nep-age New Economics Papers
on Economics of Ageing
Issue of 2019‒02‒11
nineteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Being dependent rather than handicapped in France: Does the institutional barrier at 60 affect care arrangements? By Marianne Tenand
  2. Which firms employ older workers? By Andrén, Daniela; Mudenda, Lackson Daniel; Pettersson, Nicklas
  3. What's gone wrong in the design of PAYG systems? By Riccardo Magnani
  4. Do Immigrants Delay Retirement and Social Security Claiming? By Mary J. Lopez; Sita Slavov
  5. The Costs and Benefits of Caring: Aggregate Burdens of an Aging Population By Finn Kydland; Nick Pretnar
  6. Reform Options for Mature Defined Benefit Pension Plans: The Case of the Netherlands By Marc Gerard
  7. Decentralized policies and formal care use by the disabled elderly By Quitterie Roquebert; Remi Kabore; Jerome Wittwer
  8. Health, Cognition and Work Capacity Beyond the Age of 50 International Evidence on the Extensive and Intensive Margin of Work By Vincent Vandenberghe
  9. Measuring the Adequacy of Retirement Income: A Primer By Congressional Budget Office
  10. Options for Changing the Retirement System for Federal Civilian Workers By Congressional Budget Office
  11. Health Effects of Retirement: Evidence from Survey and Register Data By Weemes Grøtting, Maja; Lillebø, Otto
  12. Tables de mortalité d’expérience incorporant une échelle de projection : adaptation aux cas des retraités en Algérie By FLICI, Farid; SENOUCI, Khadidja; HANNANI, Yasmine
  13. A Parametric Factor Model of the Term Structure of Mortality By Niels Haldrup; Carsten P. T. Rosenskjold
  14. Spatial Inequality in Mortality in France over the Past Two Centuries By Florian Bonnet; Hippolyte D'Albis
  15. Unravelling Hidden Inequities in a Universal Public Long-Term Care System By Pilar (P.) Garcia-Gomez; Helena M Hernandez-Pizarro; Guillem Lopez-Casasnovas; Joaquim Vidiella-Martin
  16. Ageing and Skills: The Case of Literacy Skills By Barrett, Garry F.; Riddell, W. Craig
  17. Alterssicherung im Handwerk By Müller, Klaus; Thonipara, Anita
  18. Program evaluation and ethnic differences: the Pension 65 program in Peru By DECANCQ Koen; OLIVERA Javier; SCHOKKAERT Erik
  19. Immigration and Public Finances in OECD Countries By Hippolyte D'Albis; Ekrame Boubtane; Dramane Coulibaly

  1. By: Marianne Tenand (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: Individuals having difficulties to perform the activities of daily living may benefit from public long-term care (LTC) support. France distinguishes between handicap benefits, accessible to individuals below 60, and dependence schemes, for individuals aged 60 and older. This paper assesses the effects of the age 60 threshold in the French LTC policies using the French Health and Disability Survey (HS 2008{2009) in two ways. First, we estimate the effect of being 60 and older on the probability to receive non-medical formal care and informal home care, controlling for a rich set of socio-demographic characteristics and age effects. Being a \dependent elderly" rather than a \handicapped adult" little affects the probability to receive home care; however, it increases formal care utilization and, to a lesser extent, decreases the probability to receive informal care. Second, we implement a Regression Discontinuity (RD) approach and provide evidence that the institutional age threshold affects living arrangements, as individuals above age 60 are more likely to be recorded as living in an institution. The architecture of LTC policies affects the way individuals' day-to-day difficulties are being compensated, thereby undermining horizontal equity in the use of formal LTC.
    Keywords: Long-term care,home care,public policies,regression discontinuity design,probit
    Date: 2018–10
  2. By: Andrén, Daniela (Örebro University School of Business); Mudenda, Lackson Daniel (Örebro University School of Business); Pettersson, Nicklas (Örebro University School of Business)
    Abstract: There is an increasing emphasizes on the importance of allowing people as they grow older to continue to work according to their work capacity and preferences. This paper builds on earlier literature that shows that firms employ older workers, but they tend not to hire them, and provides an explorative analysis of the establishments that employ older workers. A special focus is on how sensitive are the findings when the definition of older workers become more restrictive. Using employer-employee data from Swedish administrative registers, we found that the difference in establishments’ employment is large enough to explain some of the observed difference across definitions. The retirement age in the guaranteed pension scheme, i.e., 65 years, seems to be one the institutional settings that affect both the employees and employers’ decision for work after 65, but also the establishment’s size, age and ownership.
    Keywords: active aging; older workers; establishments; firms
    JEL: J21 J22 J23 J24 J26
    Date: 2019–01–29
  3. By: Riccardo Magnani (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    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
    Date: 2018–12–28
  4. By: Mary J. Lopez; Sita Slavov
    Abstract: As the share of older immigrants residing in the U.S. begins to rise, it is important to understand how immigrants’ retirement behavior and security compare to that of natives. This question has implications for the impact of immigration on government finances and for the retirement security of immigrants. We use data from the Health and Retirement Study (HRS) to examine how immigrants’ retirement and Social Security claiming patterns compare to those of natives. We find that immigrants are significantly less likely than natives to retire or claim Social Security in their early 60s. We do not find heterogeneous effects by ethnicity or age of arrival to the U.S. We also find no evidence that immigrants exit the survey at higher rates than U.S. natives in their late 50s through 60s, a finding that is consistent with immigrants retiring in the U.S. rather than abroad.
    JEL: D14 H55 J15 J26
    Date: 2019–01
  5. By: Finn Kydland; Nick Pretnar
    Abstract: Throughout the 21st century, population aging in the United States will lead to increases in the number of elderly people requiring some form of living assistance which, as some argue, is to be seen as a burden on society, straining old-age insurance systems and requiring younger agents to devote an increasing fraction of their time toward caring for infirm elders. Given this concern, it is natural to ask how aggregate GDP growth is affected by such a phenomenon. We develop an overlapping generations model where young agents face idiosyncratic risk of contracting an old-age disease, like for example Alzheimer's or dementia, which adversely affects their ability to fully enjoy consumption. Young agents care about their infirm elders and can choose to supplement elder welfare by spending time taking care of them. Through this channel, aggregate GDP growth endogenously depends on young agents' degree of altruism. We calibrate the model and show that projected population aging will lead to future reductions in output of 17% by 2056 and 39% by 2096 relative to an economy with a constant population distribution. Curing diseases like Alzheimer's and dementia can lead to a compounded output increase of 5.4% while improving welfare for all agents.
    JEL: J14 J22 O40
    Date: 2019–01
  6. By: Marc Gerard
    Abstract: The Netherlands has been operating fully funded, defined benefit second pillar pension schemes that have consistently ranked high worldwide for delivering high replacement rates while featuring strong solidarity among members. Yet the long-term sustainability of the Dutch pension funds has been undermined in recent years by protracted low interest rates and unfavorable demographic developments, exacerbating controversies over intergenerational transfer mechanisms within the plans. This has prompted a national debate over ways to move toward more individualization while preserving financial security at retirement for all. This paper draws on this experience, illustrated by stress testing simulations and assessed vis-à-vis solutions implemented in peer countries, to discuss the main policy trade-offs associated with the reform of mature pension systems in advanced economies.
    Date: 2019–01–25
  7. By: Quitterie Roquebert (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, PSE - Paris School of Economics); Remi Kabore (ISPED - Institut de Santé Publique, d'Epidémiologie et de Développement - Université Bordeaux Segalen - Bordeaux 2); Jerome Wittwer (ISPED - Institut de Santé Publique, d'Epidémiologie et de Développement - Université Bordeaux Segalen - Bordeaux 2)
    Abstract: In a context of population ageing, public policies encourage the utilization of pro- fessional home care for the elderly living in the community. This chapter studies the determinants of professional home care use by the disabled elderly in the French con- text. It focuses on the e_ects of the regulation of the supply and the generosity of public _nancing. We use departmental variations in both the regulation of providers and the implementation of the main program devoted to the disabled elderly, the APA policy. We exploit an original survey on departmental practices matched with the HSM survey to estimate the determinants of formal care use, at the extensive margin. We _nd no e_ect of the departmental generosity while, on the supply side, when non-regulated providers | whose quality is uncertain and price is lightly regulated | dominate the market, the disabled elderly have a lower probability to use formal home care. Our results contribute to discuss both the questions raised by the decentralization of a national policy and the recent reform of the home care sector requiring all home care structures to be regulated.
    Keywords: long-term care,home care,supply regulation,decentralization
    Date: 2018–09
  8. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: The rising cost of old-age dependency in Europe and elsewhere invariably leads to reforms aimed at raising the effective age or retirement. But do older individuals have the health/cognitive capacity to work longer? Following Cutler et al. (2012), this paper asks how much older individuals could work if they worked as much as their younger (50-54) counterparts in similar health/with equal cognitive performance. Contrary to existing papers, this one uses international, European, comparable panel evidence available in the Survey of Health, Ageing and Retirement in Europe (SHARE). It considers both physical health and cognition; and health consists of subjective and objective measures. Also, it examines the extensive and intensive margins of work (employment and hours): existing papers only consider the former. Results are essentially fivefold. First, declines in health significantly affect employment. Second, the impact on hours is statistical significant but of much smaller magnitude. People suffering from ill health rarely adjust hours; they rather stop working altogether. Third, cognition is not fundamentally affected by ageing, and it adds little to our capacity to predict how work capacity evolves with age. Fourth, identification issues exist and must be addressed. They comprise unobserved heterogeneity across respondents, justification bias or proxying/measurement errors regarding health. Finally, declining health/cognition explain at most 31% of the actual labour supply reduction between 50 and 70. This confirms the existence of a, currently largely underused, work capacity among older individuals.
    Keywords: Ageing, Health, Cognition, Labour Supply, Work Capacity
    JEL: J22 I10 J26
    Date: 2019–01
  9. By: Congressional Budget Office
    Abstract: Over the next 30 years, the share of the U.S. population age 65 and older will increase from about 15 percent to almost 22 percent, spurring growing interest in understanding whether people will have adequate income in retirement. Current measures of the adequacy of retirement income offer diverse answers about the state of retirement income security in the United States. This report explains the various measures and approaches, providing a framework for further analysis.
    JEL: I32 J26 J32
    Date: 2017–10–20
  10. By: Congressional Budget Office
    Abstract: In 2016, the federal government paid about $13 billion for the defined benefit pensions under the Federal Employee Retirement System (FERS) and $70 billion for pensions under the Civil Service Retirement System, the predecessor to FERS; those expenditures were partially offset by $3 billion in revenues from employees’ contributions. In addition, the government contributed an estimated $8 billion to the Thrift Savings Plan, a defined contribution plan similar to a 401(k).
    JEL: H55 J26 J32
    Date: 2017–08–29
  11. By: Weemes Grøtting, Maja (Norwegian Social Research, Oslo Metropolitan University); Lillebø, Otto (University of Bergen, Department of Economics)
    Abstract: Using a local randomized experiment that arises from the statutory retirement age in Norway, we study the effect of retirement on health across gender and socioeconomic status. We apply data from administrative registers covering the entire population and from survey data of a random sample to investigate the effects of retirement on acute hospital admissions, mortality, and a composite physical health score. Our results show that retirement has a positive effect on physical health, especially for individuals with low socioeconomic status. We find no retirement effects on acute hospitalizations or mortality in general. However, our results suggest that retirement leads to reduced likelihood of hospitalizations for individuals with low socioeconomic status. Finally, we show that the positive health effects are driven by reduced pain and reduced health limitations in conducting daily activities. Our findings highlight heterogeneity in the health effects across socioeconomic status and across subjective and objective measures of health.
    Keywords: Retirement; Health; Socioeconomic Status; Gender; Regression Discontinuity Design
    JEL: H75 I14 I18 J26
    Date: 2017–04–07
  12. By: FLICI, Farid; SENOUCI, Khadidja; HANNANI, Yasmine
    Abstract: Mortality data for Algerian retirees are not available for long periods allowing a direct application of prospective mortality models. The positioning of the experience mortality on an external reference is one of the technical solutions to circumvent data problem. Nevertheless, this procedure remains a little complicated because it requires finding an adequate external reference and to forecast the reference mortality before to be able to project the experience mortality. In this work, we propose a simpler and more efficient method. Starting from a periodic life table of retirees, for which a projection scale is applied, the projected experience mortality rates can be deduced. The results show that retired men have no significant advantages compared to the rest of the population. By contrast, at age 50, retired women can expect to live three years longer than women of the rest of the population.
    Keywords: Mortality, retirement, experience, improvement scale, Algeria
    JEL: G22 J11 J14
    Date: 2017–09
  13. By: Niels Haldrup (Aarhus University and CREATES); Carsten P. T. Rosenskjold (Aarhus University and CREATES)
    Abstract: The prototypical Lee-Carter mortality model is characterized by a single common time factor that loads differently across age groups. In this paper we propose a factor model for the term structure of mortality where multiple factors are designed to influence the age groups differently via parametric loading functions. We identify four different factors: a factor common for all age groups, factors for infant and adult mortality, and a factor for the "accident hump" that primarily affects mortality of relatively young adults and late teenagers. Since the factors are identified via restrictions on the loading functions, the factors are not designed to be orthogonal but can be dependent and can possibly cointegrate when the factors have unit roots. We suggest two estimation procedures similar to the estimation of the dynamic Nelson-Siegel term structure model. First, a two-step nonlinear least squares procedure based on cross-section regressions together with a separate model to estimate the dynamics of the factors. Second, we suggest a fully specified model estimated by maximum likelihood via the Kalman filter recursions after the model is put on state space form. We demonstrate the methodology for US and French mortality data. We find that the model provides a good fitt of the relevant factors and in a forecast comparison with a range of benchmark models it is found that, especially for longer horizons, variants of the parametric factor model have excellent forecast performance.
    Keywords: Mortality Forecasting, Term Structure of Mortality, Factor Modelling, Cointegration
    JEL: C1 C22 J10 J11 G22
    Date: 2018–01–12
  14. 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
  15. By: Pilar (P.) Garcia-Gomez (Erasmus University Rotterdam); Helena M Hernandez-Pizarro (Universitat Pompeu Fabra); Guillem Lopez-Casasnovas (Universitat Pompeu Fabra); Joaquim Vidiella-Martin (Erasmus University Rotterdam)
    Abstract: We investigate whether publicly subsidized long-term care (LTC) is allocated according to needs, independently from income, using administrative data from all applicants for public LTC in Catalonia, from 2011 to 2014. We measure the level of horizontal inequity in subsidies to compensate informal care costs, formal home care, and institutional care using objective detailed information on needs. Our findings suggest that the system is inequitable; cash transfers are distributed among the financially better-off, while the use of nursing homes is concentrated among the worse-off. Additionally, we assess the inequity in the form of provision (voucher versus in- kind) and its implications for the equity in the time to access. Our results show that while in-kind provision is concentrated among the worse-off, the better-off are more likely to receive a voucher to (partly) subsidize LTC expenses. However, this duality does not imply inequity in the time to access a nursing home.
    Keywords: long-term care; equity; public provision; voucher; in-kind
    JEL: I14 I38 J14
    Date: 2019–02–05
  16. By: Barrett, Garry F. (University of Sydney); Riddell, W. Craig (University of British Columbia, Vancouver)
    Abstract: The relationship between ageing and skills is of growing policy significance due to population ageing, the changing nature of work and the importance of literacy for social and economic well-being. This article examines the relationship between age and literacy skills in a sample of OECD countries using three internationally comparable surveys. By pooling the survey data across time we can separate birth cohort and ageing effects. In doing so we find literacy skills decline with age and that, in most of our sample countries, successive birth cohorts tend to have poorer literacy outcomes. Therefore, once we control for cohort effects the rate at which literacy proficiency falls with age is much more pronounced than that which is apparent based on the cross-sectional relationship between age and literacy skills at a point in time. Further, in studying the literacy-age relationship across the skill distribution in Canada we find a more pronounced decline in literacy skills with age at lower percentiles, which suggests that higher initial literacy moderates the influence of cognitive ageing.
    Keywords: human capital, ageing, cognitive skills, literacy, cohort effects
    JEL: I20 J14 J24
    Date: 2019–01
  17. By: Müller, Klaus; Thonipara, Anita
    Abstract: Die Ergebnisse der Umfrage 'Alterssicherung im Handwerk 2017' ermöglichen erstmalig eine Abbildung der subjektiven Einschätzung der Selbstständigen im Handwerk in Hinblick auf ihre Alterssicherung in Kombination mit ihren derzeitigen Beiträgen zur Altersvorsorge und strukturellen Kennzahlen ihrer Betriebe. Die Studie hat aufgezeigt, dass die Alterssicherung im Handwerk, sowohl der Inhaber als auch der Beschäftigten, schon heute ein erhebliches Problem darstellt, das in Zukunft noch weiter an Bedeutung gewinnen dürfte. Besonders Soloselbstständige und Inhaber kleiner Betriebe, meist aus dem zulassungsfreien Bereich, sind mit ihren voraussichtlichen Altersbezügen unzufrieden. Als Grund ist neben niedrigen Gewerbeerträgen die derzeitige Ausgestaltung der Handwerkerpflichtversicherung zu nennen, da ihr vor allem besonders schutzbedürftige Inhabergruppen nicht unterliegen. Der Kreis dieser Handwerker ist zudem in den letzten Jahren stark gewachsen. Die Zahl der pflichtversicherten Handwerker ist dagegen nicht zuletzt durch die Strukturveränderungen im Handwerk insbesondere infolge der Novellierung der Handwerksordnung von 2004 deutlich gesunken. Außerdem kann mit den 216 Pflichtbeitragsmonaten das Ziel einer ausreichenden Rente, wie es 1960 bei der Verabschiedung des Gesetzes angestrebt worden ist, nicht mehr realisiert werden. Die Ziele, die mit der Handwerkerpflichtversicherung verknüpft waren, werden also heute nicht mehr erreicht. Daher besteht ein erheblicher rentenpolitischer Handlungsbedarf.
    Keywords: Handwerk,Handwerkerversicherung,Altersvorsorge,betriebliche Altersvorsorge,Pension Schemes,German Craft Sector,Old-Age Provision of Self-Employed,Company Pension Scheme
    Date: 2018
    Abstract: We show that the introduction of a non-contributory pension program (Pension 65) in Peru had remarkably different effects for its three main ethnic groups, i.e., Mestizo, Quechua, and Aymara. The Aymara beneficiaries of the program have experienced larger increases in health and life satisfaction compared to other Peruvians. Using a panel life satisfaction regression, we find evidence for preference heterogeneity between the Aymara and the other ethnic groups that is consistent with the observed differences. Finally, we turn to the question of how the pension program can be evaluated in a robust manner while respecting the preference heterogeneity between the ethnic groups. We propose the natural criterion that a program benefits a recipient if she is lifted to a higher indifference curve. We show that the pension program was beneficial for all groups, but that more Aymara beneficiaries were lifted to a higher indifference curve compared to other Peruvians. Our proposed criterion can be useful to evaluate programs in all cases where preference differences matter.
    Keywords: Program Evaluation; Ethnicity; Preferences; Pensions; Peru
    JEL: D12 I30 I38 O12
    Date: 2018–12
  19. By: 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); Ekrame Boubtane (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique, 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); Dramane Coulibaly (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper shows that the macroeconomic and fiscal consequences of international migration are positive for OECD countries, and suggests that international migration produces a demographic dividend by increasing the share of the work- force within the population. The estimation of a structural vector autoregressive model on a panel of 19 OECD countries over the period 1980-2015 reveals that a migration shock increases GDP per capita through a positive effect on both the ratio of working-age to total population and the employment rate. International migration also improves the fiscal balance by reducing the per capita transfers paid by the government and per capita old-age public spending. To rationalize these findings, an original theoretical framework is developed. This framework highlights the roles of both the demographic structure and intergenerational public transfers and shows that migration is beneficial to host economies characterized by aging populations and large public sectors.
    Keywords: Immigration,public finances,overlapping-generation model,panel VAR
    Date: 2018–12–14

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