nep-age New Economics Papers
on Economics of Ageing
Issue of 2019‒05‒27
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Population Aging, Age Discrimination, and Age Discrimination Protections at the 50th Anniversary of the Age Discrimination in Employment Act By Patrick Button
  2. Objectives and challenges in the implementation of a universal pension system in France By Hervé Boulhol
  3. Elderly Labor and Precautionary Saving By Masaya Yasuoka
  4. Demographics and Automation By Daron Acemoglu; Pascual Restrepo
  5. The Gender Dimension of Intergenerational Transfers in Europe By Bernhard Hammer; Sonja Spitzer; Lili Vargha; Tanja IsteniÄ
  6. Optimal Stopping Time, Consumption, Labour, and Portfolio Decision for a Pension Scheme By Francesco Menoncin; Sergio Vergalli
  7. Do people really want freedom of choice? : Assessing preferences of pension holders By van Dalen, Harry; Henkens, Kene
  8. Physician Bias and Racial Disparities in Health: Evidence from Veterans' Pensions By Shari Eli; Trevon D. Logan; Boriana Miloucheva
  9. Options to Receive Employment Gratuity By Reason Machete
  10. Demography and productivity in the Italian manufacturing industry: yesterday and today By Carlo Ciccarelli; Matteo Gomellini; Paolo Sestito
  11. Unhedgeable Inflation Risk within Pension Schemes By Beetsma, Roel; Chen, Damiaan; van Wijnbergen, Sweder
  12. Impact of early retirement incentives on labor supply of young men and women : evidence from Turkey By Gunes Asik
  13. Experiencias y prioridades para incluir a las personas mayores en la implementación y seguimiento de la Agenda 2030 para el Desarrollo Sostenible By -

  1. By: Patrick Button
    Abstract: This paper discusses population aging, increased participation of seniors in the labor force in the United States (and reasons for this), and how these trends are making the struggles of older workers in the labor market increasingly relevant. Evidence examining whether age discrimination is a barrier for seniors as they try to increase their work lives through the common practice of “bridge” jobs is also presented. After discussing the evidence that measures age discrimination, economics and legal research that seeks to determine to what extent the federal Age Discrimination in Employment Act and state-level age discrimination laws prevent age discrimination is discussed. In summary, current evidence indicates that age discrimination exists, but more so for older women. While evidence suggests that age discrimination laws may help, they cannot resolve all the challenges imposed by population aging, especially for older women.
    JEL: J14 J16 J26 J71 J78 K31
    Date: 2019–05
  2. By: Hervé Boulhol
    Abstract: The mission of the French High Commission for Pension Reform is to prepare the reform introducing a universal pension points system in France. This paper explains why implementing a universal points system in France would increase transparency, reduce inequality and generate efficiency gains for the whole economy. It documents the experience of OECD countries which have opted for a points or a notional defined contribution (NDC) schemes, and provides a technical framework to compare defined benefit, points and NDC pension systems. The paper discusses some key issues related to the main parameters of the new system. While it can include a wide range of redistribution schemes depending on political choices, indexation rules should be designed in a way that maximises, as much as possible, the rates of return on pension contributions within a pay-as-you-go system while ensuring financial sustainability and accounting for changes in life expectancy. This implies that the value of the point would vary at the individual level depending on the cohort and the effective age of retirement based on actuarial principles. No country having a points system currently uses age-cohort point values, and France could be the first one to introduce such an innovation.This Working Paper relates to the 2019 OECD Economic Survey of France ( nce-economic-snapshot/)
    Keywords: France, life expectancy, pensions, redistribution, reform
    JEL: H53 H55 J11 J26
    Date: 2019–05–24
  3. By: Masaya Yasuoka (School of Economics, Kwansei Gakuin University)
    Abstract: In OECD countries, both life expectancy and elderly labor participation are increasing. The retirement age is being raised continually. The age at which pension benefits start is also being raised by governments. This paper presents an examination of how an increase in elderly labor participation affects saving and fertility in an endogenous fertility model with uncertainty of wage income during the old period. In the model with uncertainty, an increase in elderly labor time reduces savings. Thereby, fertility increases. However, without an increase in the average, an increase in the variance of wage income for elderly people increases savings and reduces fertility.
    Keywords: Elderly labor, Fertility, Precautionary saving
    JEL: J14 J13 J26
    Date: 2019–05
  4. By: Daron Acemoglu (MIT and CIFAR); Pascual Restrepo (Boston University)
    Abstract: We argue theoretically and document empirically that aging leads to greater (industrial) automation, and in particular, to more intensive use and development of robots. Using US data, we document that robots substitute for middle-aged workers (those between the ages of 36 and 55). We then show that demographic change—corresponding to an increasing ratio of older to middle-aged workers—is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones. We also provide evidence of more rapid development of automation technologies in coun- tries undergoing greater demographic change. Our directed technological change model further predicts that the induced adoption of automation technology should be more pronounced in industries that rely more on middle-aged workers and those that present greater opportunities for automation. Both of these predictions receive support from country-industry variation in the adoption of robots. Our model also implies that the productivity implications of aging are ambiguous when technology responds to demographic change, but we should expect produc- tivity to increase and labor share to decline relatively in industries that are most amenable to automation, and this is indeed the pattern we find in the data.
    Keywords: aging, automation, demographic change, economic growth, directed technological change, productivity, robots, tasks, technology
    JEL: J11 J23 J24 O33 O47 O57
    Date: 2018–03
  5. By: Bernhard Hammer; Sonja Spitzer; Lili Vargha; Tanja IsteniÄ
    Abstract: This paper analyses the gender dimension of intergenerational transfers in European countries using National Transfer Accounts data on age- and gender-specific transfers in 2010. We combine data on public and private transfers with demographic information to estimate gender-specific net transfer benefits by life stage and over the whole life course. Furthermore, public old-age benefits are decomposed into yearly averages as well as the number of years that individuals can expect to be net recipients of public transfers. The results show remarkable differences between genders, especially in old age. Yearly net public benefits in old age are considerably smaller for women. However, the total public benefits over the whole retirement period are higher for women due to their higher life expectancy.
    Keywords: Gender inequalities, intergenerational transfers, National Transfer Accounts, unpaid work.
    Date: 2019–05
  6. By: Francesco Menoncin (Università degli Studi di Brescia); Sergio Vergalli (Università degli Studi di Brescia)
    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: ptimal Stopping Time, Retirement Choice, Labour Supply, Asset Allocation, Mortality Risk
    JEL: C61 G11 J22
    Date: 2019–05
  7. By: van Dalen, Harry (Tilburg University, School of Economics and Management); Henkens, Kene (Tilburg University, School of Economics and Management)
    Abstract: Reforms of private pension plans across the world are involving the introduction of more options for pension holders to make choices to suit their preferences. Freedom of choice is not, however, a unidimensional concept despite being commonly perceived as such by policy makers. Using a unique panel survey among Dutch employees, we offer a refined typology of preferences with respect to freedom of choice. For most pension contract issues - level of pension savings, investment choice, and risk coverage - a minority (14-26 %) of participants value individual freedom of choice, whereas most would either prefer to let their pension fund make the decisions, or they favour a mixed model whereby they have the option to exercise individual choice but are not obligated to take this option or they are simply indifferent with respect to how their pension contract is designed and financed. Pension holders who distrust their pension fund or who do not express solidarity with other participants are more likely to prefer freedom of choice than those who feel a high level of solidarity and have a high level of trust in their pension fund.
    Date: 2018
  8. By: Shari Eli; Trevon D. Logan; Boriana Miloucheva
    Abstract: We estimate racial differences in longevity using records from cohorts of Union Army veterans. Since veterans received pensions based on proof of disability at medical exams, estimates of the causal effect of income on mortality may be biased, as sicker veterans received larger pensions. To circumvent endogeneity bias, we propose an exogenous source of variation in pension income: the judgment of the doctors who certified disability. We find that doctors appeared to discriminate against black veterans. The discrimination we observe is acute—we would not observe any racial mortality differences had physicians not been racially biased in determining pension awards. The effect of income on health was indeed large enough to close the black-white mortality gap in the period. Our work emphasizes that the large effects of physicians’ attitudes on racial differentials in health, which persist today amongst both veterans and the civilian population, were equally prominent in the past.
    JEL: I14 I3 N11
    Date: 2019–05
  9. By: Reason Machete
    Abstract: Employment gratuity is the money companies typically give to their employees at the end of their contracts as a legal requirement. Like pension, it is a form of retirement plan and is often given as an alternative to a pension plan. Nonetheless, there is now a new pattern whereby companies give their employees the option to receive their gratuity at various stages before the end of their contracts. In Botswana, for instance, some companies give their employees an option to receive their gratuity on a monthly basis rather than having them wait for a year or more. Many employees find this option attractive, but is it economically sound? This paper sheds light on this question, highlighting the need for analytically informed decisions. It quantifies the economic benefits of the tax relief provided by government relative to investing the monthly-received funds in a risk-free savings account or in helping repay a loan. The principles and methods used herein can be adapted and applied to different circumstances.
    Date: 2019–04
  10. By: Carlo Ciccarelli (CEIS & DEF University of Rome "Tor Vergata"); Matteo Gomellini (Bank of Italy); Paolo Sestito (Bank of Italy)
    Abstract: Population ageing and lack of productivity growth characterize most western countries. We focus on Italy and investigate whether the availability of a young population represents a determinant of manufacturing productivity growth. We follow a historical comparative analysis and provide evidence of the strength of this relation in the past (1861-1911) and today (1961-2011). To account for the sizeable regional heterogeneity characterizing historically the country we use data disaggregated at the provincial level. Our analysis suggests that the availability of a young population represents indeed one of the determinant of manufacturing productivity growth. The strength of the relation was higher in the past than today, but ageing is still nevertheless a factor that cannot be neglected from a policy perspective.
    Keywords: manufacturing, productivity, population ageing, Italy.
    JEL: O14 J11 N33 N93
    Date: 2019–05–16
  11. By: Beetsma, Roel; Chen, Damiaan; van Wijnbergen, Sweder
    Abstract: Pension schemes generally aim to protect the purchasing power of their participants, but cannot completely do this when due to market incompleteness inflation risk cannot be fully hedged. Without a market price for inflation risk the value of a pension contract depends on the investor's risk appetite and inflation risk exposure. We develop a valuation framework to deal with two sources of unhedgeable inflation risk: the absence of instruments to hedge general consumer price inflation risk and differences in group-specific consumption bundles from the economy-wide bundle. We find that the absence of financial instruments to hedge inflation risks may reduce lifetime welfare by up to 6% of certainty-equivalent consumption for commonly assumed degrees of risk aversion. Regulators face a dilemma as young (workers) and old participants (retirees) have different capacities to absorb losses from unhedgeable inflation risks and as a consequence have a different risk appetite.
    Keywords: incomplete markets; pension contract; Unhedgeable inflation risk; Valuation; welfare loss
    JEL: C61 E21 G11 G23
    Date: 2019–05
  12. By: Gunes Asik
    Date: 2018
  13. By: -
    Date: 2019–02

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