nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒01‒22
ten papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Old-age Labor Force Participation in Germany: What Explains the Trend Reversal among Older Men? And What the Steady Increase among Women? By Axel Börsch-Supan; Irene Ferrari
  2. Are Teacher Pensions "Hazardous" for Schools? By Patten Priestley Mahler
  3. Does a Discount Rate Rule Ensure a Pension Plan Can Pay Promised Benefits without Excessive Asset Accumulation? By Landon, Stuart; Smith, Constance
  4. The health benefits of a targeted cash transfer: the UK Winter Fuel Payment By Thomas Crossley; Federico Zilio
  5. Working Paper 09-17 - Reële herwaardering van de lonen via een puntenstelsel - Winnaars en verliezers bij recent gepensioneerden met een werknemerspensioen By Hans Peeters
  6. A Multivariate Model of Strategic Asset Allocation with Longevity Risk By Emilio Bisetti; Carlo A. Favero; Giacomo Nocera; Claudio Tebaldi
  7. Whistle While You Work: Job Insecurity and Older Workers' Mental Health in the United States By Italo A. Gutierrez; Pierre-Carl Michaud
  8. Labour supply responses to financial wealth shocks: evidence from Italy By Renata Bottazzi; Serena Trucchi; Matthew Wakefield
  9. Early-Life Correlates of Later-Life Well-Being: Evidence from the Wisconsin Longitudinal Study By Clark, Andrew E.; Lee, Tom
  10. Does the introduction of non-contributory social benefits discourage registered labour? Testing the impact of pension moratoriums on unregistered employment in Argentina (2003-2015). By Leonardo Eric Calcagno

  1. By: Axel Börsch-Supan; Irene Ferrari
    Abstract: The aim of this paper is to illustrate for Germany the factors that may explain the U-shaped pattern of older men’s labor force participation - from a long declining trend that began in the early 1970s to an increasing trend starting from the late 1990s - and at the same time the steady increase in older women’s labor force participation. In a first step, we provide graphical evidence of the trends of various variables which may be relevant, with the aim of investigating the presence or absence of common patterns between these factors and labor force participation. Then, through a decomposition analysis, we provide an empirical estimate of the contribution of some of these factors to the overall evolution of labor force participation. Our preliminary conclusion is that much of the change in the trend of older men’s labor force participation may be explained by changes in public pension regulations, and in particular by the phasing in of actuarial adjustments for early retirement. Regarding women, whether public pension rules play a role is unclear. Most probably, the secular change of women’s role in society is the main driver of the steadily increasing labor force participation among German women.
    JEL: H55 J14 J26
    Date: 2017–11
  2. By: Patten Priestley Mahler (Centre College)
    Abstract: I use a detailed panel of data and a unique modeling specification to explore how public schoolteachers respond to the incentives embedded in North Carolina’s retirement system. Like most public-sector retirement plans, North Carolina’s teacher pension implicitly encourages teachers to continue working until they are eligible for their pension benefits, and then leave soon afterward. I find that teachers with higher levels of quality, as measured by a teacher’s value-added to her students’ achievement test scores, are more responsive to the “pull” of teacher pensions. Younger teachers, those with higher salaries, and nonwhite teachers are also more likely to stay during the pension “pull.” All teachers show a strong response to the pension “push,” with about a quarter of teachers leaving every year once they become eligible for their pension. I depart from other models of teacher retirement by using a Cox proportional hazard model. Given that salaries are generally fixed by the state, I find that the number of years a teacher must work before she is eligible for her full pension benefit is the major driver of variation in pension wealth. This specification has the benefit of a flexible baseline hazard that can easily capture the sharp incentives driving a teacher’s retirement decision that are dependent on her proximity to retirement eligibility, and can flexibly account for differences driven by local labor market conditions. These analyses highlight important unintended effects that inform education policies going forward to ensure the retention of high-quality teachers in all types of schools.
    Keywords: Teacher Retirement, Teacher Pensions, Public Expenditure, Public Pensions, State Finance, Nonwage Benefits
    JEL: H55 H72 H75 J26 J32 I21
    Date: 2017–12
  3. By: Landon, Stuart (University of Alberta, Department of Economics); Smith, Constance (University of Alberta, Department of Economics)
    Abstract: The choice of discount rate makes a substantial difference to the magnitude of the assets required to ensure a pension plan is fully funded. Finance theory suggests that the discount rate should equal the default-free rate, but pension plan administrators argue for a rate equal to the long run return on plan assets. We evaluate the ability of a fully funded pension plan to meet its promised benefit payments when the plan's liabilities are determined using different discount rate-setting rules. To account for the uncertainty of the return to plan assets and future benefit payments, we employ Monte Carlo techniques and estimates using U.S. data. Due to the volatility of pension fund asset returns and payouts, to generate a high probability of meeting promised pension payments, a plan must use a discount rate that leads, on average, to the accumulation of significant assets in excess of those required to cover promised benefits. The better performing rules are a function of economic variables, such as the return on government bonds or the inflation rate. Two rules that yield a relatively high probability that pension obligations can be met, combined with the relatively low accumulation of excess assets, set the discount rate equal to a proxy for the corporate bond yield or an inflation forecast plus 3 percent. These rates are greater than the default free rate, but lower than the return on the plan portfolio.
    Keywords: Pension plans; discount rate; pension sustainability; defined benefit pension; policy rules
    JEL: H55 H75 H83 J26 J32
    Date: 2018–01–11
  4. By: Thomas Crossley (Institute for Fiscal Studies and Institute for Fiscal Studies, University of Essex); Federico Zilio (Institute for Fiscal Studies and Institute for Social & Economic Research)
    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 households with a member above the Female State Pension Age. 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.
    Keywords: benefits, health, biomarkers, heating, regression discontinuity
    JEL: H51 I12
    Date: 2017–10–18
  5. By: Hans Peeters
    Abstract: The Commission for Pension Reform 2020-2040 proposed an adjusted pension system which calculates pensions based on collected points. An important aspect of that system implied that past wages should be adjusted on the basis of the average wage increase. This Working Paper investigates who will be the winners and the losers when this adjustment mechanism is introduced by means of a points system in the salaried workers' scheme, and why. We show that people with low pensions, low-skilled workers, tenants and women nowadays have certain career features which make sure that they gain more often from such an operation than people with high pensions, highly skilled workers, owners and men. This also underlines the importance of minimum schemes in the impact of such a reform.
    Keywords: Pensions, Pension reforms, Point system
    JEL: I38 J38
    Date: 2017–09–19
  6. By: Emilio Bisetti; Carlo A. Favero; Giacomo Nocera (Audencia Business School - Audencia Business School); Claudio Tebaldi
    Abstract: Population-wide increase in life expectancy is a source of aggregate risk. Longevity-linked securities are a natural instrument to reallocate that risk. This paper extends the standard Campbell–Viceira (2005) strategic asset allocation model by including a longevity-linked investment possibility. Model estimation, based on prices for standardized annuities publicly offered by U.S. insurance companies, shows that aggregate shocks to survival probabilities are predictors for long-term returns of the longevity-linked securities, and reveals an unexpected predictability pattern. Valuation of longevity risk premium confirms that longevity-linked securities offer inexpensive funding opportunities to asset managers.
    Date: 2017–10
  7. By: Italo A. Gutierrez; Pierre-Carl Michaud
    Abstract: We estimate the effects of job insecurity on older workers' health outcomes using an instrumental variables approach which exploits downsizing and state-industry level changes in employment. We provide evidence that job insecurity, as measured by the self-reported probability of job loss, increases stress at work, the risk of clinical depression and lowers self-reported health status. IV estimates are much larger than OLS estimates which we interpret as evidence that job insecurity which is outside the control of workers may have much larger effects on mental health. These findings suggest that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers and pay attention at the stress that industry level changes in economic conditions may have on workers.
    Keywords: older workers, job insecurity, employer downsizing, health outcomes
    JEL: I12 M51
    Date: 2017
  8. By: Renata Bottazzi (Institute for Fiscal Studies and University of Bologna); Serena Trucchi (Institute for Fiscal Studies); Matthew Wakefield (Institute for Fiscal Studies and University of Bologna)
    Abstract: We look at how strongly shocks to asset values affect labour supply, using Italian data. We use asset price shocks to provide a measure of wealth changes that is exogenous to households’ saving and labour supply. Our results point to significant effects of wealth on hours of work and on whether or not agents leave their jobs. The magnitude of these effects can be substantial, for example for those individuals who suffered larger wealth losses during the financial crisis. Family effects reflect similar responses from men and women on average. Older working-age individuals drive the population results.
    Keywords: Labour Supply; Financial wealth shocks; Wealth effects
    Date: 2017–12–22
  9. By: Clark, Andrew E. (Paris School of Economics); Lee, Tom (Institute for Fiscal Studies, London)
    Abstract: We here use data from the Wisconsin Longitudinal Study (WLS) to provide one of the first analyses of the distal (early-life) and proximal (later-life) correlates of older-life subjective well-being. Unusually, we have two distinct measures of the latter: happiness and eudaimonia. Even after controlling for proximal covariates, outcomes at age 18 (IQ score, parental income and parental education) remain good predictors of well-being over 50 years later. In terms of the proximal covariates, mental health and social participation are the strongest predictors of both measures of well-being in older age. However, there are notable differences in the other correlates of happiness and eudaimonia. As such, well-being policy will depend to an extent on which measure is preferred.
    Keywords: health, eudaimonia, well-being, life-course, happiness
    JEL: I31 I38
    Date: 2017–11
  10. By: Leonardo Eric Calcagno (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)
    Date: 2017

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