nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒06‒25
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labor Force Participation of the Elderly in Japan By Takashi Oshio; Emiko Usui; Satoshi Shimizutani
  2. Why are People Working Longer in the Netherlands? By Adriaan Kalwij; Arie Kapteyn; Klaas de Vos
  3. Labour Market Decisions of the Self-Employed in the Netherlands at the Statutory Retirement Age By Amparo Nagore Garcia; Mariacristina Rossi; Arthur van Soest
  4. Effects of Taxes and Safety Net Pensions on life-cycle Labor Supply, Savings and Human Capital: the Case of Australia By Fedor Iskhakov; Michael Keane
  5. Combining Forces to Combat Elder Financial Victimization How Consumers Can Avoid the Financial Pitfalls of Cognitive Aging and What They Should Be Asking Their Financial Institutions By Rentezelas, Jeanne; Santucci, Larry
  6. Trends in Labor Force Participation of Older Workers in Spain By Pilar García-Gómez; Sergi Jimenez-Martin; Judit Vall Castelló
  7. Long-run Trends in the Economic Activity of Older People in the UK By James Banks; Carl Emmerson; Gemma Tetlow
  8. The distribution of pension wealth in Europe By OLIVERA Javier
  9. Optimal risk-sharing in pension funds when stock and labor markets are co-integrated By Ilja Boelaars; Roel Mehlkopf
  11. Pollution and Growth: The Role of Pension on the Efficiency of Health and Environmental Policies By Armel Ngami; Thomas Seegmuller
  12. Sustainable finance for inclusive growth in Thailand By Adam Bogiatzis; Hidekatsu Asada; Mohamed Rizwan Habeeb Rahuman
  13. Age-Specific Adjustment of Graduated Mortality By Yahia Salhi; Pierre-Emmanuel Thérond
  14. Pauvreté, Egalité, Mortalité: Mortality (In)Equality in France and the United States By Janet Currie; Hannes Schwandt; Josselin Thuilliez
  15. Labor Market and Distributional Effects of an Increase in the Retirement Age By Geyer, Johannes; Haan, Peter; Hammerschmid, Anna; Peters, Michael
  16. Making growth more inclusive in Thailand By Lara Fleischer; Adam Bogiatzis; Hidekatsu Asada; Vincent Koen
  17. Are rising house prices really good for your brain? House value and cognitive functioning among older Europeans By Isabelle CHORT; Bénédicte APOUEY
  18. The Impact of Pensions and Insurance on Global Yield Curves By Robin Greenwood; Annette Vissing-Jorgensen
  19. Changes in Nutrient Intake at Retirement By Melvin Stephens Jr.; Desmond Toohey

  1. By: Takashi Oshio; Emiko Usui; Satoshi Shimizutani
    Abstract: Japan experienced increases in labor force participation (LFP) of the elderly in recent years, as have other advanced countries. In the present study, we overview the employment trend of the elderly in Japan, and examine what factors have contributed to its increase since the early 2000s. Improved health and longevity, increasing education levels, and a shift towards less physically demanding jobs have allowed the elderly to stay longer in the labor force. However, elderly employment rebound and its timing are more closely linked to changes in social security incentives, especially increases in the eligibility age for public pension benefits. More broadly, reduced generosity in social security programs since the mid-1980s has been a key driver of the long-term trend change in elderly employment. A series of social security reforms have helped utilize the elderly’s potential work capacity, accumulated due to improving health conditions and other favorable factors for LFP in the elderly.
    JEL: H55 J21 J26
    Date: 2018–05
  2. By: Adriaan Kalwij; Arie Kapteyn; Klaas de Vos
    Abstract: Labor force participation at older ages has been rising in the Netherlands since the mid-nineteen-nineties. Reforms of the social security and pension systems have often been put forward as main explanations for this rise. However, participation rates above the normal retirement age of 65 have almost tripled for men and quadrupled for women despite the fact that at those ages reforms are unlikely to have had much impact. This suggests other factors may have played an important role in this rise as well. In addition to the effects of reforms in social security and pension systems, this chapter examines the importance for men’s labor force participation at older ages of improved health, increased levels of education, and differences in skills across cohorts, as the older cohorts moved into retirement, such that workers’ characteristics better matched labor demand. These changes on the labor supply side are likely to have contributed to the success of the reforms since the mid-nineteen-nineties and to have had a large independent impact on men’s labor force participation at older ages.
    JEL: J14 J18 J26
    Date: 2018–05
  3. By: Amparo Nagore Garcia (Luxembourg Institute of Socio-economic Research - LISER, Luxembourg); Mariacristina Rossi (Department of Management, University of Torino, Italy); Arthur van Soest (Department of Econometrics and Operations Research, Tilburg University, The Netherlands)
    Abstract: We investigate retirement decisions of the self-employed in the Netherlands using administrative data. We focus on the time period around which individuals reach the statutory retirement age (SRA, 65 years in most cases). After the statutory retirement age, each Dutch resident receives the Old Age State Pension annuity (AOW), providing an income at the subsistence level. Both the timing and the magnitude of this state pension are well known in advance. According to a standard leisure/consumption trade-off life cycle model, receiving AOW should therefore have no impact on labour supply choices. While employees often face the demand side restriction of mandatory retirement, this does not apply to the self-employed. We investigate whether retirement and earnings of the self-employed change at the SRA and whether any such changes vary with, e.g., the level of financial wealth. We find a peak in retirement when self-employed reach the SRA. The evidence suggests that the benchmark of retiring at 65 is acting as a driver, due to behavioural features like anchoring or a social norm.
    Keywords: Life cycle model, retirement decision, reference point, social norm.
    JEL: D91 D31 J26 L26
    Date: 2018–06
  4. By: Fedor Iskhakov (Australian National University and ARC Center of Excellence in Population Ageing Research); Michael Keane (UNSW School of Economics and ARC Center of Excellence in Population Ageing Research)
    Abstract: In this paper we structurally estimate a life-cycle model of consumption/savings, labor supply and retirement, using data from the Australian HILDA panel. We use the model to evaluate effects of the Australian aged pension system and tax policy on labor supply, consumption and retirement decisions. Our model accounts for human capital accumulation via learning by doing, as well as wealth accumulation and decumulation over the life cycle, uninsurable wage risk, credit constraints, a non-absorbing retirement decision, and labor market frictions. We account for the “bunching” of hours by discretizing job offers into several hours levels, allowing us to investigate labor supply on both intensive and extensive margins. Our model allows us to quantify the effects of anticipated and unanticipated tax and pension policy changes at different points of the life cycle. Our results imply that the Australian Aged Pension system as currently designed is very poorly targeted, so that means testing and other program rules could be improved.
    Keywords: Labor supply, human capital accumulation, retirement, pensions, taxes, structural model, anticipated and unanticipated policy changes, counterfactual simulations
    JEL: J22 J24 J26 C63
    Date: 2018–05
  5. By: Rentezelas, Jeanne (Federal Reserve Bank of Philadelphia); Santucci, Larry (Federal Reserve Bank of Philadelphia)
    Abstract: Medical research has linked financial vulnerability to accelerated cognitive aging — the process by which cognitive abilities decline with age. Consumers who understand the risks of cognitive aging and what their financial institutions are doing to detect and deter financial crimes are better positioned to safeguard their retirement savings. In this paper, we examine how consumers and financial institutions can prepare for the financial pitfalls of aging. We present seven important steps that consumers aged 50 or older can take to protect themselves. We also provide consumers with a list of six questions to determine how well their financial institutions are prepared to detect signs of diminished financial capacity, elder fraud, and financial abuse, and to prevent financial losses from occurring.
    Keywords: elder fraud; financial exploitation; retirement planning
    JEL: D18 G21 G28 J14 K22
    Date: 2018–06–14
  6. By: Pilar García-Gómez; Sergi Jimenez-Martin; Judit Vall Castelló
    Abstract: Similar to other OECD countries, labor force participation rates of Spanish older workers were falling until the mid-1990s when there was a reversal in the trend. Labor force participation rates of Spanish men have been increasing since then, although at a slower pace than in other OECD countries. We explore to what extent several factors can be behind these trends. First, we conclude that the (old-age) social security system (except perhaps for the disability component) has played a marginal (at most) role on this reversal given the lack of major changes in social security benefits until the last set of reforms in 2011 and 2013. Second, we also rule out that changes in the health status of the population are responsible for the reversal of this trend. Finally, we find that aggregate economic conditions, and differences across cohorts in both the skill composition and the labor force attachment of wives are potential drivers of these observed changes.
    JEL: J14 J21 J26
    Date: 2018–05
  7. By: James Banks; Carl Emmerson; Gemma Tetlow
    Abstract: We document employment rates of older men and women in the UK over the last forty years. In both cases growth in employment since the mid 1990s has been stronger than for younger age groups. On average, older men are still less likely to be in work than they were in the mid 1970s although this is not true for those with low education. We highlight issues with using years of schooling as a measure of educational achievement for analysing labour market trends at older ages, not least because a large proportion of men who left school at young ages without any formal qualifications, have subsequently acquired some. Reforms – such as the abolition of the earnings test and rises in the female State Pension Age, have pushed up employment rates. But other factors – such as the shift from defined benefit to defined contribution pensions being offered by private sector employers and the growth in employment rates at younger ages among successive cohorts of women – are also important. We discuss the role of other cohort and economy-wide trends, highlighting that the proportion of older men and women employed in professional, managerial and technical occupations has been particularly strong.
    JEL: H55 J26
    Date: 2018–05
  8. By: OLIVERA Javier
    Abstract: The present paper estimates pension wealth inequality among elderly households for 26 EU countries by exploiting cross-sections of the EU Statistics on Income and Living Conditions survey. To assess the role of life expectancy inequalities on pension wealth, this paper estimates life tables per educational level with auxiliary data in order to capture socio-economic status (SES). This procedure also distinguishes mortality estimates by sex, birth cohort, and year. The results indicate that differential mortality due to SES increases pension wealth inequality. In most of the countries, this effect has decreased between 2006 and 2014, which means that SES inequalities in mortality are less important in explaining today?s pension wealth inequality. Gini re-centered influence function (RIF) regressions confirm the diminishing influence of tertiary education on pension wealth inequality.
    Keywords: Pension wealth; Inequality; Europe; Mortality; Education; RIF regressions
    JEL: D31 H55 J14
    Date: 2018–06
  9. By: Ilja Boelaars; Roel Mehlkopf
    Abstract: A well established believe in the pension industry is that collective pension funds should take more stock market risk (compared to individual retirement accounts) since risk may be shared with future generations. We extend the OLG model of Gollier (2008) by adding labor income risk in the spirit of Benzoni, Collin-Dufresne, and Goldstein (2007) and show that this idea may be misguided. For the empirical range of parameter values reported by Benzoni et. al., we find that optimal risk-sharing actually implies that collective pension funds should take less stock market risk, not more. If labor income and dividend income are co-integrated, efficient risk-sharing policies should transfer risk from future generations to current generations instead of the other way around. Furthermore, we find that the potential welfare gains from intergenerational risk-sharing are significantly lowered.
    Keywords: Dynamic portfolio choice; Labor income risk; Pension; Retirement; Intergenerational risk-sharing; Funded pension systems
    JEL: H55 G11 G23 J26 J32
    Date: 2018–05
  10. By: Freddy Heylen; Renaat Van de Kerckhove (-)
    Abstract: Rising pressure on the welfare state due to aging, forces governments in all OECD countries to develop effective policies to raise employment, in particular employment among older individuals and low educated individuals. Increased sensitivity to rising inequality in society has made the challenge for policy makers only greater. In this paper we evaluate alternative fiscal policy scenarios to face this challenge. We construct and use an overlapping generations model for an open economy where individuals differ not only by age, but also by innate ability and human capital. The model allows us to study effects on aggregate employment, per capita income and welfare, as well as effects for specific age and ability groups. We show that well-considered fiscal policy changes can significantly improve macroeconomic productive efficiency, without increasing intergenerational or intragenerational welfare inequality. Our results strongly prefer a reduction in the labor tax rate on older workers and on all low-wage earners, financed by an overall reduction in non-employment benefits. These results are to be seen as long-run effects for economies at potential output.
    Keywords: employment by age, employment of low educated individuals, fiscal policy, heterogeneous ability, human capital, welfare inequality, overlapping generations (OLG)
    JEL: E62 H5 I28 J22 J24
    Date: 2018–05
  11. By: Armel Ngami (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Thomas Seegmuller (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE)
    Abstract: This paper analyses the effect of a pay-as-you-go pension system on the evolution of capital and pollution, and on the efficiency of an environmental versus health policy. In an overlapping generations model (OLG), we introduce endogenous longevity that depends on pollution and health expenditures. Global dynamics may display multiple balanced growth paths (BGP). We show that by discouraging savings, a policy that promotes the pension system enlarges the environmental poverty trap. More surprisingly, the environmental policy has contrasted effects according to the significance of the pension system. If it has a low size, a raise of the environmental policy enlarges the environmental poverty trap and leads to a rise in capital over pollution at the highest stationary equilibrium. In contrast, in economies where intergenerational solidarity is well developed, capital over pollution decreases at the highest BGP. In such a case, the environmental policy does not necessarily lead to a better longevity and growth.
    Keywords: longevity, environment, Health, pension system, growth, Pollution
    Date: 2018–05
  12. By: Adam Bogiatzis (OECD); Hidekatsu Asada (OECD); Mohamed Rizwan Habeeb Rahuman (OECD)
    Abstract: The Partnerships pillar of the 2030 Agenda for Sustainable Development cuts across all the goals focusing on the mobilisation of resources needed to implement the agenda. Thailand’s “sufficiency economy philosophy” encourages the prioritisation of long-term sustainability over short-term benefits. As such, Thailand has a long history of fiscal prudence that has served the country well in times of economic and political instability. However, relying on current fiscal buffers to finance foreseeable expenditure pressures is not sufficient or sustainable. A rapidly ageing population and shrinking workforce will weigh on future public finances and on the ability to achieve the Sustainable Development Goals. To ensure that Thailand is well placed over the medium term to meet growing social, environmental and infrastructure requirements, the government should: (i) increase tax revenues by broadening the tax base and enhancing collection efficiency; (ii) facilitate greater private sector investment in productive infrastructure; and (iii) reform the healthcare and pension systems to increase their efficiency and effectiveness. This Working Paper relates to the Initial Assessment report of the Multi-dimensional Country Review of Thailand. ( imensional-review-thailand.htm)
    Keywords: Fiscal consolidation, healthcare, inclusive growth, pension, public-private partnerships, regional development, social protection, tax, transfer
    JEL: E62 H21 H30 H51 H54 H55 H61 H62 H63 H68 H70
    Date: 2018–05–30
  13. By: Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon); Pierre-Emmanuel Thérond (Galea & Associés, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: Recently, there has been an increasing interest from life insurers to assess their portfolios' mortality risks. The new European prudential regulation, namely Solvency II, emphasized the need to use mortality and life tables that best capture and reflect the experienced mortality, and thus policyholders' actual risk profiles, in order to adequately quantify the underlying risk. Therefore, building a mortality table based on the experience of the portfolio is highly recommended and, for this purpose, various approaches have been introduced into actuarial literature. Although such approaches succeed in capturing the main features, it remains difficult to assess the mortality when the underlying portfolio lacks sufficient exposure. In this paper, we propose graduating the mortality curve using an adaptive procedure based on the local likelihood. The latter has the ability to model the mortality patterns even in presence of complex structures and avoids relying on expert opinions. However, such a technique fails to offer a consistent yet regular structure for portfolios with limited deaths. Although the technique borrows the information from the adjacent ages, it is sometimes not sufficient to produce a robust life table. In the presence of such a bias, we propose adjusting the corresponding curve, at the age level, based on a credibility approach. This consists in reviewing the assumption of the mortality curve as new observations arrive. We derive the updating procedure and investigate its benefits of using the latter instead of a sole graduation based on real datasets. Moreover, we look at the divergences in the mortality forecasts generated by the classic credibility approaches including Hardy–Panjer, the Poisson–Gamma model and the Makeham framework on portfolios originating from various French insurance companies.
    Keywords: Prediction,Local Likelihood,Mortality,Credibility,Life Insurance,Graduation,Smoothing
    Date: 2018–05
  14. By: Janet Currie; Hannes Schwandt; Josselin Thuilliez
    Abstract: We develop a method to compare levels and trends in inequality in mortality in the United States and France in a similar framework. The comparison shows that while income inequality has increased in both the United States and France, inequality in mortality in France remained remarkably low and stable. In the United States, inequality in mortality increased for older groups (especially women) while it decreased for children and young adults. These patterns highlight the fact that despite the strong cross-sectional relationship between income and health, there is no necessary connection between changes in income inequality and changes in health inequality.
    JEL: I14 J1
    Date: 2018–05
  15. By: Geyer, Johannes (DIW); Haan, Peter (DIW); Hammerschmid, Anna (DIW); Peters, Michael (DIW)
    Abstract: We evaluate the labor market and distributional effects of an increase in the early retirement age (ERA) from 60 to 63 for women. We use a regression discontinuity design which exploits the immediate increase in the ERA between women born in 1951 and 1952. The analysis is based on the German micro census which includes about 370,000 households per year. We focus on heterogeneous labor market effects on the individual and on the household level and we study the distributional implications using net household income. In this respect we extend the previous literature which mainly studied employment effects on the individual level. Our results show sizable labor market effects which strongly differ by subgroups. We document larger employment effects for women who cannot rely on other income on the household level, e.g. women with a low income partner. The distributional analysis shows on average no significant effects on female or household income. This result holds as well for heterogeneous groups: Even for the most vulnerable groups, such as single women, women without higher education, or low partner income, we do not find significant reductions in income. One reason for this result is program substitution.
    Keywords: retirement age; pension reform; labor supply; early retirement; distributional effects; spillover effects; household;
    JEL: J14 J18 J22 J26 H31
    Date: 2018–06–18
  16. By: Lara Fleischer (OECD); Adam Bogiatzis (OECD); Hidekatsu Asada (OECD); Vincent Koen (OECD)
    Abstract: The People pillar of the 2030 Agenda for Sustainable Development focuses on quality of life in all its dimensions, and emphasises the international community’s commitment to ensuring all human beings can fulfil their potential in dignity, equality and good health. Thailand’s path from a low-income to an upper-middle-income country over recent decades is widely hailed as a development success story. Poverty has fallen impressively and inequality is on a downwards trend, but more efforts are needed to reduce still widespread informality and persistent, substantial regional inequalities, and to further improve living standards, especially for those who currently work informally. To achieve these objectives, the government needs to: (i) consider tax and regulatory measures to encourage formalisation; (ii) boost the participation rates of informal workers in social protection schemes; (iii) expand adequate social safety nets for poor households and the elderly; (iv) prepare the healthcare system for an ageing and modernising society; and (v) improve the education system, particularly in rural areas. Gaps also remain in ensuring women’s political participation and reducing gender-based violence. This Working Paper relates to the 2018 Initial Assessment report of the Multi-dimensional Country Review of Thailand ( imensional-review-thailand.htm)
    Keywords: demographic change, education, gender equality, health care, inclusive growth, inequality, informality, labour market, pensions, poverty, regional development, social protection, well-being
    JEL: H55 I00 I12 I13 I18 I21 I25 I28 I30 I38 J08 J10 J26
    Date: 2018–05–30
  17. By: Isabelle CHORT; Bénédicte APOUEY
    Abstract: This study examines how house prices in fluence cognitive functioning for individuals aged 50+ in Europe. Using data from the Survey of Health, Ageing and Retirement (SHARE) between 2004 and 2015, we compute the median house price for each region-year, using individual self-reported house values. Cognitive scores capture either fl uid intelligence (numeracy, memory) or a mix of fl uid and crystallized intelligences (verbal fluency). Compared with the previous literature, we allow housing market fl uctuations to have different effects during episodes of price increases and decreases, and we study owners with a mortgage, owners without a mortgage, and tenants separately. Findings indicate that house price booms do not systematically improve cognitive health outcomes: for outright owners and tenants, a rise in prices correlates with a decrease in fluid intelligence. For outright owners, this result is partly explained by increased alcohol consumption, and is also related to stronger feelings of guilt and irritability, consistent with aversion to advantageous inequality. Findings also show asymmetry in the effects of price booms and busts: indeed, for mortgaged owners, both price increase and decrease episodes have a positive impact on cognitive outcomes. We argue that during the crisis the beneficial impact of price busts may have been driven by the decline in interest rates, which reduced the debt burden of households with a variable rate mortgage.
    Keywords: House prices, Wealth, Cognitive functioning, Health, Older Europeans, Europe, SHARE
    JEL: D12 I1 I3 J14
    Date: 2018–06
  18. By: Robin Greenwood (Harvard Business School, Finance Unit); Annette Vissing-Jorgensen (University of California Berkeley)
    Abstract: We document a strong effect of pension and insurance company (P&I) assets on the long end of the yield curve. Using data from 26 countries, the yield spread between 30-year and 10-year government bond yields is negatively related to the ratio of pension assets (in funded and private pension and life insurance arrangements) to GDP, suggesting that preferred-habitat demand by the P&I sector for long-dated assets drives the long end of the yield curve. We draw on changes in regulations in several European countries between 2008 and 2013 to provide well-identified evidence on the effect of the P&I sector on yields and to show that P&I demand is in part driven by hedging linked to the regulatory discount curve. When regulators reduce the dependence of the regulatory discount curve on a particular security, P&I demand for the security falls and its yield increases. We describe settings in which pension discount rules can have a destabilizing impact on bond markets.
    Date: 2018–06
  19. By: Melvin Stephens Jr.; Desmond Toohey
    Abstract: While the literature finding a decrease in food expenditures at retirement suggests households do not adequately save for retirement, subsequent evidence that nutrient intake is unaffected by retirement has tempered these concerns. We further examine nutrient intake changes at retirement both by analyzing a much wider range of datasets, including longitudinal data, and by improving upon the empirical methodology used in earlier work. Our analysis yields four main results. First, unlike prior work, we find that caloric and nutrient intake fall at retirement in numerous cross-sectional datasets. We can reconcile these contrasting results as being due to well-documented differences and improvements in methodologies used to measure food intake. Second, using longitudinal data, we also find that intake falls at retirement. Third, we show that a food consumption index used in prior work to capture the relationship between permanent income and foods eaten can severely underestimate the impact of retirement on consumption. We show that a minor methodological revision circumvents this bias and that the revised consumption index falls at retirement. Finally, while unemployment reduces the consumption index, we find, in contrast to prior work, that the impact of retirement on the consumption index is larger. Overall, we consistently find that retirement reduces food intake.
    JEL: E21 J26
    Date: 2018–05

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