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on Economics of Ageing |
| By: | Nolan, Anne (ESRI, Dublin); Barrett, Alan (ESRI, Dublin) |
| Abstract: | A feature of employment at older ages that has been observed in many countries, including Ireland, is the higher share of self-employment among older labour force participants. This pattern of higher self-employment rates at the end of the labour market career may reflect lower rates of retirement among the self-employed compared to employees, as well as transitions into self-employment at older ages. In this paper, we use data from four waves of the Irish Longitudinal Study on Ageing (TILDA), spanning the period 2010-2016, to examine both the characteristics of the older self-employed in Ireland and the determinants of transitions in employment states at older age. We find that the higher proportion of self-employed people at older ages in Ireland results from lower retirement rates among the self-employed and not from transitions from employment to self-employment. This is in contrast to other countries such as the US where transitions into self-employment are more prevalent. We find that the self-employed are older, more likely to be male, and significantly less likely to have any form of supplementary pension cover than the employed. These lower retirement rates and lower degrees of pension cover suggest that standard approaches to pension provision may be less effective in proving attractive to the self-employed in Ireland. |
| Keywords: | retirement, self-employment, older workers, Ireland |
| JEL: | D14 H55 J14 J26 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11663&r=age |
| By: | Cormac O'Dea (Yale University) |
| Abstract: | Government pension spending in advanced economies can be divided into three types: (1) Social Security-style benefits that depend on earnings during working life, (2) subsidies of private pension saving and (3) means-tested income floors provided to the elderly. Using an estimated lifecycle model that accounts for each of these, as well as endogenous labour supply, private savings and realistic uncertainty, this paper investigates the optimal combination of the three approaches. For countries (such as the US and the UK) that currently provide public pensions that depend on career-average earnings, I show that large welfare gains can be obtained by increases in the level of means-tested old-age income floors that are funded by any of reducing public pensions, increasing taxes or (especially) reducing private pension subsidies. While means-tested transfers cause costly distortions, these are more than offset by the value of the insurance they provide against low lifetime earnings potential. The optimality of greater means-tested support is specific to older individuals: I find that such support to younger households should be at a much lower level than that to the elderly. These results imply that governments should provide strong work incentives for the young, but provide pensions with good insurance properties for the old. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1037&r=age |
| By: | Nolan, Anne (ESRI, Dublin); Barrett, Alan (ESRI, Dublin) |
| Abstract: | Extending working lives is often proposed as one route through which the costs associated with population ageing can be managed. In that context, understanding who currently works for longer can help policymakers to design policies to facilitate longer working. In particular, it is important to know if longer working is a choice or a necessity, where necessity arises from a lack of pension income. In this paper, we use data from the first four waves of the Irish Longitudinal Study of Ageing (TILDA), covering the period 2010-2016, to examine patterns of labour force participation among men and women aged 65+. We find that a lack of pension income is an important determinant of later-life working and that this applies for both men and women. Although older women are significantly less likely to work than older men, we find few differences in the pattern of determinants of longer working among older men and women. However, while women are significantly less likely to work than men, this effect is stronger among married women compared to single women. This suggests that older women without immediate access to family-provided financial support may need to work to support themselves. This adds to the picture of later life work being a necessity as opposed to a choice. However, an alternative explanation is that older married women may also have caring responsibilities that reduce their labour force participation. |
| Keywords: | retirement, pensions, older workers, Ireland |
| JEL: | D14 H55 J14 J26 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11664&r=age |
| By: | Veena S. Kulkarni, Vani S. Kulkarni and Raghav Gaiha |
| Abstract: | Abstract Obtaining detailed evidence on disabilities and their covariates is important as India’s elderly population (60 years or more) is growing three times faster than its population as a whole. This study is the first of its kind to provide an analysis of disability and its covariates among the elderly during 2005–12, based on the India Human Development Survey 2015, a nationally representative panel survey. Our econometric analysis throws light on why an increase in life expectancy among the aged has not translated into healthier lives. Based on an ordered probit specification, the reasons for this include the greater vulnerability of the older age group and elderly women, a largely rural population, low assets, non-communicable diseases (NCDs), lack of participation in social networks and a rise in the prevalence of single and multiple disabilities. Although the evidence is not detailed or conclusive, an expansion of morbidity among the aged cannot be ruled out. While The Rights of Persons with Disabilities Act 2016 is laudable in its intent and procedural detail, it is largely silent on disabilities among the elderly. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bwp:bwppap:302018&r=age |
| By: | Thomas Davoine |
| Abstract: | Population aging challenges the financing of social security systems in developed economies, as the share of the working age population declines. The resulting pressure on capital-labor ratios tends to push up factor prices and production. While European countries all face this challenge, the speed at which their populations are aging differs. If capital markets are integrated, differences in population aging may lead to cross-country spillovers, as investors freely seek the best returns on their capital. Using a multi-country overlapping-generations model covering 14 European Union countries, this paper quantifies spillovers and finds that capital market integration leads to redistribution across countries over the long run. It also shows that pension reforms can change the cross-country redistribution patterns, some countries losing from capital market integration without the reform but winning with it. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:econwp:_9&r=age |
| By: | Abdoulaye Ndiaye (Northwestern University) |
| Abstract: | This paper studies optimal income taxes and retirement benefits in a life-cycle model with an intensive margin of labor supply and an endogenous retirement age. The government insures and redistributes resources across individuals who privately observe persistent shocks to their productivity. In this environment, the optimal labor tax is hump-shaped in age, unlike in existing models with no endogenous retirement choice, in which the optimal tax is everywhere increasing. Because of the retirement margin, the total Frisch elasticity of labor supply increases with age. This elasticity effect flattens the labor tax for old workers relative to the model without an extensive margin. In addition, as high-productivity workers retire later than low-productivity workers, the distribution of productivity in the labor force features, over time, a higher mean and lower variance than in the general population. This novel composition effect pushes for a labor tax that declines for old workers. Optimal policy balances these effects with the insurance benefits of taxation, yielding the hump-shape in tax rates. In numerical simulations, the optimum achieves sizable welfare gains that approximately optimal age-dependent taxes fail to capture under the current US Social Security system. Yet, an optimal combination of age-dependent linear taxes with increasing-in-age delayed retirement credits generates welfare gains that are close to those from the optimum. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:535&r=age |
| By: | Andrea Bonfatti (University of Padua); Sagiri Kitao (Keio University); Selahattin Imrohoroglu (University of Southern California) |
| Abstract: | Populations in all major economies have been aging; the working age population has already started to decline in some and projections for future decades describe differential timing and extent of aging. To the extent that capital markets are integrated across regions, these different demographic trends and different fiscal responses to them will have differential implications on capital accumulation, labor supplies, and capital movements across regions. This paper develops a general equilibrium model of the world in which overlapping generations of individuals populate three regions under perfect capital mobility. As mentioned earlier, our idea is to view our world economy as consisting of three regions that have very different demographic trends. The HI region is aging earlier and faster than the MI region, and, Japan has been aging even earlier and faster than the HI region. By isolating Japan as a separate region, our framework aims to highlight the quantitative importance of the differential aging mechanism in studying fiscal sustainability in the Japanese economy. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:245&r=age |
| By: | Si Guo; Futoshi Narita |
| Abstract: | Pacific island countries are exposed to significant risks from natural disasters. As a disaster relief measure, Fiji allowed pre-retirement pension withdrawls in the wake of Cyclone Winston in 2016. Motivated by this policy action, we provide a normative analysis of the use of early pension withdrawals after disasters, by setting up a life-cycle saving model with myopic households facing large natural disaster shocks. The model demonstrates the key trade-off between building up sufficient retirement savings and ensuring the access to savings against natural disaster shocks, and sheds light on welfare implications of early pension withdrawals. |
| Keywords: | Fiji;Insurance;Asia and Pacific;Small states;Life-cycle model, Natural disasters, Pension, Social Security and Public Pensions |
| Date: | 2018–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:18/155&r=age |
| By: | Calisto Guambe; Rodwell Kufakunesu; Gusti Van Zyl; Conrad Beyers |
| Abstract: | We study an asset allocation stochastic problem with restriction for a defined-contribution pension plan during the accumulation phase. We consider a financial market with stochastic interest rate, composed of a risk-free asset, a real zero coupon bond price, the inflation-linked bond and the risky asset. A plan member aims to maximize the expected power utility derived from the terminal wealth. In order to protect the rights of a member who dies before retirement, we introduce a clause which allows to withdraw his premiums and the difference is distributed among the survival members. Besides the mortality risk, the fund manager takes into account the salary and the inflation risks. We then obtain closed form solutions for the asset allocation problem using a sufficient maximum principle approach for the problem with partial information. Finally, we give a numerical example. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1808.06337&r=age |
| By: | Kathleen McKiernan |
| Abstract: | Abstract In May 1981, Chile became the first country to address the unsustainability of its pay-as-you-go Social Security program by reforming to a system of individual retirement accounts. In order to quantify the welfare impact of the Chilean reform, I use an overlapping generations model with three main components: multiple productivity types, a government policy modeled on the Chilean system, and a household decision to split working time between a taxed formal sector, an untaxed informal sector, and home production. Blue-collar workers, who pay lower payroll taxes but receive lower pensions prior to the reform, and white-collar workers, who pay higher taxes and receive more generous pensions, experience long-run welfare gains of roughly 25 and 30 percent, respectively. Transitional generations of both types experience welfare losses up to 1 percent. Economies without informality and home production exhibit lower long-run welfare gains. Excluding the options for households to work informally and at home decreases welfare gains for two reasons: (1) both informality and home production increase labor supply elasticity and cause the pay-as-you-go payroll tax to be more distortionary; and (2) informality allows workers to take advantage of long-run wage increases from the reform without facing the distortion caused by remaining labor taxation. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:253&r=age |
| By: | Kevin S. Milligan; Tammy Schirle |
| Abstract: | We explore recent trends in the labour force participation rates of men aged 55-69 in Canada. Following steady declines in participation until the mid-1990s, the participation rates of older men have increased substantially and have reached historically high rates among those aged 65-69. We consider various factors that may influence the participation rates of older men and suggest that improvements in health, higher education, and increased attachment of older wives to the labour market are likely important factors driving recent trends in older men’s participation in Canada. |
| JEL: | J14 J26 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24874&r=age |
| By: | Gopi Shah Goda (Stanford University); Matthew Levy (London School of Economics); Colleen Flaherty Manchester (University of Minnesota, Carlson School of Management); Aaron Sojourner (University of Minnesota); Joshua Tasoff (Claremont Graduate University) |
| Abstract: | In a nationally-representative sample, we predict retirement savings using survey- based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant and economically meaningful predictors of retirement savings. These relationships hold controlling for cognitive ability, financial literacy, and a rich set of demographic controls. We address measurement error as a potential confound and explore mechanisms through which these biases may operate. Back of the envelope calculations suggest that eliminating EGB and PB would increase retirement savings by approximately 12 percent. |
| Keywords: | household finance, retirement savings, exponential-growth bias, present bias, financial literacy, survey-based elicitations, quasi-hyperbolic discounting |
| JEL: | D19 D91 C83 C10 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-059&r=age |
| By: | Buckle, Robert A.; Creedy, John |
| Abstract: | This paper discusses the impact on research quality of New Zealand universities of the Performance-Based Research Fund from 2003 to 2012. This is a peer-review process involving assessment of individual researchers. The contribution to improvement in research quality of transitions among research quality categories and entrants and exits of individuals are identified. A substantial component of change has been the removal of non-research active staff. There has been population ageing due to retention of older and higher-quality researchers and a large reduction in the number of younger researchers. Significant differences among universities are evident in the patterns of transformation. The paper also critically considers the PBRF assessment process and characteristics of the metrics used, suggesting scope for improvement in the assessment of researchers and the way in which universities are ranked. |
| Keywords: | Education, New Zealand universities, Performance-based Research Fund, Research, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:7613&r=age |