nep-age New Economics Papers
on Economics of Ageing
Issue of 2019‒12‒09
sixteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Recent improvements to the public finance block of the OECD’s long-term global model By Yvan Guillemette
  2. Risk-sensitive preferences and age-dependent risk aversion By Phitawat Poonpolkul
  3. Proceedings: 2nd International Conference on Food and Agricultural Economics: MIGRATION AND AGEING PATTERNS IN AGRICULTURAL AREAS OF HUNGARY By Bruder, Emese; Obadovics, Csilla; Unal, Hakan
  4. Deaths without denominators: using a matched dataset to study mortality patterns in the United States By Alexander, Monica
  5. Estimating Family Preference for Home Elderly-care Services: Large-scale Conjoint Survey Experiment in Japan By KANEKO Shinji; KAWATA Keisuke; YIN Ting
  6. Public and Private Pension Systems and Macroeconomic Volatility in OECD Countries By Mario Holzner; Stefan Jestl; David Pichler
  7. Proceedings: 3rd International Conference on Food and Agricultural Economics: DEMOGRAFIC TRANSITION IN TURKEY, RURAL POPULATION AND ANALYSING OF DEMOGRAFIC PROJECTION OF 2080 By Dogan, Ozlem
  8. Childlessness, parenthood and subjective wellbeing: The relevance of conceptualizing parenthood and childlessness as a continuum. By Albertini, Marco; Arpino, Bruno
  9. Population ageing and sub-central governments: Long-term fiscal challenges By Céline Colin; Bert Brys
  10. Evaluating the Age-Energy Consumption Profile in Residential Buildings By Estiri, Hossein; Zagheni, Emilio
  11. Health Dynamics Shape Life-Cycle Incomes By Rainer Franz Kotschy
  12. The "Red Herring" after 20 Years: Ageing and Health Care Expenditures By Friedrich Breyer; Normann Lorenz
  13. The diversity and causality of pension reform pathways: a fuzzy-set qualitative comparative analysis By Carrera, Leandro N.; Angelaki, Marina
  14. Sectoral Impacts of International Labour Migration and Population Ageing in the Czech Republic By Martin Stepanek
  15. Collectivised Pension Investment with Homogeneous Epstein-Zin Preferences By John Armstrong; Cristin Buescu
  16. Preference for Elder Policy: Evidence from a Large-scale Conjoint Survey Experiment By KAWATA Keisuke; YIN Ting; YOSHIDA Yuichiro

  1. By: Yvan Guillemette
    Abstract: This paper documents recent extensions and revisions made to the model underlying the long-run global macroeconomic scenarios that are published every few years. First, a fiscal block is added for 11 countries that previously lacked one. Second, public pension expenditure projections are made endogenous to the projected ratio of retirees to workers and to a hypothesis on the future evolution of benefit ratios. Cross-country differences in projected public pension expenditure thus reflect many factors, including the speed of population ageing, the evolution of employment rates for older people, especially females, and rules regarding the evolution of statutory retirement ages. Third, revised public health expenditure projections introduce a higher income elasticity in middle-income than high-income countries and makes the excess of health care inflation over GDP inflation (Baumol effect) endogenous to the projected labour productivity growth rate. And fourth, the determination of long-term interest rates is revised to associate the fiscal risk premium to net, as opposed to gross, government debt, and make its size conditional on euro area membership, the quality of public governance and the occurrence of systemic banking crises, while allowing a flight-to-safety effect during such crises to lower bond yields in countries that are providers of global safe assets.
    Keywords: interest rates, long-term scenarios, public health expenditure, public pension expenditure
    JEL: E17 E43 H51 H55
    Date: 2019–12–04
  2. By: Phitawat Poonpolkul
    Abstract: People in different age groups have shown to differ in their degrees of risk aversion. This study investigates the macroeconomic implications of population aging when households are assumed to be increasingly risk-averse in future utility when they age. The model incorporates risk-sensitive preferences used in Hansen & Sargent (1995), which is the only recursive preferences that can separate risk aversion and intertemporal elasticity of substitution while being monotonic, into a 16-generation discrete-time OLG model with undiversifiable income risk. Compared to a time-additive counterpart, risk-sensitive preferences capture precautionary saving motive that exacerbates adverse responses of aggregate macroeconomic variables under a population aging scenario through demographic re-weighting and life-cycle redistribution channels. Varying risk aversion also allows households to internalize future uncertainties when evaluating their welfare impacts of demographic change, resulting in non-monotonic welfare dynamics with higher welfare loss under a high-risk environment and vice versa. Risk-sensitive preferences with age-dependent risk aversion can play an important role in optimal policy settings by introducing uncertainties into the welfare impact analysis, while taking into account more realistic risk-taking behavior of different age cohorts.
    Keywords: Demographic change, risk-sensitive preferences, overlapping-generation model, precautionary savings, risk aversion
    JEL: D52 E21 E60
    Date: 2019–11
  3. By: Bruder, Emese; Obadovics, Csilla; Unal, Hakan
    Abstract: Number of citizens in a country represents its primary production potential. Hungary has significant natural resources for agriculture. However, many problems follow rural areas, and one of these problems is connected to demographic changes such as; population decrease, outmigration and ageing. This paper attempts to investigate these factors to more fully understand the recent trends of an ageing population in agricultural areas of Hungary. Scolars argue that, in the rural context of aging, changes in the working-age population have a significant impact on agricultural output. The aim of the paper is to highlight the trend of demographic changes and their impact on the development of agriculture in Hungary. The obtained results indicate negative consequences of demographic changes as well as the reduction of the population working in the agricultural sector. One of the greatest consequences of deagrarisation is the lack of manpower. In this research we focus on Hungarian settlements, where individual farms and primary producers, ie small farmers carry out agricultural activities, in a way that they produce and receive revenue from this activity. Those revenues which have been realised by business organisations are not included in the research criteria. However, these organisation are members of the agricultural market, but they serve only as employers, and the employees of these companies, are actually doing agricultural activities, but not for their own benefit. Data was collected from the Territorial Information System provided by the Hungarian National Statistical Office.
    Keywords: Community/Rural/Urban Development
    Date: 2018–04
  4. By: Alexander, Monica
    Abstract: To understand national trends in mortality over time, it is important to study differences by demographic, socioeconomic and geographic characteristics. One issue with studying mortality inequalities, particularly by socioeconomic status, is that there are few micro-level data sources available that link an individual's SES with their eventual age and date of death. In this paper, a new dataset for studying mortality disparities and changes over time in the United States is presented. The dataset, termed 'CenSoc', uses two large-scale datasets: the full-count 1940 Census to obtain demographic, socioeconomic and geographic information; and that is linked to the Social Security Deaths Masterfile (SSDM) to obtain mortality information. This paper also develops mortality estimation methods to better use the 'deaths without denominators' information contained in CenSoc. Bayesian hierarchical methods are presented to estimate truncated death distributions over age and cohort, allowing for prior information in mortality trends to be incorporated and estimates of life expectancy and associated uncertainty to be produced.
    Date: 2018–07–23
  5. By: KANEKO Shinji; KAWATA Keisuke; YIN Ting
    Abstract: Elderly care services have attracted attention in many aging countries. However, the relative importance of service attributes has not been well evaluated. This paper estimates the consumer surplus of multi-attribute elderly care services at home, which allows us to evaluate them from the social welfare perspective. We propose a new empirical approach combining a fully-randomized conjoint survey experiment and the non-parametric rational choice model. Our survey is for Japanese respondents aged 40-59 and shows that expansions of service contents significantly increases the consumer surplus. Additionally, the surplus gain is completely heterogeneous; while many respondents have no surplus gains, the average surpluses are of significant size among remaining respondents.
    Date: 2019–11
  6. By: Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Stefan Jestl (The Vienna Institute for International Economic Studies, wiiw); David Pichler (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper analyses the impact of public pension expenditures and pension funds’ assets as well as their benefits on economic volatility. To do so, we use panel data for 35 OECD countries for the period 1980-2018 and apply a set of state-of-the-art econometric estimators. Our results show weak evidence of a negative impact of public pension expenditures as well as weak evidence of a positive impact of pension funds’ benefits on volatility. Results were, however, found not to be very robust. In contrast, pension funds’ assets do not show any evidence of being associated with economic volatility. Unsystematic fiscal policy, banking crises and political (in)stability, however, are revealed to be somewhat more robust determinants of economic volatility.
    Keywords: Public pensions, private pensions, pension system, macroeconomic volatility, OECD
    JEL: H55 J32 E24 E32
    Date: 2019–12
  7. By: Dogan, Ozlem
    Abstract: Turkey has a total population of 82 million 3 thousand 882 in 2018. Rural population is 6 million 337 thousand 385 and 7.7% of our population. Contribution to the agricultural economy and rural population in Turkey's economy plays a primary role. Demographic projection is a method to help us prepare prudential economic and social policies. These projections provide useful predictions about, current population structure, it’s vocations and also helps us to determine if the current behaviour of the population keeps having the same vocation, what kind of population would appear in near future, population density, migrations, sex and age pattern of the population and sociocultural changes. Demographic Projections not only suggest that Turkey’s young and constantly growing population pattern is changing but it also shows that it's fertility rates and structures showing some changes as well. Changes through Low Death and Fertilty Rates from higher rates ,what we can define as “Demographic Change Process”, affects on population’s age structure as well. What we gathered from recent projection researchs indicates that there will be constant fall on young population levels, there will be rise in the number of population in working till 2040 but then there will be fall on the number in the same population group afterwards. Based on these informations, elderly population in Turkey constantly growing. These changes on both age and demographic structures makes impact in direct or indirect ways on both Social and Ekonomic live in Turkey. Demographic changes brought some positive outcomes(having a peak on population in working age level) along with the risks that Turkey never have been faced before(aging population). This situation requires taking measures for many sectors, especially the agricultural economy. Therefore, our study of the demographic transformation of Turkey, the rural population and population projections to 2080 are analyzed.
    Keywords: Community/Rural/Urban Development
    Date: 2019–04
  8. By: Albertini, Marco; Arpino, Bruno
    Abstract: The objective of the paper is to show the theoretical and practical relevance of conceptualizing and operationalizing parenthood and childlessness as a continuum – instead of a dichotomy - when evaluating the consequences of kinless-ness in later life. It is suggested that information on the number of children, structural and associational intergenerational solidarity can be utilized to operationalize the continuum. Subjective wellbeing is utilized as outcome of interest. Data from waves 2, 4, 5 and 6 of the Survey of Health, Ageing and Retirement in Europe are used. The sample includes 183,545 respondents from 21 countries. Linear regression models with clustered standard errors are used. Childless older individuals report lower levels of life satisfaction than parents. However, the largest difference is observed between those with one and two children. Using a measure of associational intergenerational solidarity to weight the degree of parenthood it is shown that parents who have infrequent contact with children report significantly lower levels of life satisfaction than childless individuals. Kinless-ness is not only a demographic but also a social condition. When studying the consequences of ageing alone it is essential to consider not only the presence and “quantity” of kin, but also its “quality”.
    Date: 2018–10–18
  9. By: Céline Colin; Bert Brys
    Abstract: The population in OECD countries is ageing rapidly, which will have significant macroeconomic impacts, including on public expenditure and tax revenues. This paper analyses the consequences of population ageing at the sub-central government (SCG) levels and introduces the ‘SCG fiscal vulnerability to ageing’ indicator. This indicator identifies the countries in which SCGs on average are “vulnerable” to the ageing of their population from a fiscal perspective (both from the expenditure and revenue side). The paper posits that the economic and fiscal consequences of an ageing population goes beyond the central-SCG boundaries. Therefore, in order to make fiscal frameworks “ageing-resilient”, countries require a coherent fiscal strategy, which focuses on tax and spending reforms, with a whole-of-government approach that brings together central governments and SCGs.
    Keywords: ageing, demographic change, long-term scenarios, revenue vulnerability, subnational governments
    JEL: H20 H71 J14
    Date: 2019–12–04
  10. By: Estiri, Hossein; Zagheni, Emilio
    Abstract: Age is an important proxy for many life course trajectories. The relationship between energy consumption and age is complex and understudied. We evaluated the existence and determinants of an age-energy consumption profile in the U.S. residential sector, using microdata from four waves of the Residential Energy Consumption Survey (RECS) in 1987, 1990, 2005, and 2009. We constructed pseudo cohorts from Bayesian generalized linear model estimates to draw micro-profiles for energy consumption across the life course. Overall, we found that residential energy consumption increases over the life course. Much of the increase in energy consumption is due to housing size. Variations in the age-energy consumption micro-profiles can be described by concave and convex functions. In contrast to previous research that suggested that population aging would reduce energy demand, our results indicate that changing population age structure could amplify residential energy demand.
    Date: 2018–09–05
  11. By: Rainer Franz Kotschy
    Abstract: This paper empirically investigates the long-run effects of major health improvements on income growth in the United States. To isolate exogenous changes in health, the econometric model uses quasi-experimental variation in cardiovascular disease mortality across states over time. The results show that there is a causal link between health and income per person, and they provide novel evidence that health dynamics shape life-cycle incomes. Compared to previous generations, life-cycle income profiles slope more strongly at the beginning and at the end of work life, such that age becomes a more prominent determinant of income dynamics. The channels for this transformation include better health, higher educational attainment, and changing labor supply.
    Keywords: age, mortality, life expectancy, productivity, education, labor supply
    JEL: I15 J11 J24 J31 O40
    Date: 2019
  12. By: Friedrich Breyer; Normann Lorenz
    Abstract: 20 years ago, Zweifel, Felder and Meier (1999) established the by now famous “red-herring” hypothesis, according to which population ageing does not lead to an increase in per capita health care expenditures (HCE) because the observed positive correlation between age and health care expenditures (HCE) in cross-sectional data is exclusively due to the facts that mortality rises with age and a large share of HCE is caused by proximity to death. This hypothesis has spurned a large and still growing literature on the causes and consequences of growing HCE in OECD countries, but the results of empirical studies have been rather mixed. In light of the imminent population ageing in many of these countries it is still being discussed whether unfunded social health insurance systems will be sustainable, in particular as long as they promise to provide universal and unlimited access to medical care including the latest advances. In this paper, we present a critical survey of the empirical literature of the past 20 years on this topic and draw some preliminary conclusions regarding the policy question mentioned above. In doing so we distinguish four different versions of the red herring hypothesis and derive the logical connections between them. This will help to understand what empirical findings are suitable to derive predictions on the future sustainability of HCE.
    Keywords: health care expenditures, ageing, red-herring hypothesis
    JEL: H51 J11 I19
    Date: 2019
  13. By: Carrera, Leandro N.; Angelaki, Marina
    Abstract: Pension reform is one of the top public policy priorities in advanced industrialized countries due to population ageing and the significant weight of pension spending in governments’ budgets. As a result of these concerns European countries have engaged in varying degrees of pension reforms over the last three decades. The extant literature on pension reform focuses on structural, institutional and blame avoidance theories to explain how pension reform take place. Yet, how do different conditions combine to lead to significant pension reform outcomes? To answer this question we analyze a set of 48 pension reform cases in eight European countries since the late 1980s up until 2014 by using fuzzy set qualitative comparative analysis (fsQCA). Our main finding is that institutional, structural or blame avoidance theories cannot account by themselves for instances of significant pension reform. Rather, we find three pathways that combine structural and institutional conditions to lead to significant pension reform.
    Keywords: pension policy; reform; fsqca; politics; institutions
    JEL: E6 J1 R14 J01
    Date: 2019–11–04
  14. By: Martin Stepanek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: This study assesses macroeconomic and sectoral impacts of demographic changes in the Czech Republic, as a result of population ageing and international migration. To do so, it develops a unique dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model with detailed representation of individuals of different ages, educational attainment and occupations, as well as interrelations among industrial sectors in producing intermediate and final outputs. The numeric simulations show that the Czech economy will face a substantial reduction in its effective labour supply and changes in sectoral demand patterns, leading to an increase in unit labour costs and consequent shift towards more capitalbased production, price increase for the consumers, and a long-term decrease in demand particularly for agricultural products. While international migration may alleviate the pressure, the annual net immigration would need to increase by at least 8 thousand individuals on average in the 2020-2035 period and by 17 thousand individuals in the 2036-2050 period to offset the negative effects in the long term.
    Keywords: OLG, CGE, migration, labour force, economic impact
    JEL: C68 E27 J11
    Date: 2019–06
  15. By: John Armstrong; Cristin Buescu
    Abstract: In a collectivised pension fund, investors agree that any money remaining in the fund when they die can be shared among the survivors. We compute analytically the optimal investment-consumption strategy for a fund of $n$ identical investors with homogeneous Epstein--Zin preferences, investing in the Black--Scholes market in continuous time but consuming in discrete time. Our result holds for arbitrary mortality distributions. We also compute the optimal strategy for an infinite fund of investors, and prove the convergence of the optimal strategy as $n\to \infty$. The proof of convergence shows that effective strategies for inhomogeneous funds can be obtained using the optimal strategies found in this paper for homogeneous funds, using the results of [2]. We find that a constant consumption strategy is suboptimal even for infinite collectives investing in markets where assets provide no return so long as investors are "satisfaction risk-averse." This suggests that annuities and defined benefit investments will always be suboptimal investments. We present numerical results examining the importance of the fund size, $n$, and the market parameters.
    Date: 2019–11
  16. By: KAWATA Keisuke; YIN Ting; YOSHIDA Yuichiro
    Abstract: The paper estimates the preference for elder policy by using a large scale conjoint survey experiment. While the conjoint survey design allows us to evaluate multiple policy topics, the main interest is mixed elderly care. Methodologically, the paper proposes a parallel design for additional attributes, which allows us to identify the AMCE, conditional on the respondent's policy concern. Our results consistently show positive support for mixed elderly care.
    Date: 2019–11

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