nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒10‒22
twenty-one papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Household responses to the cessation of grant income: The case of South Africa's Old Age Pension By Vimal Ranchhod
  2. The Ageing Trend and Related Socio-Economic Issues in Vietnam By Nguyen, Cuong
  3. Retirement and Informal Care-giving: Behavioral Patterns among Older Workers By Raab, Roman
  4. The recent rise of labor force participation of older workers in Sweden By Laun, Lisa; Palme, Mårten
  5. Long-Term Care in Latin America and the Caribbean? Theory and Policy Considerations By Caruso Bloeck, Martín; Galiani, Sebastian; Ibarrarán, Pablo
  6. Catalonia; Independence and Pensions By Javier Diaz Gimenez; Javier Diaz Jimenez
  7. Simplifying choices in defined contribution retirement plan design: A case study By Mitchell, Olivia S.; Keim, Donald B.
  8. Elderly Care Service in an Aging Society By Masaya Yasuoka
  9. Debt and financial vulnerability on the verge of retirement By Lusardi, Annamaria; Mitchell, Olivia S.; Oggero, Noemi
  10. The Relationship between Working Hours and Mortality in the United States By Murat Anil Mercan
  11. Mortgaging Europe’s periphery By Joan Costa Font; Valentina Zigante
  12. Global demographic change and climate policies By Gerlagh, Reyer; Jaimes Bonilla, Richard; Motavasseli, Ali
  13. Towards more inclusive growth in Colombia By Christine de la Maisonneuve
  14. Automation and demographic change By Abeliansky, Ana Lucia; Prettner, Klaus
  15. Analysis of Housing Equity Withdrawal by its Forms By Declan French; Donal McKillop; Tripti Sharma
  16. Wage flexibility of older workers and the role of institutions - evidence from the German LIAB data set By Kerndler, Martin
  17. Andamento demografico, immigrazione e sviluppo economico in provincia di Reggio Emilia By Aurelio Bruzzo
  18. Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection By Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  19. The effect of house prices on the long-term care market: Evidence from England By Bilotkach, Volodymyr; Braakmann, Nils; Gonzalo-Almorox, Eduardo; Wildman, John
  20. What Drives Reciprocal Behavior? The Optimal Provision of Incentives over the Course of Careers By Matthias Fahn; Anne Schade; Katharina Schüßler
  21. Should the unemployed care for the elderly? The effect of subsidized occupational and further training in geriatric care By Lang, Julia; Dauth, Christine

  1. By: Vimal Ranchhod (Southern Africa Labour and Development Research Unit, School of Economics, University of Cape Town)
    Abstract: How do poor households respond to the cessation of cash transfers in developing countries? South Africa's generous social pension system results in most of the poor elderly being the primary 'breadwinner' in the household. We extract a longitudinal dataset using the rotating panel component of the nationally representative Quarterly Labour Force Surveys, and use fixed effects regression models to estimate the magnitude of changes in household composition and employment that coincide with the departure of a pensioner from the household. We find statistically significant changes in both of these outcome measures. Compositional changes include a decrease in the number of school going aged children, the number of teenagers, and the number of young adults; while the number of older adults increases. We also find significant increases in the number of employed prime aged adults and older adults. The combination of compositional changes and employment changes results in an increase in the mean proportion employed in all of the working age adult groups that we investigate. Overall, households respond by decreasing the number of dependents, increasing the number of potential caregivers, and increasing the proportion of adults engaged in income generating activities.
    Date: 2017
  2. By: Nguyen, Cuong
    Abstract: The aging index of Viet Nam's population increased during the past 35 years. In 2014, the aging index was 43.8% for the population from 60 years and older and 30.3% for the population aged 65 and older. In addition, there is a growing trend of elderly people living alone in Viet Nam. In 2014 rural areas had a higher ratio of single elderly people than in urban areas. Women were more likely to live alone than men, and the rate of single elderly people living alone was lower among people who graduated from college or university. Up to 32.4% of the elderly aged 80 years or older in the group of low living conditions were living alone in 2014. This proportion in the group of elderly aged 80 years or older with high living conditions was only 3.1%. Thus there was a large difference in the proportion of elderly people living alone in urban and rural areas and in households with different economic conditions.
    Keywords: Elderly, Ageing Trending, Population Census, Vietnam.
    JEL: J1 J11
    Date: 2016–11–05
  3. By: Raab, Roman (European Commission – JRC)
    Abstract: This paper uses panel data from the Survey of Health, Aging and Retirement in Europe (SHARE) to study the effect of care-giving on retirement. The findings suggest that care- and support-giving contributes to the retirement decision, in particular for men. While the frequency of care activities is more influential in the male retirement decision, the most important factor for both genders turns out to be out-of-household care.
    Keywords: informal care-giving, retirement, economics of aging, panel data
    JEL: I19 J26 J22
    Date: 2017–10
  4. By: Laun, Lisa (IFAU - Institute for Evaluation of Labour Market and Education Policy); Palme, Mårten (Department of economics, Stockholm University)
    Abstract: This paper studies the background to the increase in labor force participation of older workers in Sweden since 2000. In the first part, we study how the characteristics of the elderly have changed with respect to health, education level and work environment, as well as the impact of joint decision-making within the household. In the second part, we study the importance of institutional changes, including a major reform of the old-age pension system, introduction of tax credits for older workers, changes of the mandatory retirement age and stricter eligibility criteria in the disability insurance program. We find that the rise in labor force participation has coincided with improvements in health and educational attainment across birth cohorts as well as increased screening stringency in the disability insurance program.
    Keywords: retirement; NDC pension plans; disability insurance
    JEL: I10 J26
    Date: 2017–09–19
  5. By: Caruso Bloeck, Martín (Universidad Nacional de la Plata); Galiani, Sebastian (University of Maryland); Ibarrarán, Pablo (Inter-American Development Bank)
    Abstract: This paper discusses theoretical and practical issues related to long-term care (LTC) services in Latin America. Demand for these services will rise as the region undergoes a swift demographic transition from its currently young population to a rapidly aging one, especially since the region's aging cohorts are more prone to experience a decline in their functional and physical abilities than elderly people elsewhere in the world. We argue that private insurance markets are ill-equipped to provide coverage to meet the need for LTC, while the amount of personal savings required to afford self-insurance is prohibitively high. We study how developed economies have dealt with the issue of LTC and pay special attention to the most salient features of their LTC programs. We then direct the discussion to Latin America, where LTC may not be an immediate priority, but governments are likely to encourage the development of LTC programs as demand for them steadily grows. In particular, policymakers are probably going to focus initially on LTC programs for the poor and the vulnerable, for whom LTC affordability is a greater problem. We therefore study how basic elements of policy design affect cost-effectiveness of LTC programs by means of a formal model. Our study shows that pro-poor programs are more cost effective when people have the option to receive cash subsidies, and the availability of in-kind and in-cash choices reduces program costs overall. We argue that our findings are natural starting points to start thinking about LTC program development in the region.
    Keywords: long-term care, long-term care insurance, population aging, Latin America
    JEL: J14 N36
    Date: 2017–09
  6. By: Javier Diaz Gimenez (IESE Business School); Javier Diaz Jimenez (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This article con rms and quanti es the intuition that the consequences of independence for Catalonian residents will depend crucially on the long term growth rate of the new republic. It also shows that the demographic, educational, and productivity advantages of Catalonian residents, when compared with those of the rest of Spain, are not enough to ensure a more prosperous economic future for Catalonians or a more sustainable pension system.
    Keywords: Computable general equilibrium, social security reform, retirement.
    JEL: C68 H55 J26
    Date: 2017–10–10
  7. By: Mitchell, Olivia S.; Keim, Donald B.
    Abstract: The growth and popularity of defined contribution pensions, along with the government's increasing attention to retirement plan costs and investment choices provided, make it important to understand how people select their retirement plan investments. This paper shows how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu and deleted nearly half of the offered funds. Using administrative data, we examine the changes in plan participant investment choices that resulted from the streamlining and how these changes might affect participants' eventual retirement wellbeing. We show that streamlined participants' new allocations exhibited significantly lower within-fund turnover rates and expense ratios, and we estimate this could lead to aggregate savings for these participants over a 20-year period of $20.2M, or in excess of $9,400 per participant. Moreover, after the reform, streamlined participants' portfolios held significantly less equity and exhibited significantly lower risks by way of reduced exposures to most systematic risk factors, compared to their non-streamlined counterparts.
    Keywords: retirement saving,default investment,pension,portfolio allocation,choice overload
    JEL: J32 D14 G11 E21
    Date: 2017
  8. By: Masaya Yasuoka (School of Economics, Kwansei Gakuin University)
    Abstract: An increase in life expectancy brings about an aging society, necessitating increasing demand for elderly care services. This paper presents an examination of how an aging society affects the demand for elderly care services and the labor market for elderly care services. Related reports of the literature describe that an aging society raises the share of labor dedicated to elderly care services. However, considering a closed economy in which saving affects the capital stock, an aging society does not always raise the share of labor allocated for elderly care services as derived by the related literature. This paper presents an examination of how the labor share and wage inequality between the final goods sector and elderly care sector are determined. In addition, this paper presents an examination of whether the subsidy for elderly care service increases demand for elderly care services, or not.
    Keywords: Aging society, Elderly care service, Labor mobility, Two-sector model
    JEL: J21 H20
    Date: 2017–10
  9. By: Lusardi, Annamaria; Mitchell, Olivia S.; Oggero, Noemi
    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.
    Date: 2017
  10. By: Murat Anil Mercan (Department of Economics, Gebze Technical University)
    Abstract: This study bridges a gap in the literature by examining the relationship between working hours and the probability of mortality among older workers in the United States. We have applied the Cox regression method, a frequently used approach in survival analysis, to panel data from the Health and Retirement Survey (HRS). We have found a small negative relationship exists between working hours and the probability of mortality. This study’s findings may raise questions about the need for initiatives in the European Union and other countries that regulate the length of work schedules.
    Keywords: mortality, working hours, the United States, male, female
    JEL: J01 J81
    Date: 2017–08–01
  11. By: Joan Costa Font; Valentina Zigante
    Abstract: The public funding of long-term care (LTC) programs to support the frail elderly is still underdeveloped compared to other areas of social protection for old age. In Europe, any moves to broaden entitlements to LTC are impeded by increasing demand for care coinciding with constrained public finances. We examine a set of conditions that facilitate modifications to the financial entitlement to LTC and elaborate the concept of ‘implicit partnerships’: an implicit (or ‘silent’) agreement, encompassing the financial co-participation of public funders and the time and/or financial resources of users and their families. We argue that the successful building of ‘implicit partnerships’ opens the door to potential reform of financial entitlements, either through ‘user partnerships’ relying on users’ co-payments, or ‘caregiver partnerships’ relying on informal care provision. We examine entitlements over time in seven European countries; the EU-5, the Netherlands and Sweden. Furthermore, we show that public attitudes towards financing and provision of LTC support the country specific financial entitlements and the type of implicit partnership we identify.
    Keywords: implicit partnership, partial insurance, cost sharing, long-term care, financial sustainability, family, Europe.
    Date: 2017–10
  12. By: Gerlagh, Reyer (Tilburg University, Center For Economic Research); Jaimes Bonilla, Richard (Tilburg University, Center For Economic Research); Motavasseli, Ali (Tilburg University, Center For Economic Research)
    Abstract: Between 1950 and 2017, world average life expectancy increased from below-50 to above-70, while the fertility rate dropped from 5 to about 2.5. We develop and calibrate an analytic climate-economy model with overlapping generations to study the effect of such demographic change on capital markets and optimal climate policies. Our model replicates findings from the OLG-demography literature, such as a rise in households’ savings, and a declining rate of return to capital. We also find that demographic change raises the social cost of carbon, at 2020, from 28 euro/tCO2 in a model that abstracts from demography, to 94 euro/tCO2 in our calibrated model.
    Keywords: climate change; social cost of carbon; environmental policy; demographic trends
    JEL: H23 J11 Q54 Q58
    Date: 2017
  13. By: Christine de la Maisonneuve (OECD)
    Abstract: Growth has become more inclusive in recent years in Colombia. Strong growth and targeted social policies have reduced absolute poverty. Conditional cash transfers and education policies have increased attendance in schools. Universal health care is improving wellbeing of many Colombians. Reductions in non-wage labour costs have increased formal employment and access to social benefits. However, income inequality remains high with large disparities across regions. The causes are many. High informality keeps many workers in low quality jobs without social benefits or access to finance. Inequality is a gender issue as labour force participation rates and wages are lower for women than for men. Inequalities also reflect low social mobility as opportunities for education and jobs are influenced by socio-economic backgrounds. More targeted programmes are necessary to increase education enrolment rates of disadvantaged children in less developed regions. Further reductions in non-wage labour costs can raise formal employment. Better access to labour market programmes, early childhood education and elderly and disability care can boost female labour market participation. More resources are needed for targeted social programmes to achieve stronger outcomes. A comprehensive pension system reform is needed to extend coverage and alleviate old-age poverty. This Working Paper relates to the 2017 OECD Economic Survey of Colombia ( y-colombia.htm)
    Keywords: Education, Health, Inclusive growth, Inequality, Informality, Labour market, Pensions, Regional Development, Social protection
    JEL: E24 E26 H20 H50 I0 J0
    Date: 2017–10–18
  14. By: Abeliansky, Ana Lucia; Prettner, Klaus
    Abstract: A standard theoretical framework of accumulation of traditional physical capital and automation capital predicts that countries with a lower population growth rate are the ones innovating/adopting new automation technologies faster. We test the model prediction using panel data for 60 countries from 1993 to 2013. Empirical estimates suggest that a 1% increase in population growth is associated with an approximate 2% reduction in the growth rate of robot density.
    JEL: J11 O14 O33 O40
    Date: 2017
  15. By: Declan French; Donal McKillop; Tripti Sharma
    Abstract: Using the household level data from the UK Wealth and Asset Survey for years 2006-2014, we explore a household’s decision to use one particular method of withdrawing home equity from a range of options available to them. These options include financial products such as remortgage contracts and equity release schemes (reverse mortgage and home reversion schemes) and informal mediums carried out by individual households themselves, for example downsizing of homeownership. The results show that homeowners prefer using formal channels of equity withdrawal. This tendency persists when controlling for household characteristics such as age profile, marital status and demographics and levels of housing wealth, income, savings and unsecured and secured debts. Our findings support the argument that while the decision to withdraw home equity conforms to consumption smoothing motives, the choice of an equity withdrawal medium goes beyond those motives and depends on the circumstances facing individual households.
    Keywords: Equity release schemes; Reverse mortgage; Refinancing; Downsizing; Housing; Homeownership; Retirement; Wealth de-accumulation
    JEL: D14 E21 G21 J14 R21
    Date: 2017–10
  16. By: Kerndler, Martin
    Abstract: High and rigid wages are a threat for employment, especially for older workers. While wage levels of job stayers in many countries are not decreasing in late working life, little is known about the evolution of wage flexibility over the lifecycle. Using the German LIAB data set, this paper investigates the age pattern of wage flexibility with respect to permanent and transitory shocks to firm productivity. Works councils are found to have an important effect on wage flexibility of older workers.
    JEL: J14 J31 J41 J51
    Date: 2017
  17. By: Aurelio Bruzzo
    Abstract: Nel presente Quaderno s’illustra la situazione socio demografica presente in provincia di Reggio Emilia, con particolare riferimento all’andamento naturale e sociale della popolazione registrato a partire dall’inizio del secolo in corso. Inoltre, si esamina l’attuale consistenza dell’immigrazione proveniente dall’estero, al fine di stabilire se questa componente demografica abbia positivamente contribuito al processo di sviluppo in ambito locale, dal momento che in questa area il fenomeno migratorio si è presentato già da molti anni e in misura alquanto consistente rispetto ad altre aree geografiche dell’Emilia-Romagna.
    Keywords: Demographic Trends; Immigrants; Local Economic Development
    JEL: J11 J15 R11
    Date: 2017–10–12
  18. By: Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developed by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insurance while overall 31% report no knowledge of the product. Although we find evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demand side, once respondents have been made aware of the risks, we find that demand remains low, in part because of misperceptions of risk, lack of bequest motive and home ownership which may act as a substitute.
    JEL: D14 I13
    Date: 2017–10
  19. By: Bilotkach, Volodymyr; Braakmann, Nils; Gonzalo-Almorox, Eduardo; Wildman, John
    Abstract: High house prices are often considered to be beneficial for the elderly due to the accumulation of wealth. However, as land is an input in the provision of public services, the elderly might be harmed by them, for example, due to a shortage of local care homes. Alternatively, care home providers might be attracted by asset-rich potential clients, which could lead to a positive effect of house prices on the provision of care. Applying an instrumental variables approach on English data, we show that higher house prices lead to fewer care homes, fewer entries into the market as well as fewer available beds.
    Keywords: Care homes, house prices, long-term care, England
    JEL: I11 R31
    Date: 2017–10–16
  20. By: Matthias Fahn; Anne Schade; Katharina Schüßler
    Abstract: We explore how inherent preferences for reciprocity and repeated interaction interact in an optimal incentive system. Developing a theoretical model of a long-term employment relationship, we first show that reciprocal preferences are more important when an employee is close to retirement. At earlier stages, repeated interaction is more important because more future rents can be used to provide incentives. Preferences for reciprocity still affect the structure of an employment relationship early on, though, because of two reasons: first, preferences for reciprocity effectively reduce the employee’s effort costs. Second, they allow to relax the enforceability constraint that determines the principal’s commitment in the repeated interaction. Therefore, reciprocity-based and repeated-game incentives are dynamic substitutes, but complements at any given point in time. We test our main predictions using data from the German Socio-Economic Panel (SOEP) and find evidence for a stronger positive effect of positive reciprocity on effort for older workers.
    Keywords: reciprocity, relational contracts, dynamic incentives
    JEL: C73 D21 D22 D86 D90 D91
    Date: 2017
  21. By: Lang, Julia; Dauth, Christine
    Abstract: This study analyzes the effectiveness of subsidized training in elderly care professions for the unemployed in Germany. We find that shorter further training increases employment but hardly affects wages. Retraining, which entails a vocational degree as geriatric nurse, causes strong lock-in effects, but afterwards substantial positive wage and employment effects that exceed those of further training. Yet, large shares of the estimated employment effects are attributable to part-time employment.
    JEL: I11 J24 J68
    Date: 2017

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