nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒04‒02
seventeen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. A Viable International Tax-Order for Cross-Border Pensions By Bernd Genser
  2. Testing the effect of population ageing on national saving rates: panel data evidence from Europe. By Marta Pascual-Sáez; David Cantarero-Prieto; María González-Diego
  3. How to Assess Fiscal Implications of Demographic Shifts; A Granular Approach By David Amaglobeli; Wei Shi
  4. Testing Happiness Hypothesis among the Elderly By Cid, Alejandro; Ferrés, Daniel; Rossi, Máximo
  5. Quelle réforme pour la réversion en France ? By Anne Lavigne
  6. The length of working life in Spain: levels, recent trends, and the impact of the financial crisis By Dudel, Christian; López Gómez, María Andrée; Benavides, Fernando G.; Myrskylä, Mikko
  7. Demographic trends and the real interest rate By Lisack, Noëmie; Sajedi, Rana; Thwaites, Gregory
  8. Distributional Effects of Alternative Strategies for Financing Long-Term Services and Supports and Assisting Family Caregivers By Melissa M. Favreault; Richard W. Johnson
  9. Growing pension deficits and the expenditure decisions of UK companies By Bunn, Philip; Smietanka, Pawel; Mizen, Paul
  10. Determinants of depressive symptomatology in caregivers of frail older-adults: The case of ultra-orthodox Jewish community By Tova Band-Winterstein; Offer E. Edelstein; Yaacov G. Bachner
  11. Pension Shocks and Wages By Pawel Adrjan; Brian Bell
  12. The power of percentage : Quantitative framing of pension income By Prast, Henriette; Teppa, F.
  13. Measuring the Redistributive Effect of Pensions By Alvaro Forteza
  14. Health cost risk : A potential solution to the annuity puzzle By Peijnenburg, J.M.J.; Nijman, Theo; Werker, Bas
  15. Evaluating welfare and economic effects of raised fertility By Krzysztof Makarski; Joanna Tyrowicz; Magda Malec
  16. Sustainability of the pension system in Macedonia: A comprehensive analysis and reform proposal with MK-PENS - dynamic microsimulation model By Blagica Petreski; Pavle Gacov
  17. Equilibrium Indeterminacy with Parental Altruism By Reichlin, Pietro

  1. By: Bernd Genser (Professor of Economics, University of Konstanz; Professor of Economics and Fellow of the Austrian Academy of Sciences (Vienna))
    Abstract: There is strong evidence that the existing pattern of cross-border pension taxation in OECD countries and beyond is extremely diverse and inconsistent and thus generates a double equity dilemma for individuals and countries alike. We argue that this dilemma cannot be solved within the current double-taxation treaty network and therefore propose a new conceptual framework for the taxation of old-age pensions in a world of high and increasing cross-border mobility of workers and pensioners. We demonstrate that a coordinated move to a front-loaded pension tax system and exclusive source taxation would pave the way for an international pension tax order which eliminates the double equity dilemma. As an additional innovative element of front-loaded pension taxation we discuss the decoupling of individual tax assessment and tax payment which may prove helpful by smoothing transitional effects when the front-loaded pension tax system is introduced.
    Keywords: International Tax-Order; Cross-Border Pensions
    Date: 2018–03–01
  2. By: Marta Pascual-Sáez; David Cantarero-Prieto; María González-Diego
    Abstract: The objective of this study is to test the relationships between population ageing and gross saving rates in European countries. We use panel data techniques to explore the possible non-linearity between it. We show that the dependency ratio, when is significant, negatively affects gross saving rates. Besides, life expectancy has non-linear effects on saving rates and rising longevity is a main factor to explain saving rates at national levels. European countries are concerned about the delivery of benefits and services and financial sustainability of their welfare state and increase gross national savings rates can help to fill this gap.
    Keywords: population ageing, gross saving rates, old-age dependency ratio, life expectancy, longevity, European countries.
    JEL: J11 E21
    Date: 2018–03
  3. By: David Amaglobeli; Wei Shi
    Abstract: Over the next few decades, the world will experience significant demographic shifts, with material fiscal implications. In many advanced and emerging market economies, aging populations will lead to higher spending on pensions and health care. Moreover, projected population dynamics will adversely affect growth and government revenues. Building on and extending a 2015 IMF Staff Discussion Note by Clements and others, this note presents a simple framework that can assist researchers in quantifying the effects of demographic changes resulting from population aging on government fiscal balances. It includes two country applications of the framework and an associated template. The note addresses several key questions: What are channels through which demographic changes could affect public finances? How can we quantify the fiscal impact of demographic changes? How can we tailor the assessment to country-specific circumstances?
    Keywords: Government spending;Health care spending;Population growth;Demographic transition;Age-related spending;Revenues;Pensions;Poland;Korea, Republic of;Asia and Pacific;Aging;Europe;Fiscal policy;Health care;demographic shifts, demographics, advanced economies, emerging market economies, population aging, pension spending, population dynamics, growth, demographic changes, fiscal balances, public finances, fiscal impacts, behavioral responses, Korea
    Date: 2016–09–27
  4. By: Cid, Alejandro; Ferrés, Daniel; Rossi, Máximo
    Abstract: A growing strand of economic literature focuses its attention on the relationship between happiness levels and various individual and socioeconomic variables. Recent studies analyze the impact of income, marital status, health and educational levels and other socioeconomic variables on satisfaction with life. A large majority of these studies limit their attention to industrialized countries. In our work, we analyze data for a group of individuals living in a Latin American country (Uruguay) with age 60 or older. We use a rich data set that allows us to test different happiness hypothesis employing four methodological approaches. We find that older people in Uruguay have a tendency to report themselves happy when they are married, they have higher standards of health and when they earn higher levels of income. On the contrary, they report lower levels of happiness when they live alone and when their nutrition is insufficient. We also find that education has no clear impact on happiness. We think that our study is an initial contribution to the study of those factors that can explain happiness among the elderly in Latin American countries. Future work will focus on enhanced empirical analysis and in extending our study to other countries.
    Keywords: Happiness; Health; Family; Censored Econometric Models; Semiparametric Methods; Treatment Evaluation
    JEL: C14 C24 I10 J12
    Date: 2018–12–11
  5. By: Anne Lavigne (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article aims at pointing the extreme heterogeneity of the survivor’s pension benefit system in France and at proposing solutions to overcome this complexity. We advocate a unified system based on splitting the pension rights among the couples (being they married or just registered) as it exists for example in Germany. This reform would be more efficient if it were articulated to a more comprehensive reform encompassing the transition from an annuity-based pension system to notional defined contribution accounts.
    Abstract: Après avoir examiné les raisons d’être de dispositifs de réversion (versement d’une fraction de la pension d’un conjoint décédé à son conjoint survivant), nous mettons en évidence les très grandes disparités, de philosophie et de modalités de calcul, des mécanismes de réversion dans les différents régimes de retraite français. Nous suggérons des pistes d’évolution qui vont d’ajustements paramétriques visant à unifier les modalités de calcul de la réversion entre les régimes, à des propositions de partage des droits au sein des couples s’articulant à des réformes plus systémiques de l’ensemble du système de retraite, en points ou en comptes notionnels.
    Keywords: pension,survivor benefit,notional defined contribution accounts,retraite,réversion,partage des droits,retraite par points,comptes notionnels
    Date: 2018–02
  6. By: Dudel, Christian; López Gómez, María Andrée; Benavides, Fernando G.; Myrskylä, Mikko
    Abstract: While there has been considerable debate about extending the length of working life, relatively little is known about this issue. We use data from the Spanish Continuous Working Life Sample for 2004–2013 to calculate period working life tables, which in turn allows us to assess the impact of the financial crisis on working life expectancy in Spain. Before the recession hit, working life expectancy in Spain was around 38 years for males and 33 years for females. The recession had a tremendous impact on the Spanish labor market, but the effects differed considerably by gender and occupational category. Men working in skilled non-manual jobs were less affected, while men working in unskilled manual jobs lost close to 14 years of working life expectancy. Women were less affected than men. With working life expectancy decreasing, the average proportion of lifetime spent in unemployment and outside the labor market increased markedly, whereas the average number of years spent in retirement changed only a little. When we decompose losses in working life expectancy by age group, we find that economic fluctuations affect both older and younger workers. This result suggests that policies that focus on retirement ages only are incomplete. We also compare our findings to the results obtained by Sullivans method, which is based on prevalence rates rather than the incidence-based working life table approach. We find that the use of Sullivans approach does not accurately reflect the levels of and the trends in working life expectancy.
    Keywords: Great Recession; length of working life; multistate life table; Spain; Sullivan's method; working life epectancy
    JEL: F3 G3
    Date: 2018–01–03
  7. By: Lisack, Noëmie (Bank of England); Sajedi, Rana (Bank of England); Thwaites, Gregory (Bank of England)
    Abstract: We quantify the impact of past and future global demographic change on real interest rates, house prices and household debt in an overlapping generations model. Falling birth and death rates can explain a large part of the fall in world real interest rates and the rise in house prices and household debt since the 1980s. These trends will persist as the share of the population in the high-wealth 50+ age bracket continues to rise. As the United States ages relatively slowly, its net foreign liability position will grow. The availability of housing and debt as alternative stores of value attenuates these trends. The increasing monopolisation of the economy has ambiguous effects.
    Keywords: Demographics; population ageing; neutral interest rates
    JEL: E13 E21 E43 J11
    Date: 2017–12–21
  8. By: Melissa M. Favreault; Richard W. Johnson
    Abstract: We use two historical data sources – the Health and Retirement Study and the Medicare Current Beneficiary Study – to consider the patterns in older Americans’ severe disability and their use of long-term services and supports (LTSS) by age and socioeconomic status. We then use a dynamic microsimulation model to project how the effects of various interventions to support those with severe disabilities and their caregivers would be distributed across the income distribution. The interventions that we examine fall into three broad classes: tax credits for caregiving expenses, respite care for people in the community with family caregivers, and new social insurance programs. Within each broad class of policies, we examine how sensitive outcomes are to changes in policy details (such as, in the case of tax credits, deductible levels, refundability, and income phase-outs).
    Date: 2018–03
  9. By: Bunn, Philip (Bank of England); Smietanka, Pawel (Bank of England); Mizen, Paul (Centre for Finance, Credit and Macroeconomics, University of Nottingham)
    Abstract: Large deficits have opened up on defined benefit pension schemes in the United Kingdom since 2007, and at the same time investment expenditure has been subdued; this is a common phenomenon in other countries too. We use privileged access to a unique new data set from The Pensions Regulator and two identification schemes to investigate the effects of deficits and deficit recovery plans on UK companies’ dividends, investment, wages and cash holdings. Identification is based on the close relationship between low long-term interest rates and pension deficits; and the external regulation of pension schemes by The Pensions Regulator. We show that firms with larger pension deficits voluntarily pay lower dividends, but they do not invest less. However, firms that are required to make deficit recovery contributions by the regulator have lower dividend and investment expenditure compared to other firms, and more so if they are financially constrained. These effects are large for some individual companies, but macroeconomically small compared to the stimulus offered by the Bank of England’s quantitative easing policy.
    Keywords: Pension deficits; investment; dividends; cash holdings; monetary policy
    JEL: E22 E52 G31 G35
    Date: 2018–02–26
  10. By: Tova Band-Winterstein (University of Haifa, Department of Gerontology); Offer E. Edelstein (2. Ben-Gurion University of the Negev, The Spitzer Department of Social Work); Yaacov G. Bachner (Ben-Gurion University of the Negev, Department of Public Health)
    Abstract: Depression is the most frequent negative health outcome among informal caregivers. The aims of the current study were (i) to assess the level of depression, (ii) to explore associations between care recipients' characteristics, caregivers' characteristics, situational factors and depression among Ultra-Orthodox Jewish (UOJ) caregivers. A total of 112 (44 men and 68 women) UOJ primary caregivers of frail older-adults were interviewed face-to-face in their homes, using valid and reliable measures. Participants reported a notable depressive symptomatology. Three variables emerged as significant predictors of caregiver depression: higher external control (chance), being a spouse, and lower levels of social support. External locus of control, being a spouse, and social support are highly important factors for explaining depression among UOJ caregivers. Resources should be allocated to target spousal caregivers with lower levels of social support and a greater sense of external locus of control in order to alleviate their depressive symptomatology.
    Keywords: Minorities, Ultra-Orthodox Jews, depressive symptomatology , caregiving, older adults
    Date: 2017–10
  11. By: Pawel Adrjan; Brian Bell
    Abstract: How do wages respond to firm-level idiosyncratic cost shocks? We create a unique dataset that links longitudinal data on workers' compensation to the unexpected costs that UK firms have been forced to pay to plug large deficits in their legacy defined benefit pension plans. We show that firms are able to share the burden of such costs when a significant share of their workers are current or former members of the plan. We also investigate how compensation responds to the closure of defined benefit plans to future benefit accrual. We find that firms are able to use such closures to effectively reduce total compensation of workers who are plan members. These results point to significant frictions in the labour market, which we show are a direct result of the pension arrangement that workers have. Closing schemes has an implicit cost for firms since it reduces the frictions that workers face.
    Keywords: wages, pensions, frictions
    JEL: J31 J32 G32
    Date: 2018–03
  12. By: Prast, Henriette (Tilburg University, School of Economics and Management); Teppa, F. (Tilburg University, School of Economics and Management)
    Abstract: We investigate whether the quantitative frame used to communicate future pension income to plan members matters for perceived pension income adequacy. We allocate plan members randomly to one of four pension income framing conditions: annual pension income, monthly pension income, pension income as percentage of current income, pension income as decimal of current income. We find that expressing projected pension income as a percentage (decimal) of current income significantly increases (decreases) the probability that a plan member perceives the pension income as too low. This effect is robust to adding retirement savings attitude. In addition, we find significant and intuitive effects of household wealth, income, age and education on perceived pension income adequacy. We discuss our findings against the backdrop of previous studies on the effect of numeric frames on perceptions, provide suggestions for further research and draw conclusions for pension communication and survey design.
    Date: 2018
  13. By: Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: In this document, I present a conceptual framework for the analysis of the redistributive effect of pensions. The paper makes specific recommendations on the controversial issue of whether pensions should be treated as transfers or deferred income. I show that most pension programs have both dimensions in different degrees and present a proposal to deal with them in a unified framework. The proposal has specific recommendations in terms of accounting and counterfactuals. Using some simple examples, I show that usual accounting and “nonbehavioral” assumptions —particularly regarding non-labor income— may be very misleading.
    Keywords: Pensions, redistribution, fiscal incidence analysis
    JEL: D31 H55 I38
    Date: 2017–12
  14. By: Peijnenburg, J.M.J. (Tilburg University, School of Economics and Management); Nijman, Theo (Tilburg University, School of Economics and Management); Werker, Bas (Tilburg University, School of Economics and Management)
    Abstract: We find that health cost risk lowers optimal annuity demand at retirement. If medical expenses can be sizeable early in retirement, full annuitisation at retirement is no longer optimal because agents do not have enough time to build a liquid wealth buffer. Furthermore, large deviations from optimal annuitisation levels lead to small utility differences. Our results suggest that health cost risk can explain a large proportion of empirically observed annuity choices. Finally, allowing additional annuitisation after retirement results in welfare gains of at most 2.5% when facing health cost risk, and negligible gains without this risk.
    Date: 2017
  15. By: Krzysztof Makarski (Narodowy Bank Polski; Warsaw School Economics; Group for Research in Applied Economics (GRAPE)); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw; Institut für Arbeitsrecht und Arbeitsbeziehungen in der Europäischen Union (IAAEU); Institute of Labor Economics (IZA)); Magda Malec (Group for Research in Applied Economics (GRAPE); Warsaw School of Economics)
    Abstract: In the context of the second demographic transition, many countries consider rising fertility through pro-family polices as a potentially viable solution to the fiscal pressure stemming from longevity. However, an increased number of births implies private and immediate costs, whereas the gains are not likely to surface until later and appear via internalizing the public benefits of younger and larger population. Hence, quantification of the net effects remains a challenge. We propose using an overlapping generations model with a rich family structure to quantify the effects of increased birth rates. We analyze the overall macroeconomic and welfare effects as well as the distribution of these effects across cohorts and study the sensitivity of the final effects to the assumed target value and path of increased fertility. We find that fiscal effects are positive but, even in the case of relatively large fertility increase, they are small. The sign and the size of both welfare and fiscal effects depend substantially on the patterns of increased fertility: if increased fertility occurs via lower childlessness, the fiscal effects are smaller and welfare effects are more likely to be negative than in the case of the intensive margin adjustments.
    Keywords: gender wage gap, age, cohort, decomposition, non-parametric estimates, Germany
    JEL: J31 J71
    Date: 2018
  16. By: Blagica Petreski; Pavle Gacov
    Date: 2018–02
  17. By: Reichlin, Pietro
    Abstract: Equilibria where altruistic generations are linked via positive bequests are indeterminate and subject to sunspot variables when each individual's utility in non-separable in her own age contingent consumption and sufficiently biased towards old age. This result does not require strong income effects and it applies if individuals select their own savings and bequests by taking the decisions of their offsprings and successors as given. In this case, the equivalence with the Dynastic Equilibria of a Ramsey-type model envisaged in Barro (1974) fails. I show that the structure of equilibria of the olg model with altruism is more similar to the one generated in a canonical olg economy with two goods.
    Keywords: Bequets; Indeterminacy; parental altruism
    JEL: E10 E21 E32
    Date: 2018–03

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