nep-age New Economics Papers
on Economics of Ageing
Issue of 2019‒11‒18
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Internet Usage and the Cognitive Function of Retirees By Colin Green; Likun Mao; Vincent O'Sullivan
  2. How Would 401(k) ‘Rothification’ Alter Saving, Retirement Security, and Inequality? By Vanya Horneff; Raimond Maurer; Olivia S. Mitchell
  3. When saving is not enough: The wealth decumulation decision in retirement By Kieren, Pascal; Weber, Martin
  4. Household Debt and Aging in Japan By Charles Yuji Horioka; Yoko Niimi
  5. The Impact of Pensions and Insurance on Global Yield Curves By Robin M. Greenwood; Annette Vissing-Jorgensen
  6. Recognition versus Disclosure and Audit Fees and Costs:Evidence from Pension Accounting in Japan By Masaki KUSANO; Yoshihiro SAKUMA
  7. Short- and Long-Term Determinants of Cardiovascular Mortality: An Econometric Assessment of the Working Age Population in Russia, 1965-95 By Paniccla, Renato

  1. By: Colin Green; Likun Mao; Vincent O'Sullivan
    Abstract: Cognitive decline amongst older people is associated with poor health and lower quality of life. Previous studies demonstrate that retirement is a particularly critical period for cognitive decline and highlight the importance of post-retirement behaviours. Using longitudinal data from the Survey of Health, Ageing and Retirement in Europe, this study examines the effect of information technology usage on cognitive function, focusing on one specific form: internet usage. We demonstrate that post-retirement internet usage is associated with substantially higher scores on cognitive tests. To address the endogenous relationship between cognitive function and IT usage, we use pre-retirement computer exposure as a source of exogenous variation. Our IV results suggest smaller but still substantial moderating effects of IT usage on the cognitive decline of retirees. These results are concentrated amongst people who worked in middle-skill occupations that experienced large-scale computerisation. More broadly, our results suggest a causal effect of computer usage on the cognitive function of retirees.
    Keywords: Cognitive function, internet, computers
    JEL: J14
    Date: 2019
  2. By: Vanya Horneff (Finance Department, Goethe University); Raimond Maurer (Finance Department, Goethe University); Olivia S. Mitchell (Wharton School, University of Pennsylvania)
    Abstract: The U.S. has long incentivized retirement saving in 401(k) and similar retirement accounts by permitting workers to defer taxes on contributions, levying them instead when retirees withdraw funds in retirement. This paper develops a dynamic life-cycle model to show how and whether “Rothification†— that is, taxing 401(k) contributions rather than payouts — would alter household saving, investment, and Social Security claiming patterns. We show that these changes differ importantly for low- versus higher-paid workers. We conclude that moving to a system that taxes pension contributions instead of withdrawals will lead to later retirement ages, particularly for the better-educated. It also would reduce work hours and lifetime tax payments and increase wealth and consumption inequality. In addition, we show how these behaviors would differ in a persistently low interest rate environment versus a more “normal†historical return world.
    Date: 2019–09
  3. By: Kieren, Pascal; Weber, Martin
    Abstract: In this study, we investigate the wealth decumulation decision from the perspective of a retiree who is averse to the prospect of fully annuitizing her accumulated savings. We field a large online survey of hypothetical product choices for phased drawdown offerings and annuities. While the demand for annuities remains low in our sample, we find significant demand for phased withdrawal products with equity-based asset allocations and flexible payout structures. Consistent with the product choice, the most important self-reported considerations for the wealth decumulation decision are low default risk in the products they purchase, the size of the withdrawal rates, and flexibility in the timing of their withdrawal. As determinants of the decision of how much wealth individuals are willing to draw down, we identify consumers' attitudes towards future economic conditions, the extent to which they are protected against longevity risk, and their desire to leave bequests. Policy implications are discussed.
    Keywords: retirement planning,phased withdrawal accounts,annuity puzzle
    JEL: D14 G2 H55 J14 J26
    Date: 2019
  4. By: Charles Yuji Horioka; Yoko Niimi
    Abstract: In this paper, we analyze the borrowing behavior of Japanese households in comparison to the other Group of Seven (G7) countries and also broken down by the age group of the household head. We find that pre-retirement households (households with a head in the 50-59 age group) in Japan do not have inordinate amounts of debt and that their financial health is satisfactory. However, we also find that households with a head in the 30-39 age group have shown a sharp increase in debt holdings in recent years, due partly to the fact that tax breaks for housing purchase, reforms in the housing loan market since the early 2000s, and expansionary monetary policy enabled Japanese households to purchase housing at a younger age than they could previously. We therefore need to monitor the borrowing behavior of this cohort over time as the Bank of Japan normalizes its monetary policy, especially since households have become more vulnerable to rising interest rates as the share of households who have chosen variable-rate housing loans has increased in recent years.
    Date: 2019–11
  5. By: Robin M. Greenwood (Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)); Annette Vissing-Jorgensen (National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business)
    Abstract: We document a strong effect of pension and insurance company (P&I) assets on the long end of the yield curve. Using data from 26 countries, the yield spread between 30-year and 10-year government bond yields is negatively related to the ratio of pension assets (in funded and private pension and life insurance arrangements) to GDP, suggesting that preferred-habitat demand by the P&I sector for long-dated assets drives the long end of the yield curve. We draw on changes in regulations in several European countries between 2008 and 2013 to provide well-identified evidence on the effect of the P&I sector on yields and to show that P&I demand is in part driven by hedging linked to the regulatory discount curve. When regulators reduce the dependence of the regulatory discount curve on a particular security, P&I demand for the security falls and its yield increases. These effects extend beyond long government bonds. Our results suggest that pension discount rules can have a destabilizing impact on bond markets that reverses once rules are changed.
    Date: 2019–12
  6. By: Masaki KUSANO; Yoshihiro SAKUMA
    Abstract: Statement No. 26, Accounting Standard for Retirement Benefits, requires Japanese firms to recognize previously off-balance sheet pension liabilities on their balance sheets. We explore auditors’ responses to recognized versus disclosed pension liabilities in the Japanese audit market. We use a pre-Statement No. 26 versus post-Statement No. 26 setting to analyze the effects of disclosed versus recognized pension information on audit fees and costs. We show that disclosed pension liabilities are processed similarly to recognized previously off-balance sheet pension liabilities when audit fees are determined. However, we find that associations with audit costs differ between disclosed and recognized pension liabilities. We also find that audit costs’ differential relations with disclosed and recognized pension liabilities are particularly pronounced for firms with a large pension plan deficit. Overall, our results suggest that auditors scrutinize recognized amounts more closely than disclosed financial information, thereby increasing the reliability of accounting information.
    Keywords: Recognition versus Disclosure, Pension Accounting, Audit Fees, Audit Costs
    JEL: M41 M42 M48
    Date: 2019–11
  7. By: Paniccla, Renato
    Abstract: This paper examines the short- and long-term determinants of the mortality due to cardiovascular diseases (CVD) among the working-age population in Russia. Why Russia? Why CVD mortality? Why the working-age population? Russia is the Eastern European most affected by a rapid a sudden increase in mortality. A change which has hardly been recorded in peace time in the contemporary history. One of the main cause of such increase has been CVD mortality which has particularly been climbing rapidly among the working-age population in Russia ever since the onset of the transition and the dramatic economic and social shocks which accompanied it . Two possible explanations for this tremendous increase in adult mortality can be summarised as follows. (1) The demographic crisis is merely a 'catch-up effect' of a past trend which was interrupted by the anti-alcohol campaign. The long-term factor is identified with a time trend which explains almost all variance. This approach is very unconvincing, because the authors have not provided any plausible econometric evidence that this phenomenon really occurred. (2) The rise in mortality is due to short-term factors resulting from the problem-ridden initial phase of the transition, plus a long-term weakness in the offset variable, namely, health assets, exacerbated by the recent collapse in the provision of care through the health system. In this case, the long-term factor is not a trend, but a precise variable which could influence and constrain the short-term variation provoked by short-term shocks. This paper belongs to the second theoretical family. It attempts to specify and assess econometrically a relationship among these components over time in a 1970-94 sample. After a discussion of the theoretical model, the paper focuses on the evolution of both the dependent and explanatory variables, and then presents an estimate of the model.
    Keywords: International Development

This nep-age issue is ©2019 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.