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on Economics of Ageing |
| By: | Pauline Rossi (University of Amsterdam); Mathilde Godard (CNRS) |
| Abstract: | The old-age security motive for fertility postulates that people's needs for old-age support raise the demand for children. We test this widespread idea using the extension of social pensions in Namibia during the nineties. The reform eliminated inequalities in pension coverage and benefit across regions and ethnic groups. Combining differences in pre-reform pensions and dfferences in exposure across cohorts, we show that pensions substantially reduce fertility, especially in late reproductive life. This article provides the first quasi-experimental quantification of the old-age security motive. The results suggest that improving social protection for the elderly could go a long way in fostering fertility decline in Sub-Saharan Africa. |
| Keywords: | Fertility, Old-age pensions, Social security, Africa, Difference-in-differences |
| JEL: | H55 I38 J13 O15 O55 |
| Date: | 2019–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190069&r=all |
| By: | Bütler, Monika; Stadelmann, Sabrina |
| Abstract: | Home ownership is not only an important asset, but also provides an in-kind income stream. If individuals use pension savings to purchase real estate they face a trade-off between alleviating borrowing constraints when young and lower liquid retirement means when old. We study the decision to withdraw retirement assets in advance for home purchase by analyzing a recent reform. A change in regulations made such withdrawals more difficult, as it increased the amount of non-pension equity a borrower has to provide for a home purchase. Using individual-level data from a large Swiss occupational pension provider, we find fewer advanced withdrawals after the reform, mainly driven by individuals with lower income and of older age. For the withdrawers, the average share of pension assets withdrawn decreased. Nonetheless, the reform did not jeopardize the policy to facilitate home ownership via anticipated second pillar withdrawals. |
| Keywords: | Retirement, annuity, home ownership |
| JEL: | D81 D91 H24 J26 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2019:13&r=all |
| By: | Robert L. Clark; Denis Pelletier |
| Abstract: | This study examines the impact of the adoption of automatic enrollment provisions by schools and universities in the state of South Dakota for its supplemental retirement saving plan (SRP). In South Dakota, educational personnel are also covered by a defined benefit pension plan and by Social Security. Thus, career public employees in South Dakota can expect a life time annuity from these two programs of around 75 percent of their final salary. Prior to the introduction of automatic enrollment, the proportion of newly hired educators who were contributing to the SRP was less than two percent in their first year of employment. After the introduction of automatic enrollment, over 90 percent of newly hired workers who were auto enrolled were participating in the plan. Thus, auto enrollment is shown to have the same powerful impact on contributions to a retirement saving plan for educational employees even when they also can expect life annuities from a defined benefit pension plan. |
| JEL: | J14 J26 J45 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26263&r=all |
| By: | de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University); Montizaan, Raymond (ROA, Maastricht University) |
| Abstract: | Pension schemes in the Netherlands allow workers to redistribute their own pension wealth to increase the survivor pension of their partner. However, due to lacking communication and knowledge of survivor pensions among workers, and also due to the lack of transparent products and choice architecture, redistribution remains limited. This paper uses a stated preferences experiment that is explicitly designed for workers with a partner in the age group of 55 to 65 years to elicit their pension redistribution preferences. We find that, on average, the preferred pension wealth redistribution amounts to 50%. 35% of all individuals have such a preference. 33% of all individuals would prefer less redistribution, and 32% percent prefers to redistribute more pension income to the partner upon one's death. We further show that total family income during working life does not affect the redistribution to survivor pensions. However, the distribution of the contribution to total family income before retirement across partners, as well as the survival likelihood of the partner and the number of years the partner is expected to survive, have a significant causal impact on the preferred pension redistribution decision. The preference for redistribution to survivor pensions also depends significantly on personal characteristics, preferences and social attitude. Males have a significantly stronger preference for redistribution compared to females. Moreover, forward-looking, more risk averse and more altruistic individuals have a stronger preference to redistribute part of their pension wealth to a survivor pension. Finally, in particular when employees have the perception that their partner is more forward looking, they are willing to invest more in a survivor pension. |
| Keywords: | stated preferences experiment, redistribution of pension wealth, survivors pension, economic preferences |
| JEL: | J14 J26 D31 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12625&r=all |
| By: | Thomas Cooley (New York University); Edwin Nusbaum (University of California, Santa Barbara); Espen Henriksen (University of California, Davis) |
| Abstract: | Since the early 1990’s there have been persistent slowdowns in the growth rates of the four largest European economies: France, Germany, Italy, and the United Kingdom. This persistence suggests a low-frequency structural change is at work. Aging populations, both in terms of longer individual life expectancies and declining fertility have caused a shift in the age-cohort distribution. Growth accounting identifies the following five sources of economic growth: total factor productivity, capital accumulation, labor supply on the intensive and extensive margin, and population growth. Changing demographics affect all these five margins. The effects of aging populations on economic growth are also exacerbated by the pension systems in place. In order to fund increasing liabilities with a shrinking tax base, tax rates must increase to balance budgets. This will impose distortions to individual factor-supply choices, providing further headwinds for economic growth. We quantify the additional growth effects resulting from these distortions. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:1352&r=all |
| By: | S\'ergio Bacelar; Luis Antunes |
| Abstract: | The increasing difficulties in financing the welfare state and in particular public retirement pensions have been one of the outcomes both of the decrease of fertility and birth rates combined with the increase of life expectancy. The dynamics of retirement pensions are usually studied in Economics using overlapping generation models. These models are based on simplifying assumptions like the use of a representative agent to ease the problem of tractability. Alternatively, we propose to use agent-based modelling (ABM), relaxing the need for those assumptions and enabling the use of interacting and heterogeneous agents assigning special importance to the study of inter-generational relations. We treat pension dynamics both in economics and political perspectives. The model we build, following the ODD protocol, will try to understand the dynamics of choice of public versus private retirement pensions resulting from the conflicting preferences of different agents but also from the cooperation between them. The aggregation of these individual preferences is done by voting. We combine a microsimulation approach following the evolution of synthetic populations along time, with the ABM approach studying the interactions between the different agent types. Our objective is to depict the conditions for the survival of the public pensions system emerging from the relation between egoistic and altruistic individual and collective behaviours. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1909.08706&r=all |
| By: | Adrien Auclert (Stanford); Frederic Martenet (Stanford University); Hannes Malmberg (University of Minnesota) |
| Abstract: | Macroeconomists agree that population aging is likely to reduce equilibrium real interest rates. However, there is disagreement regarding the magnitude of this effect, and the mechanisms through which it operates. In this paper, we reconsider the pressure of demographic change on interest rates. Using a rich overlapping generation model, we show that this effect can be expressed as a function of a few interpretable elasticities. We calculate some of these elasticities directly using empirical age-wealth profiles and projected population age distributions. Our results suggest that, if interest rates were to remain constant, the twenty-first century would see a very large increase in the wealth-to-GDP ratios of rich countries. We use our decomposition framework to guide our calibration of the remaining parameters of our model and to bound the decline in equilibrium interest rates we should expect from this phenomenon. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:952&r=all |
| By: | Robert L. Clark; Robert G. Hammond; Siyan Liu |
| Abstract: | Engaging in paid employment after claiming retirement benefits may be an important avenue for individuals to work longer as life expectancies rise. After separating from one’s career employer, individuals may engage in paid work to stay active or to supplement their current level of retirement savings or both. Individuals who choose not to work after claiming may be expressing their preference to stay retired, perhaps because their retirement income is sufficient. However, the decision to work after claiming may be driven by the lack of retirement planning and insufficient savings, while the lack of post-claiming work may reflect the inability to find adequate employment opportunities. We use administrative records merged with panel data from several surveys of public employees in North Carolina to study the decision to engage in paid work after claiming retirement benefits. More than 60 percent of active workers plan to work after claiming benefits, while only around 42 percent of the same sample of individuals have engaged in post-claiming paid work in the first few years after leaving public sector employment. Despite this gap, stated work plans are strongly predictive of actual post-claiming work behavior |
| JEL: | J14 J26 J45 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26272&r=all |
| By: | Margherita Borella (Unversity of Torino); Fang Yang (Louisiana State University); Mariacristina De Nardi (UCL, Federal Reserve Bank of Chicago, CE) |
| Abstract: | In the U.S., both taxes and old age Social Security benefits depend on one's marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments (MSM) on the 1945 and 1955 birth-year cohorts and we use it to evaluate what would happen without these provisions. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. Eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle, reduces the participation of married men after age 55, and increases the savings of couples in both cohorts, including in the later one, which has similar participation to that of more recent generations. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:917&r=all |
| By: | Ciani, Emanuele (Bank of Italy); Delavande, Adeline (University of Essex); Etheridge, Ben (University of Essex); Francesconi, Marco (University of Essex) |
| Abstract: | Subjective expectations about future policy play an important role in individuals' welfare. We examine how workers' expectations about pension reform vary with proximity to reforms, information cost, and aggregate information acquisition. We construct a new pan-European dataset of reform implementations and government announcements, and combine it with individual-level representative survey data on expectations about future reforms and country-level data on online search. We find: (1) Expectations are revised upward by about 10 percentage points in the year leading up to a reform, from a median of 50%, regardless of whether the reform is announced; (2) Aggregate online search increases after announcements, when the cost of information is lower; (3) Reform announcements and online information gathering are substitutes in the formation of expectations; (4) Expectations do not converge as a result of announcements or implementations; (5) The effect of information on expectations varies substantially across workers and systematically with observed characteristics that proxy cognitive ability and information value. These findings, interpreted using a model of rational inattention, reveal substantial informational rigidities, with welfare costs that run into trillions of Euros. |
| Keywords: | expectations, retirement, pension reform uncertainty, reform announcement, online search, rational inattention |
| JEL: | C8 D84 D91 J14 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12604&r=all |
| By: | - |
| Keywords: | POBLACION, ENVEJECIMIENTO DEMOGRAFICO, CRECIMIENTO DEMOGRAFICO, PROMEDIO DE VIDA, FECUNDIDAD, MIGRACION INTERNACIONAL, TENDENCIAS DEMOGRAFICAS, POPULATION, DEMOGRAPHIC AGEING, POPULATION GROWTH, LIFE EXPECTANCY, FERTILITY, INTERNATIONAL MIGRATION, POPULATION TRENDS |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col093:44824&r=all |
| By: | Schön, Matthias; Stähler, Nikolai |
| Abstract: | In a three-region New Keynesian life-cycle model calibrated to Germany, the Euro area (without Germany) and the rest of the world, we analyze the impact of population ageing on net foreign asset and current account developments. Using unsynchronized demographic trends by taking those of Germany as given and assuming constant population everywhere else, we are able to generate German current account surpluses of up to 15% of GDP during the first half of this century. However, projected demographic trends from 2000 to 2080 in OECD countries (and China in an additional analysis) are much more synchronized. Feeding these into our model suggests that the average annual German current account surplus from 2000 to 2018 that should be attributed to ageing reduces to around 2.83% (1.23%) of GDP, with a maximum at 4.3% (2.7%) in 2006 (when taking into account China), turning negative around 2035. |
| Keywords: | Population Ageing,Net Foreign Assets,Global Imbalances,DSGE Models |
| JEL: | E43 E44 E52 E58 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:332019&r=all |
| By: | Bryson, Alex (University College London); Forth, John (Cass Business School); Gray, Helen (Institute for Employment Studies (IES)); Stokes, Lucy (National Institute of Economic and Social Research (NIESR)) |
| Abstract: | Focusing on private sector workplaces in Britain, we investigate whether the employment of older workers has implications for workplace performance. We find no significant association between changes in the proportion of older workers employed and changes in workplace performance. We find some evidence that workplace labour productivity falls where the proportion of 'middle-aged' workers falls, either due to a rise in the proportion of older or younger workers, but this association does not carry through to financial performance. Overall, the findings suggest that any reluctance on the part of employers to employ greater numbers of older workers may be misplaced. |
| Keywords: | older workers, productivity, workplace employment relations survey |
| JEL: | J21 J23 J24 J63 L25 M51 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12598&r=all |
| By: | Gastón Illanes; Manisha Padi |
| Abstract: | Retirement policy has indirect effects on its beneficiaries, through the “crowd-out” or “crowd-in” of insurance markets. We study how retirement policy in Chile, which limits the drawdown of retirement assets but otherwise does not provide or require fixed income in retirement, results in more than 60% of eligible retirees purchasing private annuities at low prices. We estimate a demand model to show that replacing this voluntary policy with partial mandatory annuitization and removing limits on drawdowns causes the private annuity market to partially unravel. Under our model, this reform leads to a welfare increase equivalent to US$4,000 of additional pension savings on average, but welfare effects are heterogenous and many retirees would be harmed due to the higher prices of private annuities. Our results highlight the importance of considering the impact of policy reforms on the equilibria of related markets. |
| JEL: | D82 G22 G28 H31 H44 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26285&r=all |
| By: | Congressional Budget Office |
| Abstract: | In 1995, 33 percent of people ages 55 to 79 worked. By 2018, that share rose to 44 percent. That growth was the result of continued increases in employment for women and a reversal of previously declining employment for men. The changes in employment of people ages 55 to 79—the period during which many people stop working—were related to changes in their demographic characteristics and the jobs they held, as well as to changes in Social Security. |
| JEL: | E24 J00 J10 J11 J26 |
| Date: | 2019–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:55454&r=all |