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on Economics of Ageing |
| By: | Yongjie Wang |
| Abstract: | This paper studies an optimal portfolio problem for a DC pension plan considering both interest rate risk and longevity risk. In the accumulation phase, plan members pay constant contributions continuously into the pension fund. We assume that the evolution of mortality rate of all the plan members can be described by the same stochastic process and a representative member is chosen to study the problem. At retirement time, the pension fund is used to purchase a lifetime annuity and a minimum guarantee is required by the representative member. To hedge the longevity risk, we introduce a mortality-linked security, i.e. a longevity bond, into the financial market. The pension manager makes investment decisions for the benefit and on behalf of the representative pension member whose objective is to maximize his expected utility of the terminal surplus between the final fund level and the minimum guarantee. To solve the initial constrained non-self-financing optimization problem, we transform it to an unconstrained self-financing problem by replicating the future contributions and the minimum guarantee. By applying dynamic programming method, analytical solutions to the equivalent optimization problem are derived and optimal investment strategies to the original problem are obtained by simple calculations. The numerical applications reveal that the longevity risk has an important impact on the investment strategies and show evidence that mortality-linked securities could provide an efficient way to hedge the longevity risk. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.10229&r=all |
| By: | Kuusi, Tero; Martikainen, Pekka; Valkonen, Tarmo |
| Abstract: | Abstract We quantify the impact of old-age retirement on health using longitudinal Finnish register data for the period 2000–2012, which allows for a strict isolation of the effects of transition from work to retirement for both mental and physical health indicators. We use the lowest statutory eligibility age for full old-age pensions, 63 years, as an instrument in FE-IV estimation to ensure causal inference. We find that (1) retirement moderately decreases the use of antidepressants, especially for women; (2) the beneficial effects of retirement on the cardiovascular and musculoskeletal conditions are smaller and more diffused; (3) there is no robust evidence that retirement effects vary systematically among socioeconomic groups, although more robust declines in musculoskeletal diseases were observed among manual-labour men; and (4) the beneficial effects in antidepressant use can be extended to apply to most Finns retiring at ages 62–64 based on our test of external validity. |
| Keywords: | Health, Health behaviour, Retirement, Retirement policies, Demographic economics |
| JEL: | I10 I12 J26 J18 |
| Date: | 2019–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:rif:wpaper:67&r=all |
| By: | GENEVOIS Anne-Sophie; LIEGEOIS Philippe; PI ALPERIN Maria Noel |
| Abstract: | We are facing one of the most important demographic events of the last decades in Europe: the population ageing process. This process will have significant economic effects particularly on health. As most diseases are age-related, this process might imply a proportionally higher share of individuals with declining health. Being able to forecast the health status of the population can help to deal with concerns about the financial and social sustainability of several public policies including health. In this paper, we present the DyMH_LU model, a dynamic microsimulation model focused exclusively on the health status of the Luxembourgish population. One of its major characteristics is that it simulates more than sixty different diseases and limitations in the activities of daily living. All this simulated information can be aggregated in order to compute, for each period, the overall health status of each individual, the marginal distribution of each disease among the total population and the global health status of the entire population. The starting point of the DyMH_LU model is the information collected in 2015 in the Wave 6 of the SHARE database that targets individuals aged 51 or older. The simulation period covers 2017 until 2045. |
| Keywords: | Dynamic microsimulation; Health; SHARE; Luxembourg |
| JEL: | C01 C02 I10 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2019-06&r=all |
| By: | Gerhard Streicher (WIFO); Ulrike Famira-Mühlberger (WIFO); Matthias Firgo (WIFO) |
| Abstract: | Projections show sharp increases in public spending on long-term care services across Europe. However, a purely cost based focus on long-term care services is economically misleading. Private and public expenditure on long-term care services directly and indirectly generate income in the form of salaries, taxes and social security contributions. The aim of this paper is to quantify the economic impact and multipliers of long-term care services for the first time. Based on an econometric regional input-output model for Austria, we estimate the direct, indirect and induced effects of public and private expenditures on value added, employment, taxes and social security contributions. According to our results, each Euro spent on long-term care services is associated with domestic value added of 1.7 € as well as 0,70 € in taxes and social security contributions. The economic multipliers of the long-term care services are comparatively high due to the high share of wages and salaries in direct expenditure and the associated high direct value added. Public expenditure on professional care services should therefore not be regarded merely as a cost factor in the public budget. Rather, this rapidly growing economic sector is also an increasingly important economic factor in a time of ageing societies. |
| Keywords: | Long-term care services, input-output model, returns to public expenditures |
| Date: | 2019–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2019:i:580&r=all |
| By: | Michael Sposi (Southern Methodist University) |
| Abstract: | The age distribution evolves asymmetrically across countries, influencing relative saving rates and labor supply. Emerging economies experienced faster increases in working age shares than advanced economies did. Using a dynamic, multi-country model I quantify the effect of demographic changes on trade imbalances across 28 countries since 1970. Counterfactually holding demographics constant reduces net exports in emerging economies and boosts them in advanced economies. On average, a one percentage point increase in a country's working age share, relative to the world, increases its ratio of net exports to GDP by one-third of a percentage point. These findings alleviate the allocation puzzle. |
| Keywords: | Demographics, Trade imbalances, Dynamics, Labor supply. |
| JEL: | F11 F21 J11 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:1902&r=all |
| By: | McMillan, Tracy; Lopez, Ana; Cooper, Jill |
| Keywords: | Engineering, Medicine and Health Sciences, Social and Behavioral Sciences |
| Date: | 2018–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsrrp:qt01t1w86c&r=all |