|
on Economics of Ageing |
| By: | Tyrowicz, Joanna (University of Warsaw); Makarski, Krzysztof (Warsaw School of Economics); Bielecki, Marcin (University of Warsaw) |
| Abstract: | We analyze the consumption and wealth inequality in an OLG model with mandatory pension systems. Our framework features within cohort heterogeneity of endowments and heterogeneity of preferences. We allow for population aging and gradual decline in TFP growth. We show four main results. First, increasing longevity translates to substantial increases in aggregate consumption inequality and wealth inequality. Second, a pension system reform from a defined benefit to a defined contribution works to reinforce consumption inequality and reduce wealth inequality. Third, minimum pension benefits are able to partially counteract an increase in inequality introduced by the defined contribution system, at a fiscal cost. Fourth the minimum pension benefit guarantee mostly addresses the sources of inequality which stem from differentiated endowments rather than those which stem from heterogeneous preferences. |
| Keywords: | consumption, wealth, inequality, longevity, defined contribution, defined benefit |
| JEL: | H55 E17 C60 C68 E21 D63 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11621&r=age |
| By: | Wouterse, B.;; Hussem, A.;; Wong, A.; |
| Abstract: | Population aging leads to concerns about the financial sustainability of collective long term care insurance systems. One way to keep public spending in check is by increasing the role of co-payments. An interesting feature of the copayments that have been introduced in the Netherlands is that they are income and wealth dependent. This dependency allows the fine-tuning of effects across income groups, but can also distort consumption decisions of the elderly. Modeling long term care expenditures over the lifecycle is challenging because of their very uneven distribution, with a small proportion of elderly experiencing very high costs. We use a flexible semi-parametric nearest-neighbor approach to estimate lifecycle paths of long term care spending. We apply this approach to an extensive administrative data set for the entire Dutch elderly population. The estimated paths are then used as inputs in a stochastic lifecycle decision model for singles at the retirement age. We analyze the effects of different co-payment schemes on the distribution of LTC payments, consumption and risk across income groups. We find that, compared to a flat-rate co-payment, income- and especially wealth-dependent copayments lead to much lower welfare costs for groups with low financial means. At the same time, the welfare costs of the groups with the highest means increase only slightly. Excluding a bequest motive leads to lower, and including healthstate dependent utility to higher welfare losses due to co-payments compared to full insurance. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:18/24&r=age |
| By: | Finn Kydland (University of California, Santa Barbara); Nicholas Pretnar (Carnegie Mellon University) |
| Abstract: | There has been recent attention to the increasing costs to individuals and families associated with caring for people who are afflicted with diseases such as dementia, including Alzheimer’s. In this paper we ask, what are the quantitative implications of these trends for important aggregates, including going forward in time. We develop an overlapping generations general equilibrium model that features government social insurance, idiosyncratic old-age health risk, and transfers of time on a market of informal hospice care from young agents to old agents. The model implies that the decline in annual output growth in the United States since the 1950s can be partly attributed to decreases in the working-age share of the adult population. When accounting for the time young people spend caring for sick elders, positive Social Security + Medicare taxes lead to reductions in the growth rate of annual output of approximately 20 basis points. Relative to an economy with no old-age insurance systems, Social Security + Medicare taxes lead to future reductions in output of 6% by 2056 and 17% by 2096. We show that depending on the working-age share of the adult population, eliminating Social Security + Medicare is not necessarily Pareto improving, leaving those afflicted by welfare-reducing diseases worse off. Placed in the context of an aging United States population, these phenomena could have dramatic or muted impacts on future economic outcomes depending on the prevalence rate of high-cost diseases and the rate at which labor is taxed to fund old-age consumption under a pay-as-you-go social insurance system. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:271&r=age |
| By: | Quitterie Roquebert (UP1 - Université Paris 1, Panthéon-Sorbonne - Université Paris I - Panthéon-Sorbonne - Pres Hesam); Marianne Tenand (PSE - Paris-Jourdan Sciences Economiques - 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: | Although the consumption of home care is increasing with population ageing, little is known about its price sensitivity. This paper estimates the price elasticity of the demand for home care of the disabled elderly, using the French home care subsidy program ("APA"). We use an original dataset collected from a French District Council with administrative records of APA out-of-pocket payments and home care consumption. Identification primarily relies on inter-individual variations in producer prices. We use the unequal spatial distribution of producers to address the potential price endogeneity arising from non-random selection into a producer. Our results point to a price elasticity around -0.4: a 10% increase in the out-of-pocket price is predicted to lower consumption by 4%, or 37 minutes per month for the median consumer. Copayment rates thus matter for allocative and dynamic efficiencies, while the generosity of home care subsidies also entails redistributive effects. |
| Keywords: | Long-term Care,Price elasticity,Public policies,Disabled elderly,Censored regression,Dépendance chez la personne âgée,Elasticité-prix,Politiques publiques,Régression censurée |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01385678&r=age |
| By: | John Ameriks (The Vanguard Group, Inc.); Andrew Caplin (New York University); Christopher Tonetti (Stanford University); Joseph Briggs (Federal Reserve Board of Governors); Matthew Shapiro (University of Michigan); Minjoon Lee (Carleton University) |
| Abstract: | Older Americans, even those who are long retired, have strong willingness to work, especially in jobs with flexible schedules. For many, labor force participation near or after normal retirement age is limited more by a lack of acceptable job opportunities or low expectations about finding them than by unwillingness to work longer. This paper establishes these findings using an approach to identification based on strategic survey questions (SSQs) purpose-designed to complement behavioral data. These findings suggest that demand-side factors are important in explaining late-in-life labor market behavior and may be the most appropriate target for policy aimed at promoting working longer. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:345&r=age |
| By: | Marcin Bielecki (University of Warsaw and Narodowy Bank Polski); Marcin Kolasa (Narodowy Bank Polski); Michał Brzoza-Brzezina (Narodowy Bank Polski) |
| Abstract: | The recent literature shows that demographic trends may affect the natural rate of interest (NRI), which is one of the key parameters affecting stabilization policies implemented by central banks. However, little is known about the quantitative impact of these processes on monetary policy, especially in the European context, despite persistently low fertility rates and an ongoing increase in longevity in many euro area economies. In this paper we develop a New Keynesian life-cycle model, and use it to assess the importance of population ageing for monetary policy. The model is fitted to euro area data and successfully matches the age profiles of consumption-savings decisions made by European households. It implies that demographic trends have contributed significantly to the decline in the NRI, lowering it by 2 percentage points between 1980 and 2030. Despite being spread over a long time, the impact of ageing on the NRI may lead to a sizable and persistent deflationary bias if the monetary authority fails to account for this slow moving process in real time. We also show that, with the current level of the inflation target, demographic trends have already exacerbated the risk of hitting the lower bound (ZLB) and that the pressure is expected to continue. Delays in updating the NRI estimates by the central bank elevate the ZLB risk even further. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:810&r=age |
| By: | Lindeboom, Maarten (Vrije Universiteit Amsterdam); Montizaan, Raymond (ROA, Maastricht University) |
| Abstract: | In January 2006, the Dutch government implemented a pension reform that substantially reduced the public pension wealth of workers born in 1950 or later. At the same time, a tax-facilitated savings plan was introduced that substantially reduced the saving costs of all workers, irrespective of birth year. This paper uses linked administrative and survey data to assess the effect of the reform on the savings and retirement expectations and realizations of two virtually identical male cohorts that differ only in treatment status, the treated having been born in 1950 and the controls having been born in 1949. We show that retirement expectations are in line with realizations and that the reform had the intended effect on the labor supply for the larger part of the workers, namely, those without sufficient means to substantially increase private savings to counter the effect of the reform. These workers, who are generally in worse health, have zero substitution rates between private and public wealth. On the other hand, there is a group of mostly high-wage workers who participate in the tax-facilitated Life Course Savings Scheme and who increase private savings to fully counter the impact of the drop in public wealth. A further, unintended side effect of the introduction of the tax-facilitated savings plan is that high wage earners who are not affected by the drop in pension wealth retire even sooner than initially planned. |
| Keywords: | natural experiment, regression discontinuity, retirement, private wealth, public wealth, crowding out, substitution rate |
| JEL: | J26 H55 J14 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11620&r=age |
| By: | Juan Carlos Conesa (Stony Brook University); Akshar Saxena (Harvard University); Daniela Costa (Wharton); Gajendran Raveendranathan (McMaster University); Parisa Kamali (University of Minnesota); Timothy Kehoe (University of Minnesota) |
| Abstract: | This paper develops an overlapping generations model to study the macroeconomic implications of an aging population. We calibrate the model along a transition path from 1950 to 2100 that features rising survival probabilities, an increasing share of college graduates, and rising healthcare costs. The aging of the population leads to increased government spending on Medicare, Medicaid, and Social Security benefits. We find that the increase in the share of college graduates compensates for most of the increase in government spending. Consequently, taxes will only have to rise by a few percentage points to balance the budget in the future even if the current eligibility criteria and benefit levels for social insurance programs are preserved. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:930&r=age |
| By: | Claudia Goldin; Adriana Lleras-Muney |
| Abstract: | Females live longer than males in most parts of the world today. Among OECD nations in recent years, the difference in life expectancy at birth is around four to six years (seven in Japan). But have women always lived so much longer than men? The answer is that they have not. We ask when and why the female advantage emerged. We show that reductions in maternal mortality and fertility are not the reasons. Rather, we argue that the sharp reduction in infectious disease in the early twentieth century played a role. The primary reason is that those who survive most infectious diseases carry a health burden that affects organs, such as the heart, as well as impacting general well-being. We use new data from Massachusetts containing information on causes of death from 1887 to show that infectious diseases disproportionately affected females between the ages of 5 and 25. Increased longevity of women, therefore, occurred as the burden of infectious disease fell for all. Our explanation does not tell us why women live longer than men, but it does help understand the timing of the increase. |
| JEL: | J1 J16 N0 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24716&r=age |
| By: | Canta, Chiara (Toulouse Business School); Cremer, Helmuth (Toulouse School of Economics) |
| 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: | H2 H5 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11619&r=age |
| By: | Gauti B. Eggertsson; Manuel Lancastre; Lawrence H. Summers |
| Abstract: | This paper re-examines the relationship between population aging and economic growth. We confirm previous research such as Cutler, Poterba, Sheiner, and Summers (1990) and Acemoglu and Restrepo (2017) that show positive correlation between measures of population aging and per-capita output growth. Our contribution is demonstrating that this relationship breaks down when the adjustment of interest rates is inhibited by an effective lower bound on nominal rates as took place during the Great Financial Crisis decade. Indeed, during the “secular stagnation regime” of 2008-2015 that prevailed in a number of countries, aging had a negative impact on living standards, consistent with the secular stagnation hypothesis. |
| JEL: | E0 E31 E32 E5 E52 E58 O4 O42 O47 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24902&r=age |
| By: | Bauernschuster, Stefan (University of Passau); Driva, Anastasia (Ludwig-Maximilians-Universität München); Hornung, Erik (University of Cologne) |
| Abstract: | We study the impact of social health insurance on mortality. Using the introduction of compulsory health insurance in the German Empire in 1884 as a natural experiment, we estimate flexible difference-in-differences models exploiting variation in eligibility for insurance across occupations. Our findings suggest that Bismarck's health insurance generated a significant mortality reduction. Despite the absence of antibiotics and most vaccines, we find the results to be largely driven by a decline of deaths from infectious diseases. We present evidence suggesting that the decline is associated with access to health services but not sick pay. This finding may be explained by insurance fund physicians transmitting new knowledge on infectious disease prevention. |
| Keywords: | health insurance, mortality, demographic transition, Prussia |
| JEL: | I13 I18 N33 J11 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11628&r=age |