nep-age New Economics Papers
on Economics of Ageing
Issue of 2018‒12‒17
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Evolution of Retirement Incentives in the U.S. By Courtney Coile
  2. A Lifetime of Changes: State Pensions and Work Incentives at Older Ages in the UK, 1948-2018 By James Banks; Carl Emmerson
  3. Increasing inclusiveness for women, youth and seniors in Canada By Andrew Barker
  4. Social Security Programs and Retirement Around the World: Reforms and Retirement Incentives – Introduction and Summary By Axel H. Börsch-Supan; Courtney Coile
  5. Redistribution from the Cradle to the Grave: A Unified Approach to Heterogeneity in Age, Income and Wealth By Pierre Emmanuel Weil
  6. Life-Cycle Consumption of Food at Home in France: Empirical Evidence from Food Expenditures and Home Production By Kyureghian, G.; Soler, L.-G.
  7. Swimming with Wealthy Sharks: Longevity, Volatility and the Value of Risk Pooling By Moshe A. Milevsky
  8. Ageing, gender and financial literacy in Japan By Shohei Okamoto; Kohei Komamura
  9. The growing American health penalty: International trends in the employment of older workers with poor health By Ben Baumberg Geiger; René Böheim; Thomas Leoni
  10. End-of-Life Medical Expenses By French, Eric; Jones, John Bailey; Kelly, Elaine; McCauley, Jeremy
  11. Saving Regret By Axel H. Börsch-Supan; Tabea Bucher-Koenen; Michael D. Hurd; Susann Rohwedder
  12. Spatial Inequality in Mortality in France over the Past Two Centuries By Florian Bonnet; Hippolyte D'Albis
  13. Health literacy for people-centred care: Where do OECD countries stand? By OECD

  1. By: Courtney Coile
    Abstract: Employment rates of older men and women in the U.S. have been rising for the past several decades. Over the same period, there have been significant changes in Social Security and private pensions, which may have contributed to this trend. In this study, we examine how the financial incentive to work at older ages has evolved since 1980 as a result of changes in Social Security and private pensions. We find that the implicit tax on work after age 65 has dropped by about 15 percentage points for a typical worker as a result of Social Security reforms; incorporating the change in private pensions, the decline is larger. We provide suggestive evidence that the evolution of retirement incentives has affected retirement behavior.
    JEL: J14 J26
    Date: 2018–11
  2. By: James Banks; Carl Emmerson
    Abstract: We describe the history of state pension policy in the UK since 1948 and calculate summary measures of the generosity of the system over time and the degree to which the it created implicit taxes on, or subsidies to, work at older ages. The time series of these measures, calculated separately for ’example-type’ individuals of different birth cohorts, education and sexes, are then related to the time-series of employment rates at older ages for the equivalent types of individual. The generosity of the system rose over the period as whole but has fallen in recent years, and in contrast to many countries there were generally never large implicit taxes on work arising from the state pension system. What implicit subsidies there were in the years immediately before the State Pension Age have been gradually eliminated and the system is now broadly neutral with regard to work incentives. Exploiting variation in pension wealth and work incentives across different cohort-education-sex groups, created by the timing and phasing of pension reforms, we show that both pension wealth and the implicit work disincentives in the pension system are correlated with employment outcomes for men, with the expected negative sign.
    JEL: H55 J26 J32
    Date: 2018–11
  3. By: Andrew Barker
    Abstract: Women, youth and seniors face barriers to economic inclusion in Canada, with considerable scope to improve their labour market outcomes. There has been no progress in shrinking the gender employment gap since 2009, and women, particularly mothers, continue to earn significantly less than men, in part due to a large gap in unpaid childcare responsibilities. Outside the province of Québec, low (but increasing) rates of government support for childcare should be expanded considerably, as should fathers’ low take-up of parental leave. Skills development should be prioritised to arrest declining skills among youth and weak wage growth among young males with low educational attainment. Fragmented labour market information needs to be consolidated to address wage penalties associated with the widespread prevalence of qualifications mismatch. Growth in old-age poverty should be tackled through further increases in basic pension payments over time. Linking changes in the age of eligibility for public pensions to life expectancy would boost growth by increasing employment of older Canadians still willing and able to work. For all three groups, well-targeted expansions of in-work tax benefits and active labour market spending have the potential to increase employment.
    Keywords: apprenticeship, Canada, child care, employment, gender equality, inclusiveness, labour force participation, labour market participation of seniors, life-long learning, long-term care, parental leave, pensions
    JEL: H55 I38 J26 J40
    Date: 2018–12–11
  4. By: Axel H. Börsch-Supan; Courtney Coile
    Abstract: This is the introduction and summary to the ninth phase of an ongoing project on Social Security Programs and Retirement Around the World. This project, which compares the experiences of a dozen developed countries, was launched in the mid 1990s, following decades of decline in the labor force participation rate of older men. The first several phases of the project document that social security program provisions can create powerful incentives for retirement that are strongly correlated with the labor force behavior of older workers. Subsequent phases have explored how disability program provisions affect retirement, whether there is a link between older employment and youth unemployment, and whether older individuals are healthy enough to work longer. In the two decades since the project began, the dramatic decline in men’s labor force participation has been replaced by sharply rising participation rates. Older women’s participation has increased dramatically as well. Over this same period, countries have undertaken numerous reforms of their social security programs, disability programs, and other public benefit programs available to older workers. In this ninth phase of the project, we explore how the financial incentive to work at older ages has evolved from 1980 to the present. We highlight the important role of reforms in these changing incentives and examine how changing incentives may have affected retirement behavior.
    JEL: J14 J26
    Date: 2018–11
  5. By: Pierre Emmanuel Weil
    Abstract: This paper studies the macroeconomic and cross-sectional consequences of redistributive fiscal policy, with a focus on pensions. Evidence suggests that transfers crowd out private savings heterogeneously across household income, wealth, and age groups. These changes cumulate to dynamic effects on the wealth distribution, which must be taken into account for policymakers with distributional goals. To quantify these channels, I build an overlapping generations heterogeneous agent model based on continuous time methods, joining canonical mechanisms of lifecycle behavior and precautionary savings. Despite its parsimony, the model yields empirically realistic distributions of savings and of the cross-sectional impact of pension reform. I use it to make two main contributions. First, I quantify the cross-sectional impact on savings of pension reform. Adjustment is concentrated among workers in lower-middle wealth groups. Richer households are indifferent about transfers, while the poorest are constrained. Thus, the equilibrium real rate stays largely unchanged, supporting previous efforts which studied these effects in partial equilibrium. Second, in a transition experiment I show that raising social security benefits leads wealth inequality to fall in the short run, but to grow past its original level after fifteen years -- even if the accompanying tax increase is progressive. This follows from lower-middle workers reducing savings most strongly. Means-testing amplifies this effect. Progressive transfers to young workers have similar impact, but through different channels. Transfers encourage riskier portfolios, however crowding out is weaker since it is easier to save than to borrow.
    JEL: E21 E62 D31 H23
    Date: 2018–12–13
  6. By: Kyureghian, G.; Soler, L.-G.
    Abstract: The share of the elderly population in France increases steadily, raising concerns that the aging households cannot maintain the pre-retirement level of consumption. We use panel data on food purchases to investigate whether households use the variation in the life-cycle availability of the two inputs of home production time and money, to sustain consumption. Our results indicate that food consumption peaks in early 40 s, drop afterwards in the late 50 s. However, it picks up at the early 60 s dramatically by as much as 40% compared to the late 50 s. This would indicate that food consumption remains uncompromised as households age. Acknowledgement : The ALIMASSENS Collaborative Project is funded by the French National Research Agency (grant # ANR-14-CE20-0003) The AgreenSkills fellowship programme, which has received funding from the EU s Seventh Framework Programme under grant agreement N FP7-609398
    Keywords: Consumer/Household Economics
    Date: 2018–07
  7. By: Moshe A. Milevsky
    Abstract: Who {\em values} life annuities more? Is it the healthy retiree who expects to live long and might become a centenarian, or is the unhealthy retiree with a short life expectancy more likely to appreciate the pooling of longevity risk? What if the unhealthy retiree is pooled with someone who is much healthier and thus forced to pay an implicit loading? To answer these and related questions this paper examines the empirical conditions under which retirees benefit (or may not) from longevity risk pooling by linking the {\em economics} of annuity equivalent wealth (AEW) to {\em actuarially} models of aging. I focus attention on the {\em Compensation Law of Mortality} which implies that individuals with higher relative mortality (e.g. lower income) age more slowly and experience greater longevity uncertainty. Ergo, they place higher utility value on the annuity. The impetus for this research today is the increasing evidence on the growing disparity in longevity expectations between rich and poor.
    Date: 2018–11
  8. By: Shohei Okamoto (Graduate School of Economics, Keio University / Research Centre for Financial Gerontology, Keio University / Tokyo Metropolitan Institute of Gerontology); Kohei Komamura (Faculty of Economics, Keio University / Research Center for Financial Gerontology, Keio University)
    Abstract: This study aims to investigate the association of financial literacy with individual characteristics (e.g. age and educational attainment) as well as factors which affect gender differences in financial literacy. The data were derived from the "Financial Literacy Survey 2016" which comprised a sample of Japanese men and women aged between 18 and 79. We found that ageing had an inverse U-shaped relationship with financial literacy and an U-shaped one with the degree of over-confidence on financial literacy. Furthermore, female respondents were likely to be less financially literate than male due to being female itself, and differences in the distributions of factors that affect financial literacy (e.g. education and financial assets) and their responses to financial literacy. Not only strategies to assist individual financial decision makings, considering that financial literacy and cognitive functioning decline as people get older, but right education and information sources at the right time are demanded to support the safe asset building of individuals.
    Keywords: Financial literacy, Financial behaviour, Investment, Ageing, Gender differences
    JEL: D14 D83 D91 G11
    Date: 2018–11–24
  9. By: Ben Baumberg Geiger; René Böheim; Thomas Leoni
    Abstract: Many countries have reduced the generosity of disability benefits while making them more activating – yet few studies have examined how employment rates have subsequently changed. We present estimates of how the employment rates of older workers with poor health in 13 high-income countries changed between 2004-7 and 2012-15 using HRS/SHARE/ELSA data. We find that those in poor health in the USA have experienced a unique deterioration: they have not only seen a widening gap to the employment rates of those with good health, but their employment rates fell per se. We find only for Sweden (and possibly England) signs that the health employment gap shrank. We then examine possible explanations for the development in the USA: we find no evidence it links to labour market trends, but possible links to the USA’s lack of disability benefit reform – which should be considered alongside the wider challenges of our findings for policymakers.
    Keywords: disability benefits; older workers; poor health; HRS/ SHARE/ELSA data
    JEL: H51 I12 I18 J14 J22
    Date: 2018–08
  10. By: French, Eric (University College London, IFS, and CEPR); Jones, John Bailey (Federal Reserve Bank of Richmond); Kelly, Elaine (Institute for Fiscal Studies and the Health Foundation); McCauley, Jeremy (University College London)
    Abstract: In this review, we document end-of-life medical spending: its level, composition, funding, and contribution to aggregate medical spending. We discuss how end-of-life expenses affect household behavior and economic evidence on the efficacy of medical spending at the end of life. Finally, we document recent trends in health and chronic disease at older ages and discuss what they might imply for end-of-life spending and medical spending in the aggregate.
    Keywords: medical spending; household behavior
    Date: 2018–12–04
  11. By: Axel H. Börsch-Supan; Tabea Bucher-Koenen; Michael D. Hurd; Susann Rohwedder
    Abstract: We define saving regret as the wish in hindsight to have saved more earlier in life. We measured saving regret and possible determinants in a survey of a probability sample of those aged 60-79. We investigate two main causes of saving regret: procrastination along with other psychological traits, and the role of shocks, both positive and negative. We find high levels of saving regret but relatively little of the variation is explained by procrastination and psychological factors. Shocks such as unemployment, health and divorce explain much more of the variation. The results have important implications for retirement saving policies.
    JEL: D14
    Date: 2018–11
  12. By: Florian Bonnet (UP1 UFR02 - Université Panthéon-Sorbonne - UFR d'Économie - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics); Hippolyte D'Albis (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 article analyzes the evolution of spatial inequalities in mortality across 90 French territorial units since 1806. Using a new database, we identify a period from 1881 to 1980 when inequalities rapidly shrank while life expectancy rose. This century of convergence across territories was mainly due to the fall in infant mortality. Since 1980, spatial inequalities have levelled out or occasionally widened, due mainly to differences in life expectancy among the elderly. The geography of mortality also changed radically during the century of convergence. Whereas in the 19th century high mortality occurred mainly in larger cities and along a line from North-west to South-east France, it is now concentrated in the North, and Paris and Lyon currently enjoy an urban advantage.
    Date: 2018–11
  13. By: OECD
    Abstract: In the 21st century care, the old paradigm “because the doctor said so” no longer holds. Individuals are now seeking ways to understand their health options and take more control over their health decisions. But this is not an easy task. Professionals continue to use medical jargon, drug instructions are not always clear, and health information in clinical settings continue to be complex and challenging to navigate. Widespread access to digital technologies offset some of these barriers by democratising access to health information, providing new ways to improve health knowledge and support self care. Nonetheless, when health information is misused or misinterpreted, it can wrongly influence individuals’ preferences and behaviour, jeopardise their health, or put unreasonable demands on health systems.
    JEL: I12 I18
    Date: 2018–12–12

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