nep-age New Economics Papers
on Economics of Ageing
Issue of 2017‒11‒12
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Healthier when retiring earlier? Evidence from France By Messe, Pierre-jean; Wolff, François-Charles
  2. The rising longevity gap by lifetime earnings: Distributional implications for the pension system By Haan, Peter; Kemptner, Daniel; Lüthen, Holger
  3. R&D-driven medical progess, health care costs, and the future of human longevity By Böhm, Sebastian; Grossmann, Volker; Strulik, Holger
  4. The effect of old age pensions on child deprivation: revisiting the role of gender By Chloé van Biljon
  5. Working, Volunteering and Mental Health in the Later Years By Mosca, Irene; Wright, Robert E.
  6. The older, the richer? A decomposition of wealth inequality by age subgroups By Ihle, Dorothee; Siebert-Meyerhoff, Andrea
  7. Inequality and Poverty in Greece:Changes in Times of Crisis By Eirini Andriopoulou; Alexandros Karakitsios; Panos Tsakloglou
  8. How much will the literacy level of the working-age population change from now to 2022? By OECD
  9. Retirement in the Shadow (Banking) By Guillermo Ordoñez; Facundo Piguillem
  10. Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection By M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  11. Using the Health and Retirement Study for Disability Policy Research: A Review By Jody Schimmel Hyde; David C. Stapleton

  1. By: Messe, Pierre-jean; Wolff, François-Charles
    Abstract: This paper contributes to the literature on the health-retirement relationship by looking at the effect of retiring before legal age on health in later life in France. To account for the endogeneity of the early retirement decision, our identification strategy relies on eligibility rules to a long-career-based early retirement scheme introduced in France starting from 2004 that substantially increased the proportion of older workers leaving their last job before the legal age of 60 years. We find a positive association between early retirement treated first as exogenous and health problems among retirees. However, we fail to evidence any causal effect of early retirement on poor health once we account for the endogeneity of the decision to retire before the legal age. Controlling for working conditions has no influence on our results and occupying a demanding job is harmful to health after retirement regardless of the retirement date.
    Keywords: early retirement, self-assessed health, working conditions
    Date: 2017–10
  2. By: Haan, Peter; Kemptner, Daniel; Lüthen, Holger
    Abstract: This study uses German social security records to provide novel evidence about the heterogeneity in life expectancy by lifetime earnings and, additionally, documents the distributional implications of this earnings-related heterogeneity. We find a strong association between lifetime earnings and life expectancy at age 65 and show that the longevity gap is increasing across cohorts. For West German men born 1926-28, the longevity gap between top and bottom decile amounts to about 4 years (about 30%). This gap increases to 7 years (almost 50%) for cohorts 1947-49. We extend our analysis to the household context and show that lifetime earnings are also related to the life expectancy of the spouse. The heterogeneity in life expectancy has sizable and relevant distributional consequences for the pension system: when accounting for heterogeneous life expectancy, we find that the German pension system is regressive despite a strong contributory link. We show that the internal rate of return of the pension system increases with lifetime earnings. Finally, we document an increase of the regressive structure across cohorts, which is consistent with the increasing longevity gap.
    Keywords: mortality,lifetime inequality,pensions,redistribution
    JEL: H55 I14 J11
    Date: 2017
  3. By: Böhm, Sebastian; Grossmann, Volker; Strulik, Holger
    Abstract: In this paper we set up an overlapping generations model of gerontological founded human aging that takes the interaction between R&D-driven medical progress and access to health care into account. We use the model to explore potential futures of human health and longevity. For the baseline policy scenario of health care access, the calibrated model predicts substantial future increases in health and life expectancy, associated with rising shares of health expenditure in GDP. Freezing the expenditure share at the 2020 level by rationing access to health care severely reduces potential gains in health, longevity and welfare. These losses are greatest in the long run due to reduced incentives for medical R&D. For example, rationing is predicted to reduce potential gains of life-expectancy at age 65 by about 4 years in the year 2050. Generally, and perhaps surprisingly, young individuals (i.e. those who save the most health care contributions through rationing) are predicted to suffer the greatest losses in terms of life expectancy and welfare.
    Keywords: Longevity,Medical R&D,Morbidity,Health Care,Rationing
    JEL: H50 I10 C60
    Date: 2017
  4. By: Chloé van Biljon (Research on Socio-Economic Policy, Department of Economics, Stellenbosch University)
    Abstract: Existing work suggests that the South African state old age pension, through, increasing female decision-making, has a positive impact on the well being of children. This study investigates this concept in two parts. Part 1 aims to answer the question of whether the old age pension has a different impact on child depravation depending on the gender of the pension recipient. Part 2 investigates whether the old age pension influences household decision-making dynamics. Using all four waves of the national income dynamics study, identification comes from comparing each individual before and after receiving a pension. This study finds some evidence of a gender bias by both male and female pension recipients; females favour girls while males favour boys. The effect of the state old age pension on child deprivation (as measured by weight for height) is however not found to be robust to different model specifications. This paper exploits the effect of income on bargaining power to explain the effect of pensions on the relative decision making power within a household. We find evidence of shifts in the decision-making dynamics with pension receipt. These shifts are greater when the pension recipient is female. The results indicate that resources held by grandmothers enable woman within the household to be primary decision makers. We conclude that the reason we see a differential effect on child outcomes depending on the gender of the pension recipient is because of a change in household decision-making dynamics. The gains in decision-making power of females, caused by the pensions, lead to lower child deprivation rates. The evidence indicates that although the state old age pension is meant for the elderly it has important implications for child deprivation. Some light is shed on the mechanism through which the pension results in positive impacts for children – by increasing the decision making power of women. The evidence supports the hypothesis that resource control matters for intra-household allocation.
    Keywords: Female autonomy, Household decision-making, Child nutrition, Public pensions, South Africa
    JEL: J16 C21 D13 H57
    Date: 2017
  5. By: Mosca, Irene (Trinity College Dublin); Wright, Robert E. (University of Strathclyde)
    Abstract: This paper examines the effect that working for pay and volunteering has on the mental health of older Irish women and men. Data from four waves of The Irish Longitudinal Study of Ageing (TILDA) are used. Three measures that capture different dimensions of mental health are considered. Ordinary least squares regression estimates suggest that both working for pay and volunteering have statistically significant and substantially large positive effects on mental health. However, these effects are less well defined when fixed effects regression is used. The analysis also suggests that combining working for pay with volunteering is more beneficial in terms of mental health than either working for pay or volunteering on their own. That is, there is something "extra" from engaging in both activities. The estimates also suggest a possible trade-off between working for pay and volunteering in terms of mental health benefits. Volunteering may be a "good mental health substitute" for working for pay. The extent of this substitutability is particularly important amongst older people, since participation in paid employment decreases while volunteering increases in older age. Higher levels of volunteering may compensate for the mental health loss associated with lower levels of working for pay. If this is the case, policies that promote volunteering may be cost-effective if they result in higher levels of self-sufficiency amongst older people.
    Keywords: mental health, working, volunteering, older people
    JEL: I12 J14 J22
    Date: 2017–10
  6. By: Ihle, Dorothee; Siebert-Meyerhoff, Andrea
    Abstract: Departing from the implication of the basic life cycle model that substantial wealth inequality may arise simply because of differences in age, at first, we investigate the quantitative importance of age as a source of wealth differences in Germany using individual wealth data from the German Socio-Economic Panel for the years 2002, 2007 and 2012. Employing the well-known Gini coefficient, we decompose wealth inequality by age subgroups and calculate within- and between-group inequalities. Results suggest that more than one third of overall wealth inequality can be explained by transitory lifetime wealth differences due to age. Secondly, unconditional quantile regression is used to examine the effects of age on different points of the wealth distribution. Results reveal that the age effect is heterogeneous across the distribution. We find that age has no effect on low quantiles and an almost linear effect for the higher ones. For the middle part of the distribution, results show a hump-shaped pattern as predicted by theory. A combination of these results provides tentative evidence that an aging of the German population is associated with a growing dispersion of wealth at the upper tail of the distribution.
    Keywords: age,wealth,inequality decomposition,unconditional quantile regression
    JEL: D30 D31 D63
    Date: 2017
  7. By: Eirini Andriopoulou; Alexandros Karakitsios; Panos Tsakloglou
    Abstract: The Greek crisis was the deepest and longest ever recorded in an OECD country in the postwar period. The output declined by over a quarter, the disposable income by more than 40%, while the unemployment rate exceeded 27%. This paper explores the effects of the crisis on the level and the structure of aggregate inequality and poverty using the data of EU-SILC for the period 2007-2014. The results show that inequality rose but the magnitude of the change varies across indices. The recorded increases are larger when the indices used are relatively more sensitive to changes close to the bottom of the income distribution. Unlike claims often made in the public discourse, the elderly improved their relative position in the income distribution while there was substantial deterioration in the relative position of the enlarged group of the unemployed. The contribution of disparities between educational groups to aggregate inequality declined while that of disparities between socio-economic groups rose. All poverty indicators suggest that poverty increased substantially, especially when “anchored” poverty lines are used. Substantial changes are observed regarding the structure of poverty. Despite an increase in the population share of households headed by pensioners, their contribution to aggregate poverty declined considerably, with a corresponding increase in the contribution of households headed by unemployed persons. These changes are starker when distribution-sensitive poverty indices are utilised.
    Keywords: Greece, inequality, poverty, decomposition analysis
    Date: 2017–10
  8. By: OECD
    Abstract: Between 2012 and 2022, the literacy proficiency of the working-age population in the countries that took part in the Survey of Adult Skills is set to improve, mainly driven by the relatively low proficiency of the cohorts who will reach 65 between now and 2022 and the much higher literacy skills among the incoming age group. The participating countries are thus reaping the distant rewards of their investment in education since the 1970s. What these data show is that high quality schooling alone will not be enough to raise the quality of the workforce nearly as quickly as skills requirements are rising. Governments therefore need to redouble their efforts to make lifelong and lifewide learning a reality for all.
    Date: 2017–11–17
  9. By: Guillermo Ordoñez (University of Pennsylvania and NBER); Facundo Piguillem (EIEF and CEPR)
    Abstract: The U.S.economy has recently experienced a large increase in life expectancy and in shadow banking activities. We argue these two phenomena are intimately related. Agents resort on financial intermediaries to buy insurance against an uncertain life span after retirement. When they expect to live longer they are more prone to rely on financial intermediaries that are riskier but offer better terms for insurance – shadow banks. We calibrate the model to replicate the level of financial intermediation in 1980, introduce the observed change in life expectancy and show that the demographic transition is critical to account for the boom both of shadow banking and credit that preceded the recent U.S. financial crisis. We construct a counterfactual without shadow banks and show that they may have contributed 0.5 GDP, which is larger than the cost of the crisis of around 0.2 GDP.
    Date: 2017
  10. By: M. 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 developped by Einavetal. (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 off ered 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 demandside, oncer espondents 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 homeownership which may act as a substitute.
    Date: 2017–10–30
  11. By: Jody Schimmel Hyde; David C. Stapleton
    Abstract: This article highlights key information collected from Health and Retirement Study (HRS) respondents that benefits disability policy research and the body of knowledge that has resulted from this information.
    Keywords: Disability, employment, survey data, Health and Retirement Study
    JEL: I J

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