nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒03‒19
six papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Population aging and cross-country redistribution in integrated capital markets By Davoine, Thomas
  2. Pensions, Retirement, and the Disutility of Labor: Bunching in Brazil By Benjamin Thompson
  3. Inflated Expectations: More Immigrants Can’t Solve Canada’s Aging Problem on Their Own By William B.P. Robson; Parisa Mahboubi
  4. Decomposition of Demographic Effects on the German Pension System By Robert Fenge; François Peglow
  5. Mortality data reliability in an internal model By Fabrice Balland; Alexandre Boumezoued; Laurent Devineau; Marine Habart; Tom Popa
  6. La salud financiera del sistema público de pensiones español. Un análisis retrospectivo By Angel de la Fuente; Miguel Angel García Díaz; Alfonso R. Sánchez

  1. By: Davoine, Thomas (Institute for Advanced Studies, Vienna)
    Abstract: Population aging challenges the financing of social security systems in developed economies, as the fraction of the population in working age declines. The resulting pressure on capital-labor ratios translates into a pressure on factor prices and production. While European countries all face this challenge, the speed at which their population ages differs, and thus the pressure on capital-labor ratios. If capital markets are integrated, differences in population aging may lead to cross-country spillovers, as investors freely seek the best returns on capital. Using a multi-country overlapping-generations model covering 14 European Union countries, I quantify spillovers and find that capital market integration leads to redistribution across countries over the long run. For instance, GDP per capita would on average be 2.9 %-points lower in Germany in each of the next 50 years if capital markets were perfectly integrated and public debts kept constants with increases in labor income taxes, compared to a closed economy case; by contrast, GDP per capita would on average be 2.1 %-points higher in France, whose population ages slower than in Germany. I also show that pension reforms can change the cross-country redistribution patterns, some countries losing from capital market integration without the reform but winning with it.
    Keywords: population aging, pension reforms, capital markets, cross-country spillovers, overlapping-generations modelling
    JEL: C68 E60 F41 J11
    Date: 2018–02
  2. By: Benjamin Thompson (University of Michigan)
    Abstract: Elderly workers in developing countries face certain frictions, such as credit constraints, in their retirement decisions that may not be as common among their counterparts in the developed world, and these concerns may lead workers to work more or less than their preferred number of years. In this study, I firstly use regression discontinuity methods to show that a large fraction of urban male heads of households in Brazil (roughly 45%) react contemporaneously to pension eligibility by retiring. Because retirement is not required to receive the pension and because the return to working does not change discontinuously at the eligibility cutoff, workers should not react contemporaneously unless optimization frictions, such as credit constraints, are at work. Secondly, I develop a model of retirement decisions that explores how pensions in the face of credit constraints can influence such decisions, and I discuss applications of this model to determine how the observed behavior in conjunction with the model can be used to make inferences about welfare and labor supply decisions in the face of different pension values.
    Date: 2017
  3. By: William B.P. Robson (C.D. Howe Institute); Parisa Mahboubi (C.D. Howe Institute)
    Abstract: Higher immigration can ease, but not entirely mitigate, the impacts of demographic change on the workforce, according to a new report from the C.D. Howe Institute. In “Inflated Expectations: More Immigrants Can’t Solve Canada’s Aging Problem on Their Own” authors William B.P. Robson and Parisa Mahboubi encourage governments to adopt policies to complement immigration that are necessary for Canada to meet its demographic challenge.
    Keywords: Demographics and Immigration; Population Trends
    JEL: J11 J18
  4. By: Robert Fenge; François Peglow
    Abstract: The paper analyses the impact of demographic developments on the German pension system until the year 2060. The projections are simulated for a range of assumptions on the latest demographic trends and on the labour market and comprise the latest pension legislation. As a central innovation we present a decomposition approach which allows to identify the isolated effects of mortality, fertility and migration developments on the dynamics of the German pension system. We show that the past population structure - driven by past fertility changes - and future mortality improvements will be the most important factors shaping the development of the German pension system. The results have a number of implications for effective and sustainable pension reforms.
    Keywords: population ageing, German pension system, labour market
    JEL: H55
    Date: 2017
  5. By: Fabrice Balland; Alexandre Boumezoued; Laurent Devineau; Marine Habart; Tom Popa
    Abstract: In this paper, we discuss the impact of some mortality data anomalies on an internal model capturing longevity risk in the Solvency 2 framework. In particular, we are concerned with abnormal cohort effects such as those for generations 1919 and 1920, for which the period tables provided by the Human Mortality Database show particularly low and high mortality rates respectively. To provide corrected tables for the three countries of interest here (France, Italy and West Germany), we use the approach developed by Boumezoued (2016) for countries for which the method applies (France and Italy), and provide an extension of the method for West Germany as monthly fertility histories are not sufficient to cover the generations of interest. These mortality tables are crucial inputs to stochastic mortality models forecasting future scenarios, from which the extreme 0,5% longevity improvement can be extracted, allowing for the calculation of the Solvency Capital Requirement (SCR). More precisely, to assess the impact of such anomalies in the Solvency II framework, we use a simplified internal model based on three usual stochastic models to project mortality rates in the future combined with a closure table methodology for older ages. Correcting this bias obviously improves the data quality of the mortality inputs, which is of paramount importance today, and slightly decreases the capital requirement. Overall, the longevity risk assessment remains stable, as well as the selection of the stochastic mortality model. As a collateral gain of this data quality improvement, the more regular estimated parameters allow for new insights and a refined assessment regarding longevity risk.
    Date: 2018–03
  6. By: Angel de la Fuente; Miguel Angel García Díaz; Alfonso R. Sánchez
    Abstract: En esta nota se analiza la evolución de las cuentas del sistema público de pensiones contributivas de la Seguridad Social durante las tres últimas décadas utilizando una descomposición contable de su saldo neto que permite aislar la contribución al mismo de una serie de factores que inciden sobre sus gastos e ingresos. El resultado más llamativo es que el estancamiento de la productividad y los salarios reales ha jugado un papel más importante que el envejecimiento de la población en el deterioro de las finanzas del sistema. El impacto negativo de estos dos factores se ha visto compensado parcialmente por una mejora de la tasa de ocupación, por una gradual reducción de la generosidad de las normas de cómputo de la pensión y por la creciente aportación del Estado a la financiación de los complementos de mínimos de las pensiones.
    Date: 2018–03

This nep-age issue is ©2018 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.