nep-age New Economics Papers
on Economics of Ageing
Issue of 2019‒05‒20
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Longevity forecasting by socio-economic groups using compositional data analysis By Søren Kjærgaard; Yunus Emre Ergemen; Marie-Pier Bergeron Boucher; Jim Oeppen; Malene Kallestrup-Lamb
  2. “Does longevity impact the severity of traffic accidents? A comparative study of young-older and old-older drivers” By Mercedes Ayuso; Rodrigo Sánchez-Reyes; Miguel Santolino
  3. Does Financial Difficulty Damage Cognitive Function? By Yumi Ishikawa
  4. Pension Funds and Risk-sharing in the Finnish Earnings-related Pension System By Lassila, Jukka; Valkonen, Tarmo
  5. Housing Equity and Household Consumption in Retirement: Evidence from the Singapore Life Panel By Chen, Lipeng; Jiang, Liang; Phang, Sock Yong; Yu, Jun
  6. Optimizing the allocation of private pension funds in Romania (2nd Pillar) By Leonardo Badea; Ion Stancu; Adina-Alexandra Darman-Guzun
  7. Optimal Stopping Time, Consumption, Labour, and Portfolio Decision for a Pension Scheme By Menoncin, Francesco; Vergalli, Sergio
  8. Planning paper 117 - Vingt ans de politique de soutenabilité des finances publiques belges - D’une stratégie de préfinancement des coûts du vieillissement à une politique de réformes du modèle socio-économique By Frédérique Denil; Vincent Frogneux; Michel Saintrain
  9. Associations of childhood health and financial situation with quality of life after retirement: Regional variation across Europe By Börnhorst, Claudia; Heger, Dörte; Mensen, Anne

  1. By: Søren Kjærgaard (University of Southern Denmark); Yunus Emre Ergemen (University of Aarhus and CREATES); Marie-Pier Bergeron Boucher (University of Southern Denmark); Jim Oeppen (University of Southern Denmark); Malene Kallestrup-Lamb (University of Aarhus and CREATES)
    Abstract: Several OECD countries have recently implemented an automatic link between the statutory retirement age and life expectancy for the total population to insure sustainability in their pension systems when life expectancy is increasing. Significant mortality differentials are observed across socio-economic groups and future changes in these differentials will determine whether some socio-economic groups drive increases in the retirement age leaving other groups with fewer years in receipt of pensions. We forecast life expectancy by socio-economic groups and compare the forecast performance of competing models using Danish mortality data and find that the most accurate model assumes a common mortality trend. Life expectancy forecasts are used to analyse the consequences of a pension system where the statutory retirement age is increased when total life expectancy is increasing
    Keywords: Compositional data, forecasting, longevity, pension, socioeconomic groups
    JEL: C22 C23 C53 I12
    Date: 2019–05–09
  2. By: Mercedes Ayuso (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.); Rodrigo Sánchez-Reyes (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.); Miguel Santolino (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.)
    Abstract: This article seeks to demonstrate differences in the severity of traffic accidents among two subgroups of older drivers – young-older (65–75) and old-older (75+). Spain, in common with other countries, has recorded an increase in its number of older drivers due to an increase in this population cohort, an increase that is set to become significant over coming years. Moreover, older drivers are now living and driving for longer periods given increasing levels of life expectancy for the elderly. The greater frequency and longevity of older drivers suggests the need to introduce a possible segmentation within this group at risk, in line with practices for drivers below the age of 65 (thus eliminating the generic interval of 65 and over as applied today in road safety data and in the automobile insurance sector). Here, we draw on data for 2016 provided by the Dirección General de Tráfico de España (Spanish Traffic Authority) and apply generalized additive and generalized linear models to demonstrate that accident severity and the expected costs of accidents increase when the driver is over the age of 75. We identify the factors related to the accident, vehicle and driver that have a significant impact on the probability of the accident being slight, serious or fatal for different age groups. Our results have obvious implications for regulators responsible for road safety policies – most specifically as they consider the need to introduce an upper age limit for driving – and for the automobile insurance industry, which to date has not examined the impact that the longevity of drivers is likely to have on their balance sheets.
    Keywords: Older drivers, groups at risk, bodily injuries, accident costs. JEL classification:J11, J14, I10, C5.
    Date: 2019–05
  3. By: Yumi Ishikawa (PhD student, Osaka School of International Public Policy, Osaka University)
    Abstract: This study aims to estimate the effect of financial difficulty on cognitive function in a sample of the Japanese elderly population, using a panel dataset which includes randomly selected elderly Japanese citizens aged 60 and over from the National Survey of the Japanese Elderly. It is appropriate dataset to capture the effect on cognitive impairment in the sense that cognitive function can gradually degenerate after retirement in many cases. We estimate the effect of household income on the probability of the onset of cognitive impairment at a following survey point using random-effect probit model. There is a significant negative effect from financial difficulty on cognitive function. When participants’ household income drops by 1%, they are 2.2% more likely to develop cognitive impairment. Financial support plays an important role in improving recipients’cognitive function. It should be noted that we found the effect of financial difficulty even in Japan which has a universal health coverage.
    Keywords: aging, cognitive function, elderly, financial difficulty, financial situation, income, Japan, universal health coverage
    Date: 2019–05
  4. By: Lassila, Jukka; Valkonen, Tarmo
    Abstract: Abstract We study the use of pension funds in the Finnish earnings-related pension system with the aim of smoothing contributions over time under demographic and economic risks. Smoothing is affected by the revisions in long-term forecasts and is thus imperfect. As a partially funded defined-benefit system, demographic risks and asset yield risks directly affect the contributions. In a general equilibrium setup, these risks also affect wages and thus pension benefits and replacement rates. We also consider alternative benefit rules where risks are transferred more to the pensioners.
    Keywords: Pensions, Funding, Contribution smoothing, Risks, Generational fairness
    JEL: E17 H55
    Date: 2019–05–07
  5. By: Chen, Lipeng (School of Economics, Fudan University); Jiang, Liang (Fanhai International School of Finance and School of Economics, Fudan University); Phang, Sock Yong (School of Economics, Singapore Management University); Yu, Jun (School of Economics and Lee Kong Chian School of Business, Singapore Management University)
    Abstract: We utilize data from the Singapore Life Panel© survey to empirically investigate the impact of housing equity on consumption of elderly households. Based on panel analysis, we find housing equity value has no significant impact on non-durable consumption for elderly people. The conclusion holds for a battery of robustness check. Moreover, heterogeneity analyses based on subsamples by age of household head, house type, and number of property possessed also show no significant impact of housing equity on consumption in general. Finally, we use scenario analysis to study the Lease Buyback Scheme (LBS), a novel housing equity monetization scheme which allows elderly households to unlock housing equity for retirement financing. We find LBS increases non-durable consumption by about only 0.69%, which may explain the low take-up rate for the LBS.
    Keywords: Housing wealth; elderly households; monetization; Singapore
    Date: 2019–05–08
  6. By: Leonardo Badea (Financial Supervisory Authority); Ion Stancu (Institute of Financial Studies Bucharest); Adina-Alexandra Darman-Guzun (West University Timisoara)
    Abstract: Recent phenomena on the aging of the population due to the improvement of the quality of life, the decrease of the population, the decrease in the fertility rate and the development of the capital markets have led to the encouragement of private pension funds. The private pension system is essential to any modern and prosperous economy; the competitive allocation of capital under this scheme ensures the maintenance / increase of the purchasing power of future earnings from pensions, as well as the most appropriate way to finance national economic development.Basedon extensive literature on the optimization of financial investment portfolios and efficient management of private pension funds, our main objective is to optimize portfolios of private pension funds in relation to the degree of risk assumed by the managers of these funds. In concrete terms, we report optimal weights for the allocation of pension funds in five asset categories (shares, corporate bonds, participation funds, government securities and bank deposits) by using three optimal portfolios models: equipping, minimizing standard deviation and risk minimization.The database includes the monthly profitability of the five asset fund categories of pension funds, as well as the VUAN evolution of pension funds and the profitability of pension fund managersfor the period from August 2013 to July 2018 (5 years). The results obtained will constitute recommendations for private pension fund managers both in choosing the portfolio optimization model and as choices for choosing the optimal combination of assets at a discounted profitability of the portfolio in relation to the assumed degree of risk by each administrator.
    Keywords: private pension system; optimal financial investment portfolios, the Markowitz model (average variance, MV), the average MCVaR model, the unit value of the net asset (VUAN), the profitability of private pension fund managers
    JEL: G11 G23 J32
    Date: 2018–11
  7. By: Menoncin, Francesco; Vergalli, Sergio
    Abstract: In this work we solve in a closed form the problem of an agent who wants to optimise the inter-temporal utility of both his consumption and leisure by choosing: (i) the optimal inter-temporal consumption, (ii) the optimal inter-temporal labour supply, (iii) the optimal share of wealth to invest in a risky asset, and (iv) the optimal retirement age. The wage of the agent is assumed to be stochastic and correlated with the risky asset on the financial market. The problem is split into two sub-problems: the optimal consumption, labour, and portfolio problem is solved first, and then the optimal stopping time is approached. The martingale method is used for the first problem, and it allows to solve it for any value of the stopping time which is just considered as a stochastic variable. The problem of the agent is solved by assuming that after retirement he received a utility that is proportional to the remaining human capital. Finally, a numerical simulation is presented for showing the behaviour over time of the optimal solution.
    Keywords: Research Methods/ Statistical Methods
    Date: 2019–05–15
  8. By: Frédérique Denil; Vincent Frogneux; Michel Saintrain
    Abstract: The Ageing fund, which was set up in 2001 as an instrument to ensure the long-term sustainability of public finances, was abolished in 2016. Its abolition symbolises the transition from a strategy of pre-funding the budgetary cost of ageing, which dominated in the early 2000s, to a strategy based mainly on reforms to the socioeconomic model. The latter was initiated after the global financial crisis and has been firmly stepped up in recent years. This Planning Paper describes the economic and institutional factors behind the shift in sustainability policy, as well as the role of the various stakeholders: the governments of course, but also the High Council of Finance, the European authorities and the Federal Planning Bureau, which has produced long-term analyses and assessments over the past 25 years that have both reflected and helped to shape the pursued policy.
    JEL: H5 H6
    Date: 2019–02–28
  9. By: Börnhorst, Claudia; Heger, Dörte; Mensen, Anne
    Abstract: Many studies have shown that childhood circumstances can have long term consequences that persist until old age. To better understand the transmission of early life circumstances, this paper analyses the effects of health and financial situation during childhood on quality of life after retirement as well as the mediating role of later life health, educational level, and income in this association. Moreover, this study is the first to compare these pathways across European regions. The analyses are based on data of 13,092 retirees aged > 60 and
    Keywords: early life circumstances,life course epidemiology,retirement phase,quality of life,path analysis
    JEL: H75 I31 J14
    Date: 2019

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