nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒08‒20
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Pension systems do not suffer from ageing or lack of home-ownership but from financialisation By Hollanders, David
  2. Quantile treatment effects of Riester participation on wealth By Ihle, Dorothee
  3. Endogenous Health Groups and Heterogeneous Dynamics of the Elderly By Amengual, D.; Bueren, J.; Crego, J.A.;
  4. Debt and Financial Vulnerability on the Verge of Retirement By Annamaria Lusardi; Olivia S. Mitchell; Noemi Oggero
  5. Levels of and Changes in Life Satisfaction Predict Mortality Hazards: Disentangling the Role of Physical Health, Perceived Control, and Social Orientation By Gizem Hülür; Jutta Heckhausen; Christiane A. Hoppmann; Frank J. Infurna; Gert G. Wagner; Nilam Ram; Denis Gerstorf
  6. The fair surrender value of a tontine By Weinert, Jan-Hendrik
  7. The ageing population phenomenon By Nicoleta Caragea; Antoniade Ciprian Alexandru
  8. Financial fairness and conditional indexation By Kleinow, Torsten; Schumacher, Hans
  9. The health benefits of a targeted cash transfer: the UK Winter Fuel Payment By Crossley, Thomas F.; Zilio, Federico
  10. Valuation of a Bermudan DB underpin hybrid pension benefit By Xiaobai Zhu; Mary Hardy; David Saunders
  11. A multilevel latent Markov model for the evaluation of nursing homes' performance By Montanari, Giorgio E.; Doretti, Marco; Bartolucci, Francesco
  12. Social Tenants' Health: Evaluating the Effectiveness of Landlord Interventions By Paul Cheshire; Stephen Gibbons; Jemma Mouland

  1. By: Hollanders, David (Tilburg University, School of Economics and Management)
    Abstract: In this article I argue that (1) a house is a substitute for pension savings at the individual level; (2) housing wealth is not wealth on the aggregate level; (3) ageing is not the main problem for pension systems, instead it is financialisation; and (4) policies that link pensions and housing may serve financial actors.
    Date: 2016
  2. By: Ihle, Dorothee
    Abstract: In numerous industrialized countries the demographic change erodes the financial basis of traditional pay-as-you-go pension systems. To compensate for decreasing statutory pensions, many governments incentivize private saving by means of subsidized retirement plans. In this context, Germany introduced the so-called Riester pension plans. To assess its effectiveness, this paper analyzes the effects of participation in Riester plans on wealth at different points of the distribution. We employ an instrumental quantile regression approach using Riester eligibility as instrument for Riester participation. The analysis is based on microeconomic survey data from the German Socio-Economic Panel of wave 2012. Results suggest substantial heterogeneity in the effect of Riester participation on wealth. While Riester participation increases total net wealth in the lower tail of the conditional distribution, it does not have a significant effect on households in the middle part of the distribution. In the upper tail of the conditional asset distribution, we find negative treatment effects providing weak evidence in favor of a mere reallocation of households' asset portfolios.
    Keywords: Saving Incentives,Retirement,Wealth Distribution,Instrumental Quantile Regression
    JEL: D31 D91 I38 J32
    Date: 2017
  3. By: Amengual, D.; Bueren, J.; Crego, J.A.;
    Abstract: Health dynamics and its associated medical and care costs have been identified by the macro literature as a major concern of the elderly. Due to its multidimensionality, however, a dicult task faced by researchers is to summarize health parsimoniously into a single state variable. We propose a panel Markov switching model to identify patterns of health heterogeneity where individuals can move across health groups as they age. To estimate the model, we use Markov chain Monte Carlo techniques to exploit information from both the crosssectional and time series dimensions. We identify health groups for individuals in the Health and Retirement Survey for the US. Results show that there exists four clearly diVerentiated groups depending on individualÂ’s physical and mental disabilities. Furthermore, we show that health groups outperform other measures of health commonly used in the literature at explaining the variance in the use of nursing homes, home health care, out of pocket medical expenses and predicted mortality.
    Date: 2017–08
  4. By: Annamaria Lusardi; Olivia S. Mitchell; Noemi Oggero
    Abstract: We analyze older individuals’ debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, in the HRS we examine three different cohorts (individuals age 56–61) in 1992, 2004, and 2010 to evaluate cross-cohort changes in debt over time. We also use two waves of the NFCS (2012 and 2015) to gain additional insights into debt management and older individuals’ capacity to shield themselves against shocks. We show that recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments.
    JEL: D14
    Date: 2017–08
  5. By: Gizem Hülür; Jutta Heckhausen; Christiane A. Hoppmann; Frank J. Infurna; Gert G. Wagner; Nilam Ram; Denis Gerstorf
    Abstract: It is well-documented that well-being typically evinces precipitous decrements at the end of life. However, research has primarily taken a postdictive approach by knowing the outcome (date of death) and aligning in retrospect how well-being has changed for people with documented death events. In the present study, we made use of a predictive approach by examining whether and how levels of and changes in life satisfaction prospectively predict mortality hazards and delineate the role of contributing factors, including health, perceived control, and social orientation. To do so, we applied shared parameter growth-survival models to 20-year longitudinal data from 10,597 participants (n = 1,560 or 15% deceased; age at baseline: M = 44 years, SD = 17, range: 18–98 years) from the national German Socio-Economic Panel Study (SOEP). Our findings showed that lower levels and steeper declines of life satisfaction each uniquely predicted higher mortality risks. Results also reveal moderating effects of age and perceived control: Life satisfaction levels and changes had stronger predictive effects for mortality hazards among older adults. Perceived control is associated with lower mortality hazards; however, this effect is diminished for those who experience accelerated life satisfaction decline. Variance decomposition suggests that predictive effects of life satisfaction trajectories were partially unique (3-6%) and partially shared with physical health, perceived control, and social orientation (16-19 %). Our discussion focuses on the strengths and challenges of a predictive approach to link developmental changes (in life satisfaction) to mortality hazards and considers implications of our findings for healthy aging.
    Keywords: mortality, life satisfaction, perceived control, longitudinal, German Socio-Economic Panel Study (SOEP)
    Date: 2017
  6. By: Weinert, Jan-Hendrik
    Abstract: A tontine provides a mortality driven, age-increasing payout structure through the pooling of mortality. Because a tontine does not entail any guarantees, the payout structure of a tontine is determined by the pooling of individual characteristics of tontinists. Therefore, the surrender decision of single tontinists directly affects the remaining members' payouts. Nevertheless, the opportunity to surrender is crucial to the success of a tontine from a regulatory as well as a policyholder perspective. Therefore, this paper derives the fair surrender value of a tontine, first on the basis of expected values, and then incorporates the increasing payout volatility to determine an equitable surrender value. Results show that the surrender decision requires a discount on the fair surrender value as security for the remaining members. The discount intensifies in decreasing tontine size and increasing risk aversion. However, tontinists are less willing to surrender for decreasing tontine size and increasing risk aversion, creating a natural protection against tontine runs stemming from short-term liquidity shocks. Furthermore we argue that a surrender decision based on private information requires a discount on the fair surrender value as well.
    Keywords: Life Insurance,Tontines,Annuities,Life Insurance Surrender
    JEL: D81 D82 D86 G22 G23 H55 H75 I13 J14 J32 N23
    Date: 2017
  7. By: Nicoleta Caragea (National Institute of Statistics, Ecological University of Bucharest); Antoniade Ciprian Alexandru (Ecological University of Bucharest, National Institute of Statistics)
    Abstract: Each of us is a member of a population and its factors have an impact on many aspects of life. The knowledge of population data, whether the people living inside the country borders or those living in other countries, but having their permanent residence in Romania, are of particular importance in various aspects. The population size and quality, two dimensions in a complex connection, determine both the intensity of socio-economic processes and the specificity of their performance. Overtime changes in population, such as the number of persons and the structure, define the demographic behaviour of a country, accounting for a major milestone in the political, economic, social and cultural context. Demographic ageing is already a phenomenon in Romania, produced independently, as a result of social and economic conditions which characterise the society we live in a given period of time.
    Keywords: usual resident population, aging population, demographic phenomena, international migration
    JEL: J10 J13 J14 J15
    Date: 2017–04
  8. By: Kleinow, Torsten; Schumacher, Hans (Tilburg University, School of Economics and Management)
    Abstract: Collective pension contracts can generate advantages for their participants by implementing forms of risk sharing. To ensure the continuity of a collective scheme, it has to be monitored whether the contracts offered to participants are financially fair in terms of their market value. When risk sharing is implemented by means of optionalities such as conditional indexation, the analysis of financial fairness is not straightforward. In this paper, we use a stylised overlapping generations model to study financial fairness for a conditional indexation scheme. We find that financial fairness for all participants at all times is not feasible within a scheme of this type, unless the nature of indexation is such that the scheme is reduced to DC. However, financial fairness for incoming generations at the moment of entry can be realised. We show how to compute the fair contribution rate as a function of the current nominal asset/liability ratio for a given level of nominal entitlements. At low levels of the ratio, the fair contribution for incoming generations is also relatively low; nevertheless, the joining of a new generation still has a positive effect on the asset/liability ratio.
    Date: 2016
  9. By: Crossley, Thomas F.; Zilio, Federico
    Abstract: Each year the UK records 25,000 or more excess winter deaths, primarily among the elderly. A key policy response is the “Winter Fuel Payment†(WFP), a labelled but unconditional cash transfer to older households. The WFP has been shown to raise fuel spending among eligible households. We examine the causal effect of the WFP on health outcomes, including self-reports of chest infection, measured hypertension and biomarkers of infection and inflammation. We find a robust and statistically significant six percentage point reduction in the incidence of high levels of serum fibrinogen. Reductions in other disease markers point to health benefits, but the estimated effects are not robustly statistically significant.
    Date: 2017–08–15
  10. By: Xiaobai Zhu; Mary Hardy; David Saunders
    Abstract: In this paper we consider three types of embedded options in pension benefit design. The first is the Florida second election (FSE) option, offered to public employees in the state of Florida in 2002. Employees were given the option to convert from a defined contribution (DC) plan to a defined benefit (DB) plan at a time of their choosing. The cost of the switch was assessed in terms of the ABO (Accrued Benefit Obligation), which is the expected present value of the accrued DB pension at the time of the switch. If the ABO was greater than the DC account, the employee was required to fund the difference. The second is the DB Underpin option, also known as a floor offset, under which the employee participates in a DC plan, but with a guaranteed minimum benefit based on a traditional DB formula. The third option can be considered a variation on each of the first two. We remove the requirement from the FSE option for employees to fund any shortfall at the switching date. The resulting option is very similar to the DB underpin, but with the possibility of early exercise. Since we assume that exercise is only permitted at discrete, annual intervals, this option is a Bermudan variation on the DB Underpin. We adopt an arbitrage-free pricing methodology to value the option. We analyse and value the optimal switching strategy for the employee by constructing an exercise frontier, and illustrate numerically the difference between the FSE, DB Underpin and Bermudan DB Underpin options.
    Date: 2017–08
  11. By: Montanari, Giorgio E.; Doretti, Marco; Bartolucci, Francesco
    Abstract: The periodic evaluation of health care services is a primary concern for many institutions. In this work, we focus on nursing home services with the aim to produce a ranking of a set of nursing homes based on their capability to improve - or at least to keep unchanged - the health status of the patients they host. As the overall health status is not directly observable, latent variable models represent a suitable approach. Moreover, given the longitudinal and multilevel structure of the available data, we rely on a multilevel latent Markov model where patients and nursing homes are the first and the second level units, respectively. The model includes individual covariates to account for the patient case-mix and the impact of nursing home membership is modeled through a pair of correlated random effects affecting the initial distribution and the transition probabilities between different levels of health status. Through the prediction of these random effects we obtain a ranking of the nursing homes. Furthermore, the proposed model is designed to address non-ignorable dropout, which typically occurs in these contexts because some elderly patients die before completing the survey. We apply our model to the Long Term Care Facilities dataset, a longitudinal dataset gathered from Regione Umbria (Italy). Our results are robust to the sensitivity parameter involved (the number of latent states) and show that differences in nursing homes' performances are statistically significant. The authors certify that they have the right to deposit this contribution in its published format with MPRA.
    Keywords: clustered data, health status evaluation, non-ingorable dropout, random effects
    JEL: C13
    Date: 2017–08–08
  12. By: Paul Cheshire; Stephen Gibbons; Jemma Mouland
    Abstract: Objectives: To test whether a social landlord can improve health outcomes for older tenants and reduce their NHS usage by simple interventions. Design: Randomised controlled trial. Setting: Social housing in five London Boroughs. Participants: 547 individuals over 50 years of age. Intervention: Baseline and two follow-up assessments of individual's health and use of medical services undertaken by health professionals. In the treated groups, individuals were given health care and support at two different levels. 25 individuals had to be removed from the trial because early assessments revealed critical and untreated health issues. Main outcome measures: Self-reported health and wellbeing ratings and NHS usage. Conclusions: Even simple interventions to a targeted group (older and poorer people), can produce significant reductions in NHS usage. Significant reductions were found for 1) planned hospital usage; 2) nights in hospital; and 3) for emergency GP usage. Well-being scores improved in the most strongly treated group but these were not statistically significant. Perhaps the single most important finding was that the early health evaluations revealed that 4.5% of the total sample - not in the most deprived section of the population - had such severe health problems that significant and immediate intervention was required.
    Keywords: randomised control trial, social housing, health interventions
    JEL: I18 C93 R29
    Date: 2017–08

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