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on Economics of Ageing |
| By: | David Amaglobeli; Hua Chai; Era Dabla-Norris; Kamil Dybczak; Mauricio Soto; Alexander F. Tieman |
| Abstract: | This SDN explores how demographic changes have affected and will affect public and private sector savings, highlighting the interaction between pension systems, labor markets, and demographic variables. |
| Keywords: | Aging;Demographic transition;Savings;Old age pensions;Aging; Demographics; Saving; Pension Spending |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfsdn:19/01&r=all |
| By: | Riccardo Magnani (Centre d'Economie de l'Université de Paris Nord (CEPN)) |
| Abstract: | In order to face the population ageing problem, most countries with PAYG systems introduced pension reforms during the last twenty years. However, in many cases these reforms are considered as insufficient to guarantee the pension sustainability; in other cases, the pension sustainability is achieved through the introduction of drastic reforms and, thus, at the expense of a dramatic reduction in the well-being of current and future generations. The objective of this article is to show that the non-sustainability of PAYG systems and, consequently, the necessity to introduce drastic pension reforms, is explained by the fact that in countries with PAYG systems pensions have not been computed according to appropriate rules. In particular, we show that the sustainability of the pension system is guaranteed if (i) pension benefits are computed using actuarial principles, (ii) the implicit rate of return on contributions is the same for each retiree and equal to the average wage bill growth rate, and (iii) pension reserves are remunerated at a risk-free interest rate equal to the average wage bill growth rate. These conditions allow a PAYG system to face any demographic shock, such as an increase in life expectancy and a transitory increase in fertility rates (baby boom) followed by a transitory reduction in fertility rates (baby boost). |
| Keywords: | Pension economics; Pension finance; Population ageing |
| JEL: | H55 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:upn:wpaper:2018-13&r=all |
| By: | Alice Zulkarnain; Matthew S. Rutledge |
| Abstract: | Older Americans have been retiring later for a number of reasons, including jobs that are becoming less physically demanding, the shift from defined benefit to defined contribution pensions, and changes in Social Security’s incentives. What are the implications of working longer for workers’ mortality and health? Answering this question is complicated, because work and health are jointly determined – healthy people with lower mortality tend to work longer. Previous studies looking at the causal effect of work on mortality and health have found mixed results and have tended to focus on the effects of early retirement, not delayed retirement. A simple assumption would be that the relationship between them is symmetric. But it is unclear that that assumption is correct – after all, people who decide to keep working are likely a healthier group than those who stop early. This paper uses administrative data from the Netherlands and exploits policy variation designed to delay retirement to explore the links between work and health outcomes. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2018-11&r=all |
| By: | Andras Simonovits (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Mathematical Institute of Budapest University of Technology) |
| Abstract: | In 2011, the Hungarian government introduced seniority pensions (Female40): females, who have been accumulating at least 40 years of eligibility (related to the length of contributions), can retire at any age without actuarial benefit reduction. The elimination of other early retirement scheme in 2012 and slowly rising real wages made the program even more popular: the lifetime benefit was maximized at the earliest retirement. Since 2016, real wages have been growing rather fast; making delay attractive. Without being recognized, Female40 has become a boomerang: immediate retirement from 2014 causes loss rather than gain to the retiree of Female40. |
| Keywords: | public pension, early retirement, seniority pensions, optimal retirement age |
| JEL: | H55 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1832&r=all |
| By: | Majchrowska Aleksandra (Faculty of Economics and Sociology, University of Lodz); Broniatowska Paulina (Warsaw School of Economics) |
| Keywords: | workforce ageing, age structure, wages, occupational groups |
| JEL: | J24 J31 J14 |
| Date: | 2018–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:ann:wpaper:8/2018&r=all |
| By: | Costa-Font, Joan; Courbage, Christophe; Zweifel, Peter |
| Abstract: | Long-term care (LTC) is the largest insurable risk facing the elderly in most western societies. Paradoxically, institutional responses to the need to insure ex-ante (before the contingency occurs) the financial risks of needing LTC (by means of social and private insurance and self-insurance) exhibit limited development. In contrast, mechanisms to finance LTC ex-post continue to develop, primarily those supported by the public sector (by means of subsidies or tax deductions) and the family (by means of intergenerational transfers). Both ex-ante and ex-post types of financing mechanisms are found to be subject to shortcomings which give rise to dilemmas for public policy. Governments confront these dilemmas in different ways, causing a great deal of heterogeneity in the financing and provision of LTC services across Europe. |
| Keywords: | long-term care; old age dependency; long-term care insurance; subsidies; tax deductions for providing formal care |
| JEL: | E6 |
| Date: | 2017–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:61032&r=all |
| By: | Melinda S. Morrill; John Westall |
| Abstract: | This study documents an important role for Social Security income in workers' retirement timing. About 40 percent of public school teachers are not covered by Social Security. This provides an opportunity to analyze the causal impact of Social Security on retirement timing by comparing covered and non-covered teachers. Using individual-level data from the American Community Survey, we find robust evidence of higher rates of retirement among covered teachers at Social Security eligibility ages. This pattern is confirmed using an alternative regression model of participation in the teacher labor force. These estimates suggest that, should the federal government mandate full inclusion in Social Security for all public sector workers, the retirement timing patterns of newly covered teachers and other public sector workers would likely change. |
| JEL: | H55 H75 I28 J26 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25411&r=all |
| By: | John Bailey Jones (Federal Reserve Bank of Richmond and University at Albany); Yue Li (University at Albany) |
| Abstract: | Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent change in the payroll tax would increase labor supply, consumption, and welfare. From an ex-ante perspective an equally desirable reform would be to make the portion of benefits subject to income taxes completely independent of other income. |
| Keywords: | Social Security, Labor Supply, Taxation |
| JEL: | E21 H24 H55 I38 |
| URL: | http://d.repec.org/n?u=RePEc:duh:wpaper:1706&r=all |
| By: | Strulik, Holger |
| Abstract: | In this paper, I propose a life cycle model of painkiller consumption that combines the theory of health deficit accumulation with the theory of addiction. Chronic pain is conceptualized as a persistent negative shock to lifetime utility that can be treated by pain relief medication. Some individuals treated with opioid pain relievers develop addiction, which increases their demand for opioids and reduces their welfare and life expectancy through side effects and potential overdose. Nevertheless, individuals prefer opioid treatment if they fail to understand how it causes addiction. Once individuals are unintentionally addicted and access to prescription opioids is discontinued, consumption shifts to illicit opioids (like heroin). I calibrate the model for a benchmark American and investigate the comparative dynamics of alternative drug characteristics, pain intensities, and ages of onsets of pain and their implications for welfare and life expectancy. I also discuss treatment of addiction and the use of opioids in palliative care. |
| Keywords: | pain,pain relief,addiction,opioid epidemic,health deficits,life expectancy,illicit drugs |
| JEL: | D91 I10 I12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:359&r=all |
| By: | Paolo Guasoni; Yu-Jui Huang |
| Abstract: | This paper solves the problem of optimal dynamic consumption, investment, and healthcare spending with isoelastic utility, when natural mortality grows exponentially to reflect Gompertz' law and investment opportunities are constant. Healthcare slows the natural growth of mortality, indirectly increasing utility from consumption through longer lifetimes. Optimal consumption and healthcare imply an endogenous mortality law that is asymptotically exponential in the old-age limit, with lower growth rate than natural mortality. Healthcare spending steadily increases with age, both in absolute terms and relative to total spending. The optimal stochastic control problem reduces to a nonlinear ordinary differential equation with a unique solution, which has an explicit expression in the old-age limit. The main results are obtained through a novel version of Perron's method. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1901.00424&r=all |
| By: | Strulik, Holger |
| Abstract: | In this paper I discuss overweight and obesity and their repercussions on health deficit accumulation and longevity in a life cycle model. Individual decisions are conceptualized as the partial control of impulsive desires of a short-run self (the limbic system) by a rationally forward-looking long-run self (the prefrontal cortex). The short-run self-strives for immediate gratification through consumption of food and other goods. The long-run self reflects the consequences of eating behavior on weight gain and health, exercises to lose weight, invests money to improve health and saves for health expenditure in old age. Not conceding to short-run desires, however, entails an idiosyncratic utility cost of self-control. The model is calibrated to match food expenditure, exercise, and other choices of an average U.S. American. The results suggest that imperfect self-control reduces average lifetime by up to five years. I use the model to analyze the role of self-control, income, food prices, energy density, and medical progress in explaining obesity and to develop a test on whether obesity is driven by excessive desire for food or lack of self-control. |
| Keywords: | self-control,overweight,obesity,physical exercise,health investments,aging,longevity |
| JEL: | D11 D91 E21 I10 I12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:360&r=all |
| By: | Anek Belbase; Laura D. Quinby |
| Abstract: | Most Americans enter retirement as married couples, and one spouse, typically the wife, outlives the other. Many widows lack the income needed to maintain the standard of living they had when their husbands were alive. Widows would generally have more adequate incomes if their husbands, who are typically the higher earner in the couple, delayed claiming Social Security. This project uses the Health and Retirement Study (HRS) to test the extent to which husbands consider their wives’ well-being as widows when making claiming decisions. It then uses an online experiment to determine whether raising a husband’s awareness of the risks that his widow faces, and how delayed claiming can reduce those risks, affect his claiming behavior. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2018-12&r=all |
| By: | Anqi Chen; Alicia H. Munnell; Geoffrey T. Sanzenbacher |
| Abstract: | Recent research by Bee and Mitchell (2017) has refocused attention on the fact that the Current Population Survey (CPS) underestimates retirement income. In the wake of this study, some observers have questioned whether other surveys more frequently used by retirement researchers also understate retirement income and, if so, whether prior research suggesting that many households are unprepared for retirement is accurate. This paper addresses both questions by examining retirement income data from the CPS and four other surveys: 1) the Survey of Consumer Finances (SCF); 2) the Health and Retirement Study (HRS); 3) the Panel Survey of Income Dynamics (PSID); and 4) the Survey of Income and Program Participation (SIPP). The paper compares the income measures from each survey to administrative data from tax and Social Security records, both in aggregate and across the income distribution. It then uses a common measure of retirement income adequacy, the replacement rate, to assess overall household preparedness for retirement. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2018-14&r=all |
| By: | Gary V. Engelhardt |
| Abstract: | This paper examined how the earnings test affects the hours and employment of men who claim early benefits. It uses 1982-2016 data from the Current Population Survey and 1992-2014 data from the Health and Retirement Study. Critical components of the analysis include the idea that for any fixed earnings-test threshold amount, an increase in the hourly wage at which a beneficiary can work reduces the number of hours needed annually to hit the threshold. This feature of the test and substantial state-by-calendar year variation from increases in the minimum wage, which lower the threshold level of hours at which the earnings test binds, are used to identify the impact of the test on labor supply on the intensive and extensive margins for men who claim early. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2018-13&r=all |
| By: | Nicolas Bédard; Pierre-Carl Michaud |
| Abstract: | Because retired households cannot adjust quickly to shocks, for example by working more, they represent a vulnerable group when credit conditions deteriorate. We analyze the evolution of debt among households nearing retirement in Canada over the period 1999-2016. First, we find that debt as a ratio of income has risen considerably over that period and debt as a fraction of assets has also doubled even tough assets remain roughly five times as large as debt. Second, we report that mortgage debt has risen the most but that average mortgage payments have remained relatively constant over the period due to the downward trend in borrowing costs. Finally, we find that a small but significant fraction households are playing with fire, being vul-nerable to a sudden rise on borrowing costs or a drop in house values which could jeopardize their standard of living in retirement. |
| Keywords: | Household debt,mortgages,credit,retirement, |
| JEL: | D14 D18 J14 |
| Date: | 2018–12–25 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2018s-42&r=all |
| By: | Martin Benjamin Hackmann; R. Vincent Pohl |
| Abstract: | How do patient and provider incentives affect mode and cost of long-term care? Our analysis of 1 million nursing home stays yields three main insights. First, Medicaid-covered residents prolong their stays instead of transitioning to community-based care due to limited cost-sharing. Second, nursing homes shorten Medicaid stays when capacity binds to admit more profitable out-of-pocket payers. Third, providers react more elastically to financial incentives than patients, so moving to episode-based provider reimbursement is more effective in shortening Medicaid stays than increasing resident cost-sharing. Moreover, we do not find evidence for health improvements due to longer stays for marginal Medicaid beneficiaries. |
| Keywords: | long-term care, nursing homes, patient incentives, provider incentives, cost-sharing, episode-based reimbursement, medicaid |
| JEL: | H51 H75 I11 I13 I18 J14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7373&r=all |