nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒07‒30
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Mobilize finance for social protection in ageing societies By Zhenqian Huang; Vanessa Steinmayer
  2. Poverty Among the Elderly: The Role of Public Pension Systems By Philippe Jacques; Marie-Louise Leroux; Dalibor Stevanovic
  3. Population Aging, Social Security and Fiscal Limits By Burkhard Heer; Vito Polito; Michael Wickens
  4. Accounting for the Rise of Health Spending and Longevity By Raquel Fonseca; Pierre-Carl Michaud; Arie Kapteyn; Titus Galama
  5. The Betrayed Generation? Intra-Household Transfers and Retirement Behavior in South Korea By Kyeongkuk Kim; Sang-Hyop Lee; Timothy J Halliday
  6. Immigration and the Health of Older Natives in Western Europe By Escarce, José J.; Rocco, Lorenzo
  7. Thinking about pension systems for the 21st century: A few remarks based on the Polish example By Marek Góra
  8. Preparation for old age in France: The roles of preferences and expectations By Bénédicte H. Apouey
  9. Missing Poor in the U.S. By Mathieu Lefebvre; Pierre Pestieau; Gregory Ponthiere
  10. Pension shocks and wages By Adrjan, Pawel; Bell, Brian
  11. Long Term Care Risk Misperceptions By M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  12. Comparing the Education Gradient in Chronic Disease Incidence among the Elderly in Six OECD Countries By Aurélie Côté-Sergent; Raquel Fonseca; Erin Strumpf
  13. Why choosing dominated personal pension plans: sales force and financial literacy effects By Giuseppe Marotta
  14. Pay-as-you-go pension, a factor of social justice and economic growth? By Alain Jourdain
  15. A Canadian Parlor Room-Type Approach to the Long-Term Care Insurance Puzzle By M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  16. A study on elderly attitude and color preference on Republic of Korea nursing homes. By MuLin Jeong; HeyKyung Park
  17. The Effect of Transportation Benefits on Health and Consumption among the Elderly: Quasi-Experimental Evidence from Urban China By YIN Ting; YIN Zhigang; ZHANG Junchao
  18. The Effects of Political Competition on the Generosity of Public-Sector Pension Plans By Sutirtha Bagchi
  19. Características de un Sistema Pensional Multipilar aplicado en el contexto colombiano By Leonardo Villar; Alejandro Becerra; David Forero

  1. By: Zhenqian Huang (United Nations Economic and Social Commission for Asia and the Pacific); Vanessa Steinmayer (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: The region is undergoing profound and rapid population changes. In 2017, an estimated 572 million persons aged 60 years or older lived in the Asia-Pacific region, accounting for 60% of the world’s older population. The number is predicted to increase to 1.3 billion in 2050, which means that one out of four persons in the region will be aged 60 years or above. Population ageing affects sustainable development in all its dimensions. Addressing population ageing is aligned with the 2030 Agenda for Sustainable Development particularly in ending poverty, ensuring healthy lives and promote well-being, achieving gender equality, and promoting sustained and inclusive economic growth. Countries have to prepare early with adequate social policies and financial resources to address the challenges of population ageing. Traditionally, families support their ageing parents, both financially and by providing care. However, with smaller families, there will be fewer family members in working age to shoulder this responsibility. In this context, mobilizing resources to finance social protection programmes are imperative to provide security of income and well-being during old age. There is increasing political will to provide social protection to older persons, reflected by an increasing number of countries providing social pensions.2 However, in many cases, policies focus on some aspects of population ageing only.
    Date: 2018
  2. By: Philippe Jacques; Marie-Louise Leroux; Dalibor Stevanovic
    Abstract: The objective of this paper is to measure the impact of first-pillar public pensions spending on the prevalence of poverty among the elderly. Using data from 27 European countries from 1995 to 2014, we estimate the elasticity of the poverty rate among individuals aged over 65 years to per capita public pension spending. We show the existence of a nonlinear relationship between these two variables. The elasticity is negative and statistically different from 0 only beyond a level of spending of 685 Euro per capita. At the average value of 2,819 Euro, it is estimated that the elasticity is about -1.45. This nonlinear relation is robust to the treatment of possible endogeneity and to different robustness checks like the variation of the poverty line, and the inclusion of country-specific differences in public pension plans.
    Keywords: Ageing, Poverty, Income Inequalities, Public Pension Systems, Panel Data
    JEL: H55 I32 I38
    Date: 2018
  3. By: Burkhard Heer; Vito Polito; Michael Wickens
    Abstract: We study the sustainability of pension systems using a life-cycle model with distortionary taxation that sets an upper limit to the real value of tax revenues. This limit implies an endogenous threshold dependency ratio, i.e. a point in the cross-section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees. We quantify the threshold using a computable life-cycle model calibrated on the United States and fourteen European countries which have dependency ratios among the highest in the world. We examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems. New tax data on dynamic Laffer effects are provided.
    Keywords: dependency ratio, fiscal space, Laffer effects, pensions, fiscal policy sustainability
    JEL: E62 H20 H55
    Date: 2018
  4. By: Raquel Fonseca; Pierre-Carl Michaud; Arie Kapteyn; Titus Galama
    Abstract: We estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36.3% of the rise in health spending (technology 31.5% and insurance 4.8%), while income explains only 4.4%. By simultaneously occurring over this period, these changes may have led to complementarity effects which explain an additional 59% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health-care productivity at an annual rate of 1.7%, explains almost all of the rise in life expectancy at age 25 over this period. Welfare gains are substantial and most of the gain appears to be due to technological change (47% out of a total gain of 67%).
    Keywords: health spending, longevity, life-cycle models, technological change
    JEL: I10 I38 J26
    Date: 2018
  5. By: Kyeongkuk Kim (University of Hawai‘i at MÄ noa); Sang-Hyop Lee (University of Hawai‘i at MÄ noa); Timothy J Halliday (University of Hawai‘i at MÄ noa)
    Abstract: We consider the nexus of intra-household transfers, the sex composition of the sibship, and parental retirement behavior in Korea. We provide evidence that the cost of raising sons is higher than it is for daughters in Korea. In the absence of sufficient transfers from adult sons to parents, this implies that parents will increase their labor supply to fund earlier investments in their sons. Consistent with this, we show that parents with more adult sons delay their retirements. In particular, an elderly parent with all sons has a retirement probability that is 7-10 percentage points lower than a comparable parent with all daughters. Elderly parents also work between 1.8-2.7 hours more per week when their sibship consists of all sons. These effects are the most pronounced when the first born is a son as well as for poorer households.
    Keywords: retirement, intra-household transfers, gender, sex ratios
    JEL: J1 J13 J16 J26
    Date: 2018–05
  6. By: Escarce, José J.; Rocco, Lorenzo
    Abstract: Previous research has found that immigration benefits the health of working-age natives, an effect mediated through the labor market. We use the Study of Health, Ageing and Retirement in Europe (SHARE) to investigate whether immigration also affects the health of natives 65-80 years old. Immigration may increase the supply and lower the price of personal and household services, a term that refers to care services and non-care services such as cleaning, meal preparation, and domestic chores. Higher consumption of personal and household services by older natives may help maintain health through a variety of pathways. Using a shift-share IV, we find pervasive beneficial effects of immigration on the physical and mental health of older natives. We also find evidence for the hypothesized pathways, especially for an effect of immigration in increasing social integration (e.g., institutional connections, social participation). However, our ability to test mechanisms is limited in our data.
    Keywords: Health,immigration,aging,social determinants
    JEL: I12 I14 J61
    Date: 2018
  7. By: Marek Góra
    Abstract: The end of 2018 will mark the 20th anniversary of the introduction of Poland’s current pension system. It has been subjected to constant modifications, in general dictated by either ideological or ad hoc goals, but it has resisted destruction, and in essence is working as it was designed. The need for its introduction, misleadingly called a reform, was dictated by a long-term shift in the age structure of the population. In essence, the earlier system was replaced by the current one. The essence of this switch is a shift from the quasi-tax financing suited to the population structure by age of the past, to quasi-savings financing suited to the structure in the 21st century. This text is not an overview of the 20-year history of the current system; it is a critical examination of the functioning of Poland’s pension system against the backdrop of the universal challenges that pension systems are facing in the 21st century. The text barely touches on many fundamental questions. A full discussion of them would require a longer discourse, for which there is no space here.
    Keywords: pension systems, demographic transition, NDC/FDC, tax-financing, savings-financing, political economy, Polish pension system
    JEL: H55 J18
    Date: 2018–07–24
  8. By: Bénédicte H. Apouey (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This article assesses the roles of preferences and expectations on preparation for old age, employing unique data on French individuals aged 50+. The data do not only contain information on the general feeling to prepare for old age and on specific preparation activities in various domains, but also on risk and time attitudes, family and social altruism, and expected disability and longevity. Half of the sample reports preparing for old age. Future orientation emerges as an important predictor of preparation. While risk attitudes and altruism also matter for preparation, their effect may be less systematic across outcomes than that of general future orientation. Individuals who expect to become disabled or to live longer are more likely to prepare for old age. Policies promoting healthy aging should include messages targeting present-oriented individuals and try to make people more future-oriented.
    Keywords: expected longevity,altruism,Preparation for old age,risk aversion,time preference
    Date: 2017–11
  9. By: Mathieu Lefebvre; Pierre Pestieau; Gregory Ponthiere
    Abstract: Given that poor individuals face worse survival conditions than nonpoorindividuals, one can expect that a steeper income/mortality gradient leads, through stronger income-based selection, to a lower poverty rate at the old age (i.e. the "missing poor" hypothesis). This paper uses U.S.state-level data on poverty at age 65+ and life expectancy by income levels to provide an empirical test of the missing poor hypothesis. Using airpollution as an instrument for mortality di§erentials, we show that instrumented changes in mortality differentials have a negative and statistically significant effect on old-age poverty: a 1 % increase in the mortality differential implies a 9 % decrease in the 65+ headcount poverty rate. Using those regression results, we compute hypothetical old-age poverty rateswhile neutralizing the impact of the income/mortality gradient, and show that correcting for heterogeneity in income-based selection effects modifies the comparison of old-age poverty prevalence across states.
    Keywords: poverty, measurement, income/mortality gradient, selection biases, comparability.
    JEL: I32
    Date: 2018
  10. By: Adrjan, Pawel; Bell, Brian
    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: G32 J31 J32
    Date: 2018–03–01
  11. By: M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: This paper reports survey evidence on long-term care (LTC) risk misperceptions and demand for long-term care insurance (LTCI) in Canada. LTC risk misperceptions is divided into three different risks: needing help for at least one activity of daily life, needing access to a nursing home, and living to be 85 years old. We contrast subjective (i.e. stated) probabilities with actual probabilities for these three dimensions. We first provide descriptive statistics of how objective and subjective probabilities differ and correlate to each other. Second, we study cross-correlations between different types of risks. We then study how risk misperceptions correlate with individual characteristics, and evaluate how misperceptions affect intentions and actual purchase of LTCI. Our conclusions are two-fold. First, we find that most subjects are not well informed about their individual LTC risks, making it difficult for them to take the correct LTCI decisions. Second, and even though misperceptions explain an individuals actual or his intentions to take-up LTCI, misperceptions are unlikely to explain the poor take-up rate of LTCI in our sample.
    Keywords: Long-term care insurance puzzle, disability, misperceptions, subjective probability
    JEL: D91 I13
    Date: 2018
  12. By: Aurélie Côté-Sergent; Raquel Fonseca; Erin Strumpf
    Abstract: Inequalities in health by educational attainment are persistent both over time and across countries. However, their magnitudes, evolution, and main drivers are not necessarily consistent across jurisdictions. We examine the health-education gradient among older adults in the United States, Canada, France, the Netherlands, Spain and Italy, including how it changes over time between 2004 and 2010. Using longitudinal survey data, we assess how rates of incident poor health, incident difficulties with activities of daily living, and incident chronic conditions vary by educational attainment across countries. We also examine how potential confounders, including demographic characteristics, income, health care utilisation and health behaviours, affect the health-education gradient within countries over time. We find systematic differences in disease incidence, as well as in the health-education gradients, across countries. We also demonstrate that while adjusting for confounders generally diminishes the health-education gradient, the impacts of these variables vary somewhat across countries.
    Keywords: disease incidence, older ages, education
    JEL: I1 I2
    Date: 2018
  13. By: Giuseppe Marotta
    Abstract: We investigate the puzzle of choices of dominated personal pension instruments in Italy, with insurers’ products (PIPs) much more subscribed than shares of open pension funds offered by banks (FPAs). We find evidence, using the three waves of Bank of Italy’s Survey of Household Income and Wealth (SHIW) between 2010 and 2014, of a sales force effect deriving from a network of post offices and independent financial advisors associated with insurance companies much more widespread than bank branches. We document that financial literacy has a significant dampening effect on the supply push factor only for PIPs, and especially for the subset with voluntary matching employers’ contributions. The effect is detected mostly in the 2014 SHIW wave, the one fully affected by the implementation of the pension system reform legislated in December 2011.
    Keywords: ension system reform, Financial literacy, Retail financial products distribution, Italy
    JEL: D91 E21 G11 H55
    Date: 2018–07
  14. By: Alain Jourdain (EHESP-ARENES - EHESP-ARENES - EHESP - École des Hautes Études en Santé Publique [EHESP])
    Date: 2018–06–15
  15. By: M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers.
    Keywords: Long-term care puzzle; Risk perceptions; Supply and demand of insurance, Government programs
    JEL: G02 G12 C14
    Date: 2018
  16. By: MuLin Jeong (Inje University); HeyKyung Park (Inje University)
    Abstract: Rapid graying made the Korean government has enforced the Long-term care insurance in 2008 and related elderly nursing homes are ever increasing since.The elderly nursing homes in Korea are focusing on quality rather than quantity, especially environmental supports.Color environment design is one of the quality elements that improve the services of the nursing homes as well as the satisfaction of its residents. Therefore, reasonable planning will only be available after the element is studied.The purpose of this research is to understand elderly consciousness on the nursing homes and their color preferences in order to provide baseline data for elderly nursing home plans.
    Keywords: nursing home / elderly / color preference
    Date: 2017–07
  17. By: YIN Ting; YIN Zhigang; ZHANG Junchao
    Abstract: This study estimates the causal effect of transportation subsidies or similar benefits on the health of elderly people. We exploit a discontinuity in the probability of receiving transportation benefits induced by an age-based policy to take into account the endogeneity of treatment status. Our baseline IV results indicate that receiving public transportation benefits significantly improves elderly people's health condition by approximately 10 percentage points. The results are robust under different specifications and placebo tests. Further tests on possible channels show that the health effect is driven by increasing food consumption and health care utilization, but not by the amount of exercise done.
    Date: 2018–06
  18. By: Sutirtha Bagchi (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: In politically competitive jurisdictions, there can be strong electoral incentives to increase the generosity of public pensions and simultaneously, to not fund them fully, in order to keep taxes low. I examine the relationship between political competition and generosity of public pensions using a panel dataset for 3,000 municipal plans from Pennsylvania for the period 2003–2013. I find that as the level of political competition in a municipality increases, pension plans become more generous but this relationship holds true only for plans run by municipal governments. A one standard deviation increase in the level of political competition is associated with an increase in the generosity of municipal plans by about 3 percent ($426–507/retiree/year) with no effect on plans run by municipal authorities. The effects of political competition are driven by municipalities that have a higher proportion of uninformed voters and are absent for defined contribution plans.
    Keywords: Public-sector pensions; Political competition; Generosity of benefits; Defined benefit pensions; Defined contribution pensions
    JEL: H75 J45
    Date: 2018–07
  19. By: Leonardo Villar; Alejandro Becerra; David Forero
    Abstract: El diseño atípico del sistema pensional contributivo en Colombia, sólo similar al existente en Perú, implica un régimen de competencia entre el sistema público, Régimen de Prima Media, y el sistema privado, Régimen de Ahorro Individual con Solidaridad. En este documento analizamos en detalle las características de la competen-cia entre estos dos esquemas, y hacemos una propuesta para cambiarlos hacia un esquema Multipilar basado en la complementa-riedad, en donde no hay afiliados a uno y otro régimen y todos los trabajadores contribuyen a ambos. Se exploran también las reformas paramétricas requeridas por el nuevo sistema, el rol del programa de Beneficios Económicos Periódicos –BEPS, y se hace una valoración de los regímenes especiales del Magisterio y de las Fuerzas Armadas.
    Keywords: Reforma Pensional, Régimen de Prima Media, RPM, Régimen de Ahorro Individual con Solidaridad, RAIS, Beneficios Económicos Periódicos, BEPS, Sistema Multipilar, Competencia, Complementariedad, Regímenes Especiales, Colombia
    Date: 2017–12–20

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