nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒11‒05
twenty papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Fiscal Sustainability in Japan: What to tackle? By Selahattin İMROHOROĞLU; KITAO Sagiri; YAMADA Tomoaki
  2. Tenure Choice, Portfolio Structure and Long-term Care - Optimal Risk Management in Retirement By Hofmann, Maurice; Fehr, Hans
  3. The Effect of Pension Subsidies on Retirement Timing of Older Women: Evidence from a Regression Kink Design By Ye, Han
  4. Navigating Complex Financial Decisions at Retirement: Evidence from Annuity Choices in Public Sector Pensions By Robert L. Clark; Robert G. Hammond; David Vanderweide
  5. Are Retirees More Satisfied? Anticipation and Adaptation Effects of Retirement on Subjective Well-Being: A Panel Analysis for Germany By Merz, Joachim
  6. Long-term Care, Ageing and Gender in the Greek crisis By Antigone Lyberaki; Platon Tinios
  7. Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality By Andreas Kuhn; Stefan Staubli; Jean-Philippe Wuellrich; Josef Zweimüller
  8. How Will Persistent Low Expected Returns Shape Household Economic Behavior? By Vanya Horneff; Raimond Maurer; Olivia S. Mitchell
  9. A Head-to-Head Comparison of Augmented Wealth in Germany and the United States By Bönke, Timm; Schröder, Carsten; Grabka, Markus; Wolff, Edward
  10. Effect of Aging on Housing Prices: A Perspective from an Overlapping Generation Model By Sun, Tianyu; Chand, Satish; Sharpe, Keiran
  11. Pauvreté, Egalité, Mortalité: Mortality (In)Equality in France and the United States By Janet CURRIE; Hannes SCHWANDT; Josselin THUILLIEZ
  12. Measuring the Redistributive Effect of Pensions By Alvaro Forteza
  13. Herding behavior of Dutch pension funds in asset class investments By I. Koetsier; J.A. Bikker
  14. Understanding Joint Retirement By Pierre-Carl Michaud; Arthur van Soest; Luc Bissonnette
  15. Demand for Annuities: Price Sensitivity, Risk Perceptions, and Knowledge By M. Martin Boyer; Sébastien Box-Couillard; Pierre-Carl Michaud
  16. The New Lifecycle of Women's Employment: Disappearing Humps, Sagging Middle, Expanding Tops By Claudia Goldin; Joshua W. Mitchell
  17. Medicare Coverage and Reporting By Renuka Bhaskar; James Noon; Brett O'Hara; Victoria Velkoff
  18. La gestion et le dépistage des risques liés au vieillissement, et le rôle des régimes de retraite dans le marché de l’assurance de soins de longue durée By M. Martin Boyer
  19. Tourism Pattern of Elderly People in Hua Hin District, Prachuap Khiri Khan Province, Thailand By Chombhak Klangrahad; Phuprurd Kanna; Charles-Amaury Quellec
  20. Happiness at Different Ages: The Social Context Matters By John F. Helliwell; Max B. Norton; Haifang Huang; Shun Wang

  1. By: Selahattin İMROHOROĞLU; KITAO Sagiri; YAMADA Tomoaki
    Abstract: Japan leads all advanced economies in terms of aging and has the highest debt to gross domestic product (GDP) ratio. The public pension, medical and long-term care (LTC) expenditures are projected to far outpace revenues and create significant fiscal burdens. In this paper, we develop a detailed overlapping generations model that incorporates the social insurance programs in detail, use most recent estimates from Japanese micro data and government demographic projections to discipline the earnings and labor supply profiles of heterogeneous agents and their cohort shares, and simulate future paths of fiscal and macroeconomic indicators. Our numerical results suggest that absent any change in current policies, Japan will continue to run large pension, public health, LTC, and basic deficits and the debt to GDP ratio will continue to reach unprecedented highs, with interest payments on the debt becoming increasingly larger. Although no single policy tool can address fiscal consolidation, a combination of policies is found to achieve sustainability: raise the retirement age to 67, cut pensions by 10%, raise copays of health and LTC insurances to 20%, find policies to propel female employment and earnings to the levels of their male counterparts, and increase the consumption tax rate to 15%. Under these changes, the debt to output ratio in 2050 would be lower than that in 2020.
    Date: 2018–09
  2. By: Hofmann, Maurice; Fehr, Hans
    Abstract: Our study analyzes the savings behavior of elderly and highlights the interplay between tenure decisions, stock market investment and long-term care risk. Housing equity serves a dual purpose as a consumption good and as an asset, consequently it is important for the optimal risk structure of the financial portfolio. In addition, recent contributions also point out its implicit insurance provision to buffer long-term care shocks. Our stylized life cycle model captures these links and indicates that in Germany long-term care risks may be an important driver for homeownership. In our preferred set-up housing equity is a rather low-risky investment that even encourages stockmarket participation among elderly homeowners.
    Keywords: Homeownership,Life-cycle models,Stock market participation,Long-term care insurance provision
    JEL: C61 G11 H55
    Date: 2018
  3. By: Ye, Han (University of Mannheim)
    Abstract: This paper provides a clear and transparent setting to study the effect of additional pension benefits on women's retirement decision. Using administrative pension insurance records from Germany, I examine the impact of a pension subsidy program to low pay workers, implemented in 1992. The subsidies have a kinked relationship with the recipients' average pension contribution, which led to sharply different slopes of benefits for similar women to the left and to the right of the kink point. Using a regression kink design, I find that 100 euros additional monthly pension benefits induce female recipients to claim pension earlier by about 10 months. The hazard rate to claim a pension at age 60 increases by 17%. A back-of-the-envelope calculation suggests the ratio of behavioral cost to mechanical cost of this subsidy program is 0.3, which is smaller than other anti-poverty programs such as extending unemployment benefits and progressive taxation. I find that the phasing out of this subsidy program can account for one third of the increase in women's age of claiming pension over the past decade.
    Keywords: pension subsidy, pension generosity, retirement, regression kink design
    JEL: H55 J18 J21 J26
    Date: 2018–09
  4. By: Robert L. Clark; Robert G. Hammond; David Vanderweide
    Abstract: Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We analyze the factors determining annuity option choices offered by a public sector defined pension plan with no default annuity option. Using combined administrative records and survey data, we explore the role of individual and household characteristics as well as risk preferences, time preferences, and financial literacy. The evidence is consistent with predictions over which households might benefit most from each annuity option. Comparing retirees who chose different annuities, we find that these groups of retirees report very different levels of well-being in retirement.
    JEL: G2 H55 H7
    Date: 2018–10
  5. By: Merz, Joachim (Leuphana University Lüneburg)
    Abstract: Quality of life and satisfaction with life are of particular importance for individuals as well as for society concerning the "demographic change" with now longer retirement periods. This study will contribute to the life satisfaction discussion and quantifies life satisfaction and pattern of explanation before and after such a prominent life cycle event, the entrance into retirement. In particular, with the individual longitudinal data and 33 waves of the Socio-Economic Panel (SOEP) and the appropriate microeconometric causal fixed effects robust panel methods we ask and quantify if actual life satisfaction indeed is decreasing before retirement, is increasing at the entrance into retirement, and is decreasing then after certain periods back to a foregoing level. Thus, we ask if such an anticipation and adaptation pattern – as known from other prominent events – is also to discover for life satisfaction before and after retirement in Germany.
    Keywords: retirement, life-satisfaction, happiness, retirement, anticipation and adaptation effects, fixed-effect regression, Socio-Economic Panel (SOEP), Germany
    JEL: I31 J26 J14 J17 A13 C23
    Date: 2018–09
  6. By: Antigone Lyberaki; Platon Tinios
    Abstract: The paper examines Long Term Care (LTC) in Greece over the crisis. It does so through examining micro data from the 2007 and 2015 waves of the Survey of Health, Ageing and Retirement and Europe (SHARE. The crisis was exceptionally deep and involved retrenchments in public welfare, superimposed on a familial LTC system. Hence, the ‘austerity narrative’, expects cutbacks to have led to deteriorating outcomes and to rising informal provision. The empirical investigation casts doubt on these expectations: First, LTC needs did not rise, despite a deterioration in health. Second, ‘care gaps’ – people declaring need who receive no care – shrank, despite austerity. Third, it was (paid) professional care, rather than informal care which rose, despite the familial LTC system. Fourth, care in the last year of life is a further drain on family finances. The paper concludes with thoughts on whether expecting the family to keep delivering is a sustainable LTC medium term policy in the face of ageing.
    Keywords: Greece; Long term care; Care needs; Austerity; Gender; financial crisis
    Date: 2018–09
  7. By: Andreas Kuhn; Stefan Staubli; Jean-Philippe Wuellrich; Josef Zweimüller
    Abstract: We estimate the causal effect of permanent and premature exits from the labor force on mortality. To overcome the problem of negative health selection into early retirement, we exploit a policy change in unemployment insurance rules in Austria that allowed workers in eligible regions to exit the labor force 3 years earlier compared to workers in non-eligible regions. Using administrative data with precise information on mortality and retirement, we find that the policy change induced eligible workers to exit the labor force significantly earlier. Instrumental variable estimation results show that for men retiring one year earlier causes a 6.8% increase in the risk of premature death and 0.2 years reduction in the age at death, but has no significant effect for women.
    JEL: I10 I12 J14 J26
    Date: 2018–10
  8. By: Vanya Horneff; Raimond Maurer; Olivia S. Mitchell
    Abstract: Many believe that global capital markets will generate lower returns in the future versus the past. We examine how persistently lower real returns will reshape work, retirement, saving, and investment behavior of older persons using a calibrated dynamic life cycle model. In a low return regime, workers build up less wealth in their tax-qualified 401(k) accounts versus the past, claim social security benefits later, and work more. Moreover, the better-educated are more sensitive to real interest rate changes, and the least-educated alter their behavior less. Interestingly, wealth inequality is lower in periods of persistent low expected returns.
    JEL: D14 D91 G11 G22
    Date: 2018–10
  9. By: Bönke, Timm; Schröder, Carsten; Grabka, Markus; Wolff, Edward
    Abstract: We provide levels of, compositions of, and inequalities in household augmented wealth – defined as the sum of net worth and pension wealth – for two countries: the United States and Germany. Pension wealth makes up a considerable portion of household wealth: about 48% in the United States and 61%in Germany. The higher share in Germany narrows the wealth gap between the two countries: While average net worth in the United States (US$337,000 in 2013) is about 1.8 times higher than in Germany, augmented wealth (US$651,000) is only 1.4 times higher. Further, the inclusion of pension wealth in household wealth reduces the Gini coefficient from 0.892 to 0.701 in the United States and from 0.765 to 0.511 in Germany.
    JEL: D31 H55 J32
    Date: 2018
  10. By: Sun, Tianyu; Chand, Satish; Sharpe, Keiran
    Abstract: This paper investigates the effect of aging on housing prices. It provides a theoretical explanation to address the on-going debate about this issue. The analysis demonstrates that aging has divergent effects on housing prices, depending on the net effects of a fall in fertility vis-à-vis a rise in longevity on demand for housing. In addition, the results suggest that aging could cause a turning point in the price dynamics. Before this turning point, aging would boost the prices; however, after this point, the prices are depressed because of aging. Furthermore, inequality of household utility is enlarged during the aging processes.
    Keywords: Aging Population; OLG Model; House Prices; Land Prices; Turning Point
    JEL: E21 E31 J11 R21 R31
    Date: 2018–02–10
  11. By: Janet CURRIE (FERDI); Hannes SCHWANDT (FERDI); Josselin THUILLIEZ (CNRS-Sorbonne)
    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.
    Date: 2018–05
  12. By: Alvaro Forteza
    Abstract: In this document, I present a methodological proposal for the analysis of the redistributive e↵ect of pension programs. The analysis is challenging and has generated controversies in the literature. One of the issues is to what extent pensions should be treated as transfers or deferred income (Lustig and Higgins 2017). In my view, this is basically a question about the correct counterfactual for non labor income. In other words, the main challenge is to estimate the income from property of wealth individuals would have earned had the pension program not been present. I use a standard life cycle model to provide a consistent answer.
    Date: 2018–09
  13. By: I. Koetsier; J.A. 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
    Date: 2018
  14. By: Pierre-Carl Michaud; Arthur van Soest; Luc Bissonnette
    Abstract: Evidence from different sources shows that spouses' retirement decisions are correlated. Retirement policies affecting individuals in couples are therefore also likely to affect behavior of their spouses. It is therefore important to account for joint features in modeling retirement. This paper studies a structural collective model of labor supply and retirement of both partners in a couple with interdependent preferences, imperfect knowledge of preferences of the spouse, and subjective expectations about the future. We propose a novel method to estimate preferences and the intra-household bargaining process, which relies on stated preferences data collected in the Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and replacement rates of both spouses from three perspectives: considering their own preferences only, the preferences of their spouse only, or the most likely decision for the household. With these data, all model parameters are identified and potential sources of joint retirement can be disentangled. We find that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this bias. They suggest that correlation in unobserved heterogeneity components of the partners' marginal utility of leisure explains a large share of joint retirement decisions. We also find significant positive complementarities in leisure, but this explains a much smaller part of joint retirement.
    Keywords: Collective models,Leisure complementarity,Stated choices,Identification,
    JEL: D13 J26 C81
    Date: 2018–10–15
  15. By: M. Martin Boyer; Sébastien Box-Couillard; Pierre-Carl Michaud
    Abstract: The demand for voluntary individual lifetime annuities is low. To assess the rea-sons why, we designed a stated-preference experiment where we vary characteristics of annuity contracts to estimate individuals’ sensitivity to their value-to-cost ra-tio, a statistic also known as an annuity’s money’s worth. Using different measures of longevity risk and survival expectations, including individually tailored estimates from a micro-simulation model and subjective expectations, we investigate how knowledge of the product and mortality risk misperceptions affect the take-up as well as the sensitivity of the demand for annuities. We find that annuities are objectively not priced fairly, although they can appear to be fairly priced given an individual’s subjective mortality risk. We also find that demand is somewhat price-inelastic so that, given their current 10% take-up rate, lowering the price of annuities to fair actuarial levels could increase demand by at most 2 percentage points. Lack of knowledge of annuities explains another 1.2 percentage points. We find limited additional inter-est for deferred annuities compared to immediate ones although respondents are less price sensitive when evaluating deferred annuities.
    Keywords: Life annuities’ money’s worth,Stated preferences,Subjective survival probabilities,
    JEL: J26 D14 I13
    Date: 2018–10–17
  16. By: Claudia Goldin; Joshua W. Mitchell
    Abstract: The new lifecycle of women's employment is initially high and flat, there is a dip in the middle and a phasing out that is more prolonged than for previous cohorts. The hump is gone, the middle is a bit sagging and the top has greatly expanded. We explore the increase in cumulative work experience for women from the 1930s to the 1970s birth cohorts using the SIPP and the HRS. We investigate the changing labor force impact of a birth event across cohorts and by education and also the impact of taking leave or quitting. We find greatly increased labor force experience across cohorts, far less time out after a birth and greater labor force recovery for those who take paid or unpaid leave. More work experience across the lifecycle is related to the increased employment of women in their older ages.
    Date: 2016–11
  17. By: Renuka Bhaskar; James Noon; Brett O'Hara; Victoria Velkoff
    Abstract: Medicare coverage of the older population in the United States is widely recognized as being nearly universal. Recent statistics from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) indicate that 93 percent of individuals aged 65 and older were covered by Medicare in 2013. Those without Medicare include those who are not eligible for the public health program, though the CPS ASEC estimate may also be impacted by misreporting. Using linked data from the CPS ASEC and Medicare Enrollment Database (i.e., the Medicare administrative data), we estimate the extent to which individuals misreport their Medicare coverage. We focus on those who report having Medicare but are not enrolled (false positives) and those who do not report having Medicare but are enrolled (false negatives). We use regression analyses to evaluate factors associated with both types of misreporting including socioeconomic, demographic, and household characteristics. We then provide estimates of the implied Medicare-covered, insured, and uninsured older population, taking into account misreporting in the CPS ASEC. We find an undercount in the CPS ASEC estimates of the Medicare covered population of 4.5 percent. This misreporting is not random - characteristics associated with misreporting include citizenship status, year of entry, labor force participation, Medicare coverage of others in the household, disability status, and imputation of Medicare responses. When we adjust the CPS ASEC estimates to account for misreporting, Medicare coverage of the population aged 65 and older increases from 93.4 percent to 95.6 percent while the uninsured rate decreases from 1.4 percent to 1.3 percent.
    Date: 2016–12
  18. By: M. Martin Boyer
    Abstract: Nous examinons l’interaction entre les véhicules d’épargne-retraite, publics et privés, et l’achat d’assurance de soins de longue durée dans un monde où les agents découvrent au fil du temps leur risque de vieillir. Dans la mesure où chaque agent en sait plus sur son risque réel de vieillir que tous les autres participants du marché, alors certains agents préfèreront attendre de connaître leur état de santé (c.-à-d. leur catégorie de risque) avant d’acheter un produit d’épargne-retraite (situation semblable à avoir un régime à contributions déterminées), alors que d’autres préfèreront un produit qui est indépendant de leur état de santé (c.-à-d. d’adhérer à un régime public ou à prestations déterminées). Avant la révélation du risque lié au vieillissement de chacun, la préférence des agents pour l’un ou pour l’autre dépendra, entre autres facteurs, de la différence dans les probabilités de chacun de vieillir, dans la riscophobie des agents, et dans la probabilité d’avoir besoin de soins de longue durée et de leurs coûts potentiels. Lorsque les agents n’ont accès qu’à un régime à cotisations déterminées, alors ils choisiront une assurance complète de soins de longue durée. Ce n’est pas le cas lorsque les agents n’ont accès qu’à un régime public dont les primes sont indépendantes du risque de vieillissement de chacun.
    Keywords: , Information asymétrique,Acquisition d’information,Anti-sélection,Risque de longévité
    JEL: D82 G22 H55
    Date: 2018–05–16
  19. By: Chombhak Klangrahad (Faculty of Management Science, Silpakorn University Petchaburi IT campus); Phuprurd Kanna (Faculty of Management Science, Silpakorn University Petchaburi IT campus); Charles-Amaury Quellec (Silpakorn University International College, Silpakorn University)
    Abstract: The study on Tourism Pattern of Elderly People in Hua Hin District was the quantitative research aimed to examine the tourism pattern of elderly people in Hua Hin District, Prachuap Khiri Khan Province or their use of services, and understand the problems of travelling of elderly people in Hua Hin District, Prachuap Khiri Khan Province. The research was conducted with 385 samples. Data was collected using a questionnaire and statistics, which were frequency and percentage, were used.Analysis results of 385 samples? personal data indicated that 49.61% of the samples were male while 50.39% were female, aged between 56-60 years old, accounted for 46.75%. 83.64% were married and 91.17% had child or children. 43.12% of them earned 40,001-50,000 baht per month. 64.45% of them graduated with Bachelor?s degree. 45.79% were living in the central region. Most of them, 77.14%, were healthy. Regarding to the purpose of travelling, 62.86% would like to have a relaxation and 72.99% chose to visit the hotel or resort. 65.71% spent 1-2 days for the travelling which 37.92% travelled during the weekend. 51.43% travelled with private car. 89.09% of them travelled in group which 57.92% were family or relatives. In the trip, 68.57% had 4-7 companions and the expense of travelling was less than 10,000 baht, 46.23%. 37.40% of the expense was for accommodation. 47.01% of the travelers visited an ocean park and amusement park. They bought clothing as souvenir the most, 34.29%. 34.29% of them received the information about tourist site from television. 22.38% of them suggested that the security of tourist should be improved.
    Keywords: TourismTourism patternElderly people
    Date: 2018–07
  20. By: John F. Helliwell; Max B. Norton; Haifang Huang; Shun Wang
    Abstract: This paper uses a variety of individual-level survey data from several countries to test for interactions between subjective well-being at different ages and variables measuring the nature and quality of the social context at work, at home, and in the community. While earlier studies have found important age patterns (often U-shaped) and social context effects, these two sets of variables have generally been treated as mutually independent. We test for and find several large and highly significant interactions. Results are presented for life evaluations and (in some surveys) for happiness yesterday, in models with and without other control variables. The U-shape in age is found to be significantly flatter, and well-being in the middle of the age range higher, for those who are in workplaces with partner-like superiors, for those living as couples, and for those who have lived for longer in their communities. A strong sense of community belonging is associated with greater life satisfaction at all ages, but especially so at ages 60 and above, in some samples deepening the U-shape in age by increasing the size of the life satisfaction gains following the mid-life low.
    JEL: I31 J12 J32 R13
    Date: 2018–10

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