nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒08‒13
seventeen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Drivers of Labor Force Participation in Advanced Economies: Macro and Micro Evidence By Francesco Grigoli; Zsoka Koczan; Petia Topalova
  2. How season of birth affects health and aging By Abeliansky, Ana Lucia; Strulik, Holger
  3. Can I Stay or Should I Go? Mandatory Retirement and Labor Force Participation of Older Workers By Simon Rabaté
  4. Projecting future demand for informal care among older people in China: the road towards a sustainable long-term care system By Hu, Bo
  5. Periodic or Generational Actuarial Tables: Which One to Choose? By Severine Arnold (-Gaille); Anca Jijiie; Eric Jondeau; Michael Rockinger
  6. Forced reduction of pension contribution rate? By Andras Simonovits
  7. Should Public Elderly Care Be Provided? By Yasuoka, Masaya
  8. To Become a Cawir Metua: Life Satisfaction of The Karo Elderly A Social Security Case Study on The Karo Elderly in Lingga Village, Simpang Empat Sub-District, Tanah Karo Regency By Achmad, Nurman; Harahap, R. Hamdani; Nasution, M. Arif; Subhilhar, Subhilhar
  9. Financial Fraud among Older Americans: Evidence and Implications By Marguerite DeLiema; Martha Deevy; Annamaria Lusardi; Olivia S. Mitchell
  10. Designing pension benefits when longevities increase with wages By Andras Simonovits
  11. Later Pension, Poorer Health? Evidence from the New State Pension Age in the UK By Carrino, Ludovico; Glaser, Karen; Avendano, Mauricio
  12. Partial Employment Protection and Perceived Job Security: Evidence from France By Alexandre Georgieff; Anthony Lepinteur
  13. Herding behavior of Dutch pension funds in asset class investments By Ian Koetsier; Jacob Bikker
  14. Longevity, Human Capital and Domestic Investment By Francisco Parro; Francisco Szederkenyi; Patricio Valenzuela
  15. Age Differences in Intertemporal Choice: U-Shaped Associations in a Probability Sample of German Households By David Richter; Rui Mata
  16. The US labour force participation debacle: learning from the contrast with Britain By Richiardi, Matteo; Nolan, Brian; Kenworthy, Lane
  17. Uncertain Altruism and Non-Linear Long-Term Care Policies By Chiara Canta; Helmuth Cremer

  1. By: Francesco Grigoli; Zsoka Koczan; Petia Topalova
    Abstract: Despite signi cant headwinds from population aging in most advanced economies (AEs), labor force participation rates show remarkably divergent trajectories both across countries and across di erent groups of workers. Participation increased sharply among prime-age women and, more recently, older workers, but fell among the young and prime-age men. This pa- per investigates the determinants of these trends using aggregate and individual-level data. We nd that the bulk of the dramatic increase in the labor force attachment of prime-age women and older workers in the past three decades can be explained by changes in labor mar- ket policies and institutions, structural transformation, and gains in educational attainment. Technological advances such as automation, on the other hand, weighed on the labor supply of prime-age and older workers. In light of the dramatic demographic shifts expected in the coming decades in many AEs, our ndings underscore the need to invest in education and training, reform the tax system, reduce early retirement incentives, improve the job-matching process, and help individuals combine family and work life in order to alleviate the pressures from aging on labor supply.
    Date: 2018–06–25
  2. By: Abeliansky, Ana Lucia; Strulik, Holger
    Abstract: We investigate how the season of birth affects human health and aging. For this purpose, we use five waves of the Survey of Health, Aging, and Retirement in Europe (SHARE) dataset and construct a health deficit index for 21 European countries. Results from log-linear regressions suggest that, on average, elderly European men age faster when they were born in spring and summer (compared to autumn). At given age, they have developed about 3.5 percent more health deficits. The bulk of the season effect is neither mediated through body height nor through education. In a subsample of Southern European countries, where the seasonal variation of sunlight is smaller, the season of birth plays an insignificant role for health in old age. In a subsample of Northern countries, in contrast, the season or birth effect gets larger. At given age, elderly Northern European men born in spring have developed on average 8.7 percent more health deficits than those born in autumn. In non-linear regression we find that the season effect increases with age suggesting that the speed of aging is also influenced by the season of birth.
    Keywords: health,aging,health deficit index,season of birth
    JEL: I10 I19 J13
    Date: 2018
  3. By: Simon Rabaté (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: Retirement is commonly described as a pure labor supply decision, despite the potential importance of the demand side channel. This is partly due to the fact that both dimensions are often di?cult to disentangle. In this paper, I manage to overcome this di?culty by using a unique natural experiment, the progressive ban of mandatory retirement in France in the 2000s. Drawing on an extensive administrative dataset, I use inter-industry reform-induced variations in mandatory retirement legislation, thereby insulating this factor from other determinants of retirement, such as ?nancial incentives. I ?nd that demand-side determinants through mandatory retirement do a?ect retirement patterns: exit rates from employment are estimated to be 6% higher when mandatory retirement is possible. Secondly, as the mandatory retirement age coincides with the full rate age, I exhibit a previously uncovered determinant of the large bunching in retirement distribution at this age. Mandatory retirement is estimated to explain 10% of the observed spike at full rate.
    Keywords: Retirement,Employment,Labor demand
    Date: 2017–05
  4. By: Hu, Bo
    Abstract: The long-term care system in China relies heavily on informal care provided by family members. This study makes projections on the demand for informal care among Chinese older people between 2015 and 2035 and quantifies the level of long-term care resources needed to meet their needs. The data come from longitudinal information in a nationally representative sample, China Health and Retirement Longitudinal Survey 2011 and 2013. The macrosimulation approach (PSSRU model) and the Markov approach are integrated into one Bayesian modelling framework. The Monte Carlo simulation technique is used to capture parameter uncertainty. We project that the demand for informal care will increase from 41.3 million people (95% CI: 39.9–42.7) in 2015 to 82.6 million people (95% CI: 78.3–86.9) in 2035. The long-term care system faces unbalanced pressure of demand for informal care from different groups of older people. The projected demand is sensitive to changes in older people’s disability trajectory and the availability of formal care provided by the government, but less sensitive to an increase in singleton households in the future. We discuss possible policy measures to alleviate the mounting pressure on the demand for informal care.
    Keywords: Long-term care projections; Disability transitions; Population ageing; China; Macrosimulation; Markov modelling; Bayesian approach
    JEL: J1
    Date: 2018–06–19
  5. By: Severine Arnold (-Gaille) (University of Lausanne); Anca Jijiie (Faculty of Business and Economics); Eric Jondeau (University of Lausanne and Swiss Finance Institute); Michael Rockinger (University of Lausanne, Centre for Economic Policy Research (CEPR), and Swiss Finance Institute)
    Abstract: The increase in life expectancy over the past several decades has been impressive and represents a key challenge for institutions that provide life insurance products. Indeed, when a new actuarial table is released with updated survival and death rates, such institutions need to update the amount of mathematical reserve that they need to set aside to guarantee the future payments of their annuities. As mortality forecasting techniques are currently well developed, it is relatively easy to forecast mortality over several decades and to directly use these forecast rates in the determination of the mathematical reserve needed to guarantee annuity payments. Future mortality evolution is then directly incorporated into the liabilities valuation of an institution, and it is thus commonly believed that such liabilities should not require much updating when a new actuarial table is released. In this paper, we demonstrate that contrary to this common belief, institutions that use generational tables (namely, tables including future mortality evolution) will most likely need to make more important adjustments (positive or negative) to their liabilities than will institutions using periodic (static) tables whenever a new table is released. By using three very different models to project mortality, we demonstrate that our findings are inherent in the required long horizons of the forecasts needed in the generational approach, with the uncertainty surrounding the forecast values increasing with the horizon. Therefore, generational tables may introduce more instability in a pension institution’s accounts than periodic tables.
    Keywords: Mortality rates, Periodic actuarial tables, Generational actuarial tables, Life expectancy, Mathematical reserve, Mortality forecasts
    Date: 2018–01
  6. By: Andras Simonovits (Institute of Economics Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology)
    Abstract: Due to various causes, the pension contribution rate can be reduced temporarily below its long-term value. We call a reduction forced if the balance of the public pension system is preserved through excessive wage-hikes and irritable relative devaluation of pensions in progress. A very simple overlapping cohorts model shows the limits of this policy and the resulting unfairness among cohorts.
    Keywords: public pensions, pension contribution rate, indexation, fairness among cohorts
    JEL: D10 H55
    Date: 2018–06
  7. By: Yasuoka, Masaya
    Abstract: This short paper sets an elderly care model in which the public elderly care and informal elderly care provided by the family are substitutive, with examination of the dynamics of capital accumulation and the labor supply. With certain conditions, by virtue of public elderly care, informal elderly care vanishes and a full labor supply is achieved. However, this paper presents derivation of the result that the economy with informal elderly care is simultaneously socially optimal.
    Keywords: Informal care, Public elderly care
    JEL: H51 H55 J14
    Date: 2018–07–16
  8. By: Achmad, Nurman; Harahap, R. Hamdani; Nasution, M. Arif; Subhilhar, Subhilhar
    Abstract: Elderly becomes one of the crucial issues faced by many countries in the world today. The composition of the elderly population is growing rapidly in both developed and developing countries. The increase in the number of elderly requires attention so that they not only live long but can enjoy their old age happily and improve the quality of their life. In some areas, large numbers of elderly people become burdensome if they have health problems resulting in increased health care costs, decreased income, increased disability, lack of social support and independence. This statement is not entirely true, because there are elderly who are still able to be independent to achieve life satisfaction. This study employed a qualitative approach to get a picture of life and concepts related to elderly life. Emik view of the power was used to analyze the life of elderly from Karo ethnicity. The data were collected by using participant observation and depth interview which was performed on five elderly families and questionnaires for 100 respondents of elderly Karo family in Lingga Village. The strength of informants in establishing rapport became the key of success in this Karo elderly research. The result of the research showed that Karo elderly felt shame if they have to live with their children or be dependent because it is the nature of a Karo person to be independent. It is reinforced by a very strong culture of shame. In addition, Karo people have a standard of life satisfaction which has been a part of their culture. It is the satisfaction of life when all of their children have married and have enough income. In Karo society, it is called Cawir Metua. Someone who has reached the Cawir Mertua is supposed to hold a party to tell people that he or she has achieved satisfaction in life.
    Keywords: Elderly; Shame Culture; Cawir Metua
    JEL: A13 H55 J28 P25
    Date: 2018–02
  9. By: Marguerite DeLiema; Martha Deevy; Annamaria Lusardi; Olivia S. Mitchell
    Abstract: The consequences of poor financial capability at older ages are serious and include making mistakes with credit, spending retirement assets too quickly, and being defrauded by financial predators. Because older persons are at or past the peak of their wealth accumulation, they are often the targets of fraud. Our project analyzes a module we developed and fielded in the 2016 Health and Retirement Study (HRS). Using this dataset, we evaluate the incidence and risk factors for investment fraud, prize/lottery scams, and account misuse, using regression analysis. Relatively few HRS respondents mentioned any single form of fraud over the prior five years, but nearly 5% reported at least one form of investment fraud, 4 % recounted prize/lottery fraud, and 30% indicated that others had used/attempted to use their accounts without permission. There were few risk factors consistently associated with such victimization in the older population. Fraud is a complex phenomenon and no single factor uniquely predicts victimization. The incidence of fraud could be reduced by educating consumers about various types of fraud and by increasing awareness among financial service professionals.
    JEL: D14 D18
    Date: 2018–07
  10. By: Andras Simonovits (Institute of Economics Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology)
    Abstract: At the design of public pension systems, the designers frequently neglect that higher earners statistically live longer, and possibly also retire later. Since the first difference has recently been rising steeply, this negligence is less and less tolerable, especially with nonfinancial defined contribution system (NDC). We analyze three simple connected pension models to understand how the redistribution from the low-earners to the high-earners can be reduced or reversed. Our answers: either mixing NDC and flat benefit or reducing the weight of wage indexation of benefits. It is an open question how the neglected behavioral reactions (lower share of NDC implies lower labor supply and greater tax evasion) influence the social welfare.
    Keywords: public pension system, retirement age, wage indexation, wage-dependent life expectancy
    JEL: D10 H55
    Date: 2018–02
  11. By: Carrino, Ludovico; Glaser, Karen; Avendano, Mauricio
    Abstract: This paper examines the health impact of UK pension reforms that increased women’s State Pension age for up to six years since 2010. Exploiting an 11% increase in employment caused by the reforms, we show that rising the State Pension age reduces physical and mental health among women from routine-manual occupations. We show robust evidence that a larger increase in the State Pension age leads to larger negative health effects, resulting in a widening gap in health between women from different occupations. Our results are consistent with a 27% fall in individual incomes for women in routine-manual occupations.
    Keywords: Social Security, Public Pensions, Economics of ageing, Public Health; Understanding Society
    JEL: H75 I14 I18 J26
    Date: 2018–04–15
  12. By: Alexandre Georgieff (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); Anthony Lepinteur (PSE - Paris School of Economics, 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)
    Abstract: This paper assesses the causal effect of partial employment protection on workers' subjective job security via the perceived probability of layoff. We consider the rise in the French Delalande tax, which is paid by private firms if they lay off older workers. This reform was restricted to large firms and therefore allows us to use a difference-indifference strategy. In ECHP data, we find that the change in the perceived probability of layoffs induced by the higher Delalande tax improved the subjective job security of older (protected) workers, but at the cost of a negative externality on younger (unprotected) workers. While the fall in perceived job security of younger workers is mirrored by actual increase in their layoff rate, the rise in perceived job security of older workers is more puzzling because we do not observe a reduction in their layoff rate.
    Keywords: Employment Protection,Perceived Job Security,Difference-in- Difference
    Date: 2017–05
  13. By: Ian Koetsier; Jacob Bikker
    Abstract: This study investigates asset herd behavior for Dutch pension funds from 1999 to 2014 using quarterly data. We find considerable asset class herd behavior, which is more intensive for the more 'exotic' sub-asset classes, such as private equity and emerging market shares. We find higher buy herd behavior in sub-asset class markets, which are affected by the stock market and debt crises. The extent of pension fund's herd behavior is affected by financial market, macroeconomics circumstances and returns. We find destabilizing effects of herd behavior for shares and private equity on the sell side, for fixed-interest investments on the buy side and for real estate on both the buy and sell side. We find stabilizing effects of herd behavior for shares and private equity on the buy side, for fixed interest investments on the sell side and for other investments on both the buy and the sell side. For crises, we find evidence that destabilizing behavior is concentrated on the buy side, whereas sell herd behavior mostly has a stabilizing effect.
    Keywords: Herd behaviour, (de)stabilising, pension funds, asset classes
    JEL: G23 G24
    Date: 2018–07
  14. By: Francisco Parro; Francisco Szederkenyi; Patricio Valenzuela
    Abstract: This article explores the interaction between aggregate initial human capital, life expectancy and domestic investment. The article introduces a simple model that predicts that the positive effect of life expectancy on the domestic investment rate is mitigated in economies with a higher level of initial human capital. Using a large panel of countries over the past five decades, the article presents empirical evidence consistent with the main prediction of the model. JEL Classification: E22; I15; J11; J24. Key words: Keywords: Domestic investment; Life expectancy; Human capital.
    Date: 2017
  15. By: David Richter; Rui Mata
    Abstract: To describe adult age differences in intertemporal choice, we analyzed data from 1,491 participants who completed an incentivized monetary intertemporal discounting choice task involving different conditions (e.g., time delay of 12 months vs. 1 month). Respondents completed a number of other survey measures, including behavioral measures of cognitive ability, and self-reports concerning health, financial security, and demographic characteristics. We found significant quadratic (U-shaped) effects of age in task conditions involving 12-month (but not 1-month) delays, with middle-aged adults proving most patient relative to younger and older adults. The age effects found were robust to the inclusion of covariates, including cognitive ability, that have been suggested to underlie individual and age differences in time preferences. The results favor theories that propose non-linear effects of age-related processes or multiple mechanisms underlying the development of intertemporal choice across the life span and suggest that it is important to consider long time delays and wide age ranges when trying to understand age differences in time preferences.
    Keywords: Decision-Making; Cognition; Life Course and Developmental Change; Time PreferencesJEL:
    Date: 2018
  16. By: Richiardi, Matteo; Nolan, Brian; Kenworthy, Lane
    Abstract: This paper uses the marked divergence in labour force participation trends between the US and the UK to probe underlying drivers and implications for recent US poor performance. Contrary to a common US narrative, our comparative perspective suggests that the relative decline in US labour force participation is not confined to the (white) male population: the divergence in female participation rate is even more pronounced. We also do not find evidence that the poor US performance is linked to some structural changes brought about by the financial crisis; instead, it is a more pervasive, longer-run phenomenon. Our multivariate analysis seeks to disentangle age, cohort, and period effects, and shows that the US is particularly ill-equipped to deal with the looming ageing of the Baby Boom generation. An Oaxaca decomposition shows that the relative decline of US participation rates with respect to the UK is roughly equally attributable to characteristics, which have become less favourable over time, and the impact of those characteristics, which have become more adverse to participation.
    Date: 2018–07–30
  17. By: Chiara Canta; Helmuth Cremer
    Abstract: We study the design of public long-term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non-linear policies where the LTC benefit depends on the level of informal care, which is assumed to be observable while children’s altruism is not. The traditional topping up and opting out policies are special cases of ours. Both total and informal care should increase with the children’s level of altruism. This obtains under full and asymmetric information. Social LTC, on the other hand, may be non-monotonic. Under asymmetric information, social LTC is lower than its full information level for the lowest level of altruism, while it is distorted upward for the higher level of altruism. This is explained by the need to provide incentives to high-altruism children. The implementing contract is always such that social care increases with formal care.
    Keywords: long term care, uncertain altruism, private insurance, public insurance, topping up, opting out
    JEL: H20 H50
    Date: 2018

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