that sets an upper limit to the real value of tax revenues. This limit implies an endogenous threshold dependency ratio, i.e. a point in the cross-section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees. We quantify the threshold using a computable life-cycle model calibrated on the United States and on 14 European countries which have dependency ratios among the highest in the world. We examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems. New tax data on dynamic Laffer effects are provided. |
| Keywords: | Dependency Ratio; Fiscal space; Laffer Effects; Pensions |
| JEL: | E62 H20 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11978&r=age |
| By: | Alserda, G.A.G.; Steenbeek, O.W.; van der Lecq, S.G. |
| Abstract: | Collective pension arrangements tend to yield higher risk-adjusted pension benefits than individual plans due to intergenerational risk sharing and the lack of annuity conversion risk. These benefits pose the implicit assumption that the pension fund has an infinite horizon, while we observe that many pension funds discontinue. Using case studies of six discontinued pension funds, in combination with a simulation model, this paper analyses the occurrence and impact of pension fund discontinuity. Although discontinuity tends to increase the volatility of pension benefits, median benefits in most institutional settings increase after discontinuing the fund. We find that both the occurrence and impact of discontinuity depends strongly on the institutional setting of the pension fund. Stricter regulations, such as more conservative discount rates, increase the financial stability of the pension fund; however, they may reduce membership support through lower replacement rates. This poses a trade-off in the design of the pension system. |
| Keywords: | pension fund discontinuity |
| Date: | 2017–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureri:99472&r=age |
| By: | Alimi, Omoniyi (University of Waikato); Maré, Dave C. (Motu Economic and Public Policy Research Trust); Poot, Jacques (University of Waikato) |
| Abstract: | As is the case in most developed countries, the population of New Zealand is ageing numerically and structurally. Population ageing can have important effects on the distribution of personal income within and between urban areas. The age structure of the population may affect the distribution of income through the life-cycle profile of earnings but also through the spatial-temporal distribution of income within the various age groups. By decomposing New Zealand census data from 1986 to 2013 by age and urban area, this paper examines the effects of population ageing on spatial-temporal changes in the distribution of personal income to better understand urban area-level income inequality (measured by the Mean Log Deviation index). We focus explicitly on differences between metropolitan and non-metropolitan urban areas. New Zealand has experienced a significant increase in income inequality over the last few decades, but population ageing has slightly dampened this trend. Because metropolitan areas are ageing slower, the inequality-reducing effect of ageing has been less in these areas. However, this urban-size differential-ageing effect on inequality growth has been relatively small compared with the faster growth in intra-age group inequality in the metropolitan areas. |
| Keywords: | inequality, age composition, urbanisation, population aging |
| JEL: | J11 D31 R23 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10690&r=age |
| By: | Beetsma, Roel; Lekniute, Zina; Ponds, Eduard |
| Abstract: | We present empirical evidence that municipal bond yields are increasing in the pension debt towards U.S. state civil servants. However, positive yield effects of both pension and explicit debt are found only for the period since the start of the crisis, suggesting that the crisis triggered awareness of budgetary sustainability. The marginal yield effect of higher pension debt is smaller than that of higher explicit debt, but still economically meaningful. The effect of higher pension debt seems stronger when using market values of pension assets than actuarial values, suggesting that investors pay more attention to market values. |
| Keywords: | actuarial values; civil servants pension funds; explicit debt; implicit debt; market values; municipal yields; underfunding; unfunded pension liabilities |
| JEL: | G12 H55 H74 H75 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11998&r=age |
| By: | Lewandowski, Piotr (Institute for Structural Research (IBS)); Keister, Roma (Institute for Structural Research (IBS)); Hardy, Wojciech (Institute for Structural Research (IBS)); Górka, Szymon (Institute for Structural Research (IBS)) |
| Abstract: | This paper analyses the age dimension of changes in the task composition of jobs in 12 European countries between 1998 and 2014. We use the approach proposed by Autor et al. (2003) and Acemoglu & Autor (2011), and combine O*NET occupation content data with EU-LFS individual data to construct five task content measures: non-routine cognitive analytical, non-routine cognitive interpersonal, routine cognitive, routine manual, and nonroutine manual physical. We estimate occupation-level and worker-level regressions and find that the shift away from routine work and toward non-routine work occurred much faster among workers born between 1970 and 1989 than among workers born between 1950 and 1969. In the majority of countries, the ageing of the workforce occurred more quickly in occupations that were initially more routine-intensive, as the share of young workers in these occupations was declining. Individuals in these occupations were increasingly likely to be unemployed, especially if they were between the ages of 15 and 34. |
| Keywords: | task content of jobs, routinisation, ageing, occupational change, O*NET |
| JEL: | J21 J23 J24 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10732&r=age |
| By: | Damon Jones (University of Chicago); Alexander M. Gelber (University of California, Berkeley); Daniel W. Sacks (Indiana University); Jae Song |
| Abstract: | We develop a method for estimating the effect of a kinked budget set on workers' employment decisions, and we use it to estimate the impact of the Social Security Old-Age and Survivors Insurance (OASI) Annual Earnings Test (AET). The AET reduces OASI claimants' current OASI benefits in proportion to their earnings in excess of an exempt amount. Using a Regression Kink Design and Social Security Administration data, we document that the discontinuous change in the benefit reduction rate at the exempt amount causes a corresponding change in the employment rate. We develop conditions in a general setting under which we can use such patterns to estimate the elasticity of the employment rate with respect to the effective average net-of-tax rate. Our resulting elasticity point estimate for the AET is at least 0.49, suggesting that the AET reduces employment by more than one percentage point in the group we study. |
| Keywords: | social security, elasticity of employment rate, Annual Earnings Test |
| JEL: | H24 H31 H55 J14 J22 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-034&r=age |
| By: | Abeliansky, Ana; Prettner, Klaus |
| Abstract: | We analyze the effects of declining population growth on automation. A simple theoretical model of capital accumulation predicts that countries with lower population growth introduce automation technologies earlier. We test the theoretical prediction on panel data for 60 countries over the time span 1993-2013. Regression estimates support the theoretical prediction, suggesting that a 1% increase in population growth is associated with an approximately 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, different estimation methods, dynamic specifications, and changes to the measurement of the stock of robots. |
| Keywords: | automation,industrial robots,demographic change,population growth,declining labor force,economic growth |
| JEL: | J11 O14 O33 O40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:310&r=age |
| By: | Regina T. Riphahn; Rebecca Schrader |
| Abstract: | We investigate whether a cut in unemployment benefit payout periods affected older workers' labor market transitions. We apply rich administrative data and exploit a difference-in-differences approach. We compare the reference group of 40-44 year olds with constant benefit payout periods to older treatment groups with reduced payout durations. For the latter job exit rates declined, job finding rates increased, the propensity to remain employed increased, and the propensity to remain unemployed declined after the reform. These patterns suggest that the reform of unemployment benefits may be one of the reasons behind the recent incredible rise in old age employment in Germany. |
| Keywords: | labor force participation, employment, unemployment insurance, retirement |
| JEL: | J14 J26 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bav:wpaper:169_riphahnschrader&r=age |
| By: | Schünemann, Johannes; Strulik, Holger; Trimborn, Timo |
| Abstract: | Married people live longer than singles but how much of the longevity differential is causal and what the particular mechanisms are is not fully understood. In this paper we propose a new approach, based on counterfactual computational experiments, in order to asses how much of the marriage gap can be explained by public-goods sharing and collective bargaining of partners with different preferences and biology. For that purpose we integrate cooperative decision making of a couple into a biologically-founded life-cycle model of health deficit accumulation and endogenous longevity. We calibrate the model with U.S. data and perform the counterfactual experiment of preventing the partnership. We elaborate three economic channels and find that, as singles, men live 8.5 months shorter and women 6 months longer. We conclude that about 30% of the marriage gain in longevity of men can be motivated by economic calculus while the marriage gain for women observed in the data is attributed to selection or other (non-standard economic) motives. |
| Keywords: | health,aging,longevity,marriage-gap,gender-specific preferences,unhealthy behavior |
| JEL: | D91 J17 J26 I12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuweco:042017&r=age |
| By: | Jin Sun; Pavel V. Shevchenko; Man Chung Fung |
| Abstract: | Variable annuities, as a class of retirement income products, allow equity market exposure for a policyholder's retirement fund with electable additional guarantees to limit the downside risk of the market. Management fees and guarantee insurance fees are charged respectively for the market exposure and for the protection from the downside risk. We investigate the impact of management fees on the pricing of variable annuity guarantees under optimal withdrawal strategies. Two optimal strategies, from policyholder's and from insurer's perspectives, are respectively formulated and the corresponding pricing problems are solved using dynamic programming. Our results show that when management fees are present, the two strategies can deviate significantly from each other, leading to a substantial difference of the guarantee insurance fees. This provides a possible explanation of lower guarantee insurance fees observed in the market. Numerical experiments are conducted to illustrate our results. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1705.03787&r=age |
| By: | de Graaff, Thomas (Vrije Universiteit Amsterdam); Arribas-Bel, Daniel (University of Liverpool); Ozgen, Ceren (University of Birmingham) |
| Abstract: | Persistence of high youth unemployment and dismal labour market outcomes are imminent concerns for most European economies. The relationship between demographic ageing and employment outcomes is even more worrying once the relationship is scrutinized at the regional level. We focus on modelling regional heterogeneity. We argue that an average impact across regions is often not very useful, and that – conditional on the region's characteristics – impacts may differ significantly. We advocate the use of modelling varying level and slope effects, and specifically to cluster them by the use of latent class or finite mixture models (FMMs). Moreover, in order to fully exploit the output from the FMM, we adopt self-organizing maps to understand the composition of the resulting segmentation and as a way to depict the underlying regional similarities that would otherwise be missed if a standard approach was adopted. We apply our proposed method to a case-study of Germany where we show that the regional impact of young age cohorts on the labor market is indeed very heterogeneous across regions and our results are robust against potential endogeneity bias. |
| Keywords: | demographic aging, employment, finite mixture models, self-organizing maps, youth cohorts, immigrant workers |
| JEL: | J21 J61 J01 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10734&r=age |
| By: | Philippe Deprez; Pavel V. Shevchenko; Mario V. W\"uthrich |
| Abstract: | Various stochastic models have been proposed to estimate mortality rates. In this paper we illustrate how machine learning techniques allow us to analyze the quality of such mortality models. In addition, we present how these techniques can be used for differentiating the different causes of death in mortality modeling. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1705.03396&r=age |