nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒04‒30
eight papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. On Welfare Effects of Increasing Retirement Age By Makarski, Krzysztof; Tyrowicz, Joanna
  2. Endogenous Fertility and Pension System By Yasuoka, Masaya
  3. Demographic Change and the European Income Distribution By Dolls, Mathias; Doorley, Karina; Paulus, Alari; Schneider, Hilmar; Sommer, Eric
  4. The Impact of a Permanent Income Shock on the Situation of Women in the Household: the case of a pension reform in Argentina By Inés Berniell; Dolores de la Mata; Matilde Pinto Machado
  5. Inequality in EU crisis countries. How effective were automatic stabilisers? By Callan, Tim; Doorley, Karina; Savage, Michael
  6. Age, tasks and skills in European labour markets. Background paper for the world bank report “Growing United: Upgrading Europe’s Convergence Machine” By Szymon Gorka; Wojciech Hardy; Roma Keister; Piotr Lewandowski
  7. Urban Green Space and Obesity in Older Adults By Dempsey, Seraphim; Lyons, Seán; Nolan, Anne
  8. Health insurance, endogenous medical progress, and health expenditure growth By Frankovic, Ivan; Kuhn, Michael

  1. By: Makarski, Krzysztof (Warsaw School of Economics); Tyrowicz, Joanna (University of Warsaw)
    Abstract: We develop an OLG model with realistic assumptions about longevity to analyze the welfare effects of raising the retirement age. We look at a scenario where an economy has a pay-as-you-go defined benefit scheme and compare it to a scenario with defined contribution schemes (funded or notional). We show that, initially, in both types of pension system schemes the majority of welfare effects comes from adjustments in taxes and/or prices. After the transition period, welfare effects are predominantly generated by the preference for smoothing inherent in many widely used models. We also show that although incentives differ between defined benefit and defined contribution systems, the welfare effects are of comparable magnitude under both schemes. We provide an explanation for this counter-intuitive result.
    Keywords: longevity, PAYG, retirement age, pension system reform, welfare
    JEL: C68 E21 J11 H55
    Date: 2018–03
  2. By: Yasuoka, Masaya
    Abstract: This paper presents consideration of two public pension systems having a Defined Contribution (DC) or a Defined Benefit (DB) structure. The differences between these two pension structures are considerably important. In fact, DC benefits for older people are changed according to a budget under a constant contribution rate by younger people, but DB entails a contribution rate that changes based on maintenance of a balanced budget, providing constant benefits for older people. In addition, this paper presents consideration of the child care of two types: one for the child care service and the other for the child care time. The noteworthy result shows that the DB pension system derives the multiple fertility if the child care is given by the time because of the contribution rate affects both the household disposable income and opportunity cost to have children.
    Keywords: Defined benefit, Defined contribution, Endogenous fertility
    JEL: H55 J13
    Date: 2018–04–11
  3. By: Dolls, Mathias (Ifo Institute for Economic Research); Doorley, Karina (Economic and Social Research Institute, Dublin); Paulus, Alari (ISER, University of Essex); Schneider, Hilmar (IZA); Sommer, Eric (IZA)
    Abstract: This paper assesses the effect of key demographic changes (population ageing and upskilling) that are expected by 2030 on the income distribution in the EU-27 and examines the potential of tax-benefit systems to counterbalance negative developments. Theory predicts that population ageing should increase income inequality, while the effect of up-skilling is more ambiguous. Tax-benefit systems may stabilize these expected changes though this is largely an empirical question given their typically complex nature. We use a decomposition technique to isolate the effect of projected demographic change on income inequality and poverty from the reaction of the labor market to this demographic change through wage adjustments. Our results show that demographic change is likely to lead to increasing inequality while related wage adjustments work mainly in the opposite direction. Changes to projected relative poverty are minimal for most countries. With a few exceptions, EU tax-benefit systems are able to absorb most of projected increase in market income inequality.
    Keywords: income distribution, demography, labor market, decomposition
    JEL: J11 J21 J22
    Date: 2018–03
  4. By: Inés Berniell (CEDLAS-UNLP); Dolores de la Mata (CAF); Matilde Pinto Machado (Universidad Carlos III de Madrid)
    Abstract: Income transfers from social programs are often not gender neutral and should, according to the vast literature on intra-household decision making and allocation, affect the distribution of bargaining power within the household. This result, however, was by and large established under the assumption of marriage stability. If this assumption does not hold, then the positive response of bargaining power to income found in the empirical research may be the artefact of sample selection. One may postulate, however, that when restricted to certain groups in the population, such as seniors, the assumption may hold since their probability of divorce is close to zero. In this paper we prove that the assumption is wrong, even when applied to seniors. We use a non-contributory pension reform in Argentina, that resulted in an unexpected and substantial increase in permanent income for around 1.8 million women, to study its effects on outcomes related to both marital stability and women’s bargaining power within the household. We find that the reform increased the probability of divorce/separation among senior highly educated women but had no impact on the low-educated. Instead, the latter gained considerable bargaining power within the household by decreasing the probability of being the only one in charge of household chores in tandem with an increase in their husbands’ participation in these chores.
    JEL: J12 J16 J26 H55
    Date: 2017–11
  5. By: Callan, Tim; Doorley, Karina; Savage, Michael
    Abstract: The Great Recession and the widespread adoption of fiscal austerity policies have heightened concern about inequality and how well tax-benefit systems redistribute. We examine how the distribution of income in the EU countries which were hardest hit during the recession evolved over this time. Using and extending a recently developed framework (Savage et al., 2017), the overall change in income inequality is decomposed into parts attributable to the change in market income inequality, changes in discretionary tax-benefit policy and automatic stabilisation effects. We implement this approach using the microsimulation software, EUROMOD, linked to EU-SILC survey data. Automatic stabilisation effects, particularly through benefits, are found to play an important role in reducing inequality in all the crisis countries. Their role is less important if we focus on the working age population only, due to the relative importance of old-age benefits in southern European welfare systems. Discretionary policy changes also contributed to reductions in inequality, but to a much lesser extent.
    Date: 2018–04–19
  6. By: Szymon Gorka; Wojciech Hardy; Roma Keister; Piotr Lewandowski
    Abstract: There are important intergenerational differences behind aggregate shifts away from manual jobs towards cognitive jobs, and away from routine work towards non-routine work. We study these age and cohort patterns in tasks and skills in European countries. Changes in the task composition were happening much faster among workers born in the 1970s and 1980s than among those born before 1970. The most routine occupations aged faster, while the least routine jobs slower than the average. Changes in the cohort-specific growth in the intensity of non-routine cognitive tasks and in the decline of the intensity of manual tasks can be attributed to changes in workforce upgrading – the rise in tertiary attainment was embodied in younger cohorts. By the 2010s, older workers across Europe were significantly less likely to be highly proficient in various skills, and significantly more likely to have low proficiency. These effects were visible among workers as young as 45 years, and were the most pronounced in the case of problems solving skills.
    Keywords: task content of jobs, routinisation, ageing, occupational change, skills, O*NET, PIAAC
    JEL: J21 J23 J24
    Date: 2017–05
  7. By: Dempsey, Seraphim; Lyons, Seán; Nolan, Anne
    Date: 2018
  8. By: Frankovic, Ivan; Kuhn, Michael
    Abstract: We study the impact of health insurance expansion in the US on health expenditure, longevity growth and welfare in an overlapping generations economy in which individuals purchase health care to lower mortality. We consider three sectors: final goods production; a health care sector, selling medical services to individuals; and an R&D sector, selling increasingly effective medical technology to the health care sector. We calibrate the model to match the development of the US economy/health care system from 1965 to 2005 and study numerically the impact of the insurance expansion on health expenditures, medical progress and longevity. We find that more extensive health insurance accounts for a large share of the rise in US health spending but also boosts the rate of medical progress. A welfare analysis shows that while the moral hazard associated with subsidized health care creates excessive health care expenditure, the gains in life expectancy brought about by induced medical progress more than compensate for this. By mitigating an intergenerational externality associated with the longevity benefits from current medical innovation the expansion of health insurance constitutes a Pareto improvement.
    Keywords: life-cycle model,health care spending,health insurance,medical progress,moral hazard,overlapping generations
    JEL: I11 I12 I18 J11 J17 O31 O41
    Date: 2018

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.