nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒11‒12
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Drivers of Labor Force Participation in Advanced Economies: Macro and Micro Evidence By Grigoli, Francesco; Koczan, Zsoka; Topalova, Petia
  2. A Cohort-Based Analysis of Labor Force Participation for Advanced Economies By Grigoli, Francesco; Koczan, Zsoka; Topalova, Petia
  3. The Betrayed Generation? Intra-Household Transfers and Retirement Behavior in South Korea By Kim, Kyeongkuk; Lee, Sang-Hyop; Halliday, Timothy J.
  4. Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality By Kuhn, Andreas; Staubli, Stefan; Wuellrich, Jean-Philippe; Zweimüller, Josef
  5. A New Measure of Intra-generational Redistribution within PAYG Pension Schemes and its Application to German Micro-data By Klos, Jonas; Krieger, Tim; Stöwhase, Sven
  6. Longevity and Companionship in an Overlapping-Generations Model By Gylfi Zoega; Marias H. Gestsson
  7. Elementos para una reforma al Sistema de Protección Económica a la Vejez en Colombia By Leonardo Villar; David Forero
  8. A Co-Evolutionary, Long-Term, MacroEconomic Forecast for the UK Using Demographic Projections By Nick Jagger
  9. Early Determinants of Work Disability in an International Perspective By Axel Börsch-Supan; Tabea Bucher-Koenen; Felizia Hanemann
  10. Can we afford a defined benefit pension By Woon K. Wong
  11. Gone with the Windfall - Germany‘s Second LTC Strengthening Act and its Intergenerational Implications By Lewe Bahnsen; Stefan Fetzer; Fabian Franke; Christian Hagist

  1. By: Grigoli, Francesco; Koczan, Zsoka; Topalova, Petia
    Abstract: Despite significant headwinds from population aging in most advanced economies (AEs), labor force participation rates show remarkably divergent trajectories both across countries and across different 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 paper investigates the determinants of these trends using aggregate and individual-level data. We find 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 market 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 findings 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.
    Keywords: labor force participation,policies,technology,routinization
    JEL: J11 J21 O33
    Date: 2018
  2. By: Grigoli, Francesco; Koczan, Zsoka; Topalova, Petia
    Abstract: Advanced economies are in the midst of a major demographic transition, with the number of elderly rising precipitously relative to the working-age population. Yet, despite the acceleration in demographic shifts in the past decade, advanced economies experienced markedly different trajectories in overall labor force participation rates and the workforce attachment of men and women. Using a cohort-based model of labor force participation for 17 advanced economies estimated over the 1985{2016 period, we document a significant role of common patterns of participation over the life cycle and shifts in these patterns across generations for aggregate labor supply, especially in the case of women. The entry of new cohorts of women led to upward shifts in the age participation profile, boosting aggregate participation rates. However, this process plateaued in most advanced economies, with signs of reversal in some. Using the model's results to forecast future participation trends, we project sizable declines in aggregate participation rates over the next three decades due to the aging of the population. Illustrative simulations show that implementing policies encouraging labor supply can help attenuate but may not fully offset demographic pressures.
    Keywords: Advanced economies,age,cohort,labor force participation,population aging,simulations
    JEL: J01 J16 J21
    Date: 2018
  3. By: Kim, Kyeongkuk (University of Hawaii at Manoa); Lee, Sang-Hyop (University of Hawaii at Manoa); Halliday, Timothy J. (University of Hawaii at Manoa)
    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. Thus, in the absence of sufficient transfers from adult sons to parents, parents will fund their earlier investments in their sons by increasing their labor supply. Consistent with this, we show that parents with more adult sons delay their retirement. 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 and 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: 2018–09
  4. By: Kuhn, Andreas (Swiss Federal Institute for Vocational Education and Training); Staubli, Stefan (University of Calgary); Wuellrich, Jean-Philippe (University of Zurich); Zweimüller, Josef (University of Zurich)
    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.
    Keywords: early retirement, mortality, health behavior, instrumental variable
    JEL: I10 I12 J14 J26
    Date: 2018–09
  5. By: Klos, Jonas; Krieger, Tim; Stöwhase, Sven
    Abstract: This paper proposes a new Index for measuring intra-generational redistribution in PAYG pension schemes. This index solely requires information on contributions and pension benefits of retirees, eliminating the involvement of the contribution side in a PAYG pension scheme. As an application, we use contribution records of new German retirees to measure intra-generational redistribution in the German statutory pension scheme and the importance of certain additional benefits.
    Keywords: PAYG pension systems,intra-generational redistribution,Beveridge vs. Bismarck,index,microdata,Germany
    JEL: H55 D31
    Date: 2018
  6. By: Gylfi Zoega (University of Iceland; Birkbeck, University of London); Marias H. Gestsson (University of Iceland)
    Abstract: We derive a golden rule for the level of life-extending health care when the utility of the old depends not only their level of consumption but also on the number of old people alive. While previous work has emphasized the negative pecuniary externality from longevity, we derive the effect of the positive non-pecuniary externality of being able to consume with other members of one’s cohort.
    Keywords: Longevity, health care expenditures, companionship.
    JEL: E6 E2 I1
    Date: 2018–11
  7. By: Leonardo Villar; David Forero
    Abstract: Presentación de la propuesta sobre una reforma pensional en Colombia de Fedesarrollo, en el XI Congreso de Asofondos, realizado en Cartagena el día 12 de abril, 2018.
    Keywords: Pensiones de Jubilación, Sistema de Protección Social, Reforma Pensional, Vejez, Protección Económica, Sistema Pensional
    JEL: H55 J14 J21 J26 J32
    Date: 2018–04–12
  8. By: Nick Jagger (SPRU, University of Sussex; University of Brighton)
    Abstract: This paper is based around outlining and illustrating the use of a co-evolutionary method for long-term macro-economic forecasting. The paper includes economic forecasts for the UK to 2060 using a novel approach based on Multichannel Singular Spectral Analysis (MSSA). The forecasts are based on projections of the working-age population and their educational attainment, as well as building on the historic trends of these variables. The variables forecasted are Gross Domestic Product (GDP), investment and productivity, based on historic time-series dating back to 1856, and their interactions with the projected variables. Other longterm forecasts for the UK are examined and the important impact of demographic change and plateauing educational attainment is assessed. Additionally, the power of the new MSSA forecasting technique proposed here is illustrated.
    Keywords: Co-evolutionary forecasting; Multichannel Singular Spectral Analysis; Demographics; Educational Attainment; Long-term macro-economic forecasting
    JEL: B15 B22 C14 C53 J11
    Date: 2018–10
  9. By: Axel Börsch-Supan; Tabea Bucher-Koenen; Felizia Hanemann
    Abstract: This paper studies the interrelated roles of health and welfare state policies in the decision to take up disability insurance (DI) benefits due to work disability (WD), defined as the (partial) inability to engage in gainful employment due to physical or mental illness. We exploit the large international variation of health, self-reported WD and the uptake of DI benefits in the US and Europe using a harmonized data set with life history information assembled from the Survey of Health Ageing and Retirement in Europe (SHARE), the English Longitudinal Study on Ageing (ELSA) and the Health and Retirement Study (HRS). Particular attention is given to the role of life-time health and other life-time experiences in explaining WD and DI uptake later in life. We find that while our large set of health measures explains a substantial share of the within-country variation in WD and DI, this is not the case for the variation across countries. Rather, most of the variation between countries is explained by differences in DI policies.
    JEL: H55 J21 J26
    Date: 2018–10
  10. By: Woon K. Wong (Cardiff Business School)
    Abstract: CA representative pensioner is considered for the evaluation of some of the cost factors for the career-average-revalued-earnings (CARE) defined benefit scheme of USS (the Universities Superannuation Scheme). Since the promised benefit increases with inflation, the return on the pension portfolio is required to exceed the rate of inflation in order for the scheme to be fully funded. Therefore, given current low interest rates, the de-risking of replacing equities with bonds in the portfolio significantly increases the risk of under-funding and hence is prohibitively expensive. On the other hand, the risk of holding equities in the portfolio can be effectively mitigated through the principle of time diversification, thereby resulting in not only a high probability of a fully-funded scheme, but also possible lower contributions from both scheme sponsors and members in the future. Moreover, it is shown that a zero or negative real interest rate provides the condition for allocating all funds into equities if minimising the probability of underfunding is the sole objective. Finally, the paper finds that the promised benefit will be cheaper to fund if the pensioner has (i) made more years of contribution; (ii) has become a deferred member; (iii) has a slower wage growth; and (iv) has made the contribution earlier. The implication is that the current CARE scheme is cheaper and less risky than the final-salary scheme.
    Keywords: pension, defined benefit, time diversification, de-risking, USS
    Date: 2018–11
  11. By: Lewe Bahnsen; Stefan Fetzer; Fabian Franke; Christian Hagist
    Abstract: Due to the debate about the generosity of LTC insurance benefits the German government decided to increase benefits and widen the circle of LTC beneficiaries with the Second LTC Strengthening Act. In this paper, we evaluate the long-term implications of this recent reform for the German LTC insurance scheme. Using the framework of generational accounting we show that the reform has led to a widening of the short-term gap between revenues and expenditure and that the LTC insurance is not sustainably financed, neither pre- nor post-reform. By the early 2020s there will be fiscal pressure for further reforms. From an intergenerational perspective, the reform can be seen as a windfall to current beneficiaries increasing the intergenerational redistribution through the pay-as-you-go system.
    Keywords: Generational accounting, long-term care insurance, intergenerational distribution
    JEL: H51 I13 J14
    Date: 2018–10–26

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