nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒01‒13
seventeen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Pensions in Europe: what perspectives? By Gérard-François Dumont
  2. Financial stability of pension system in the European Union member states By Sabina Hod?i?; Lucija Rogi? Duman?i?; Emira Be?i?
  3. Transforming public pensions: A mixed scheme with a credit granted by the state By M. Carmen Boado-Penas; Julia Eisenberg; Ralf Korn
  4. Rethinking universalism: Older-age international migrants and social pensions in Latin America and the Caribbean By Cruz-Martinez, Gibran
  5. Trends in Health and Mortality Inequalities in the United States By Péter Hudomiet; Michael D. Hurd; Susann Rohwedder
  6. Older‐Age Social Pensions and Poverty: Revisiting Assumptions on Targeting and Universalism By Cruz-Martinez, Gibran
  7. The Impact of Bequest Motives on Retirement Behavior in Japan: A Theoretical and Empirical Analysis By Charles Yuji Horioka; Emin Gahramanov; Aziz Hayat; Xueli Tang
  8. Does the Life Cycle Hypothesis Apply in the Case of Japan? By Charles Yuji Horioka
  9. What Does a Job Candidate’s Age Signal to Employers? By Hannah Van Borm; Ian Burn; Stijn Baert
  10. La pension libre complémentaire pour salariés (PLCS) en Belgique By Sabbadini, Pierre M.
  11. Demographic Transition and Inflation in Emerging Economies By M. Koray Kalafatcilar; M. Utku Ozmen
  12. Aging, Factor Prices and Capital Flows By Andrea BONFATTI; Selahattin Ä°MROHOROÄžLU; KITAO Sagiri
  13. Sensitivity of Estimation Precision to Moments with an Application to a Model of Joint Retirement Planning of Couples By Bo E. Honoré; Thomas Jorgensen; Áureo de Paula
  14. Labor productivity, labor supply of the old, and economic growth By Chen, Hung-Ju; Miyazaki, Koichi
  15. The Automatisation Challenge Meets the Demographic Challenge: In Need of Higher Productivity Growth By Sandra Leitner; Robert Stehrer
  16. Factor of Social Growth of the Population at Japanese Local Countryside area By takashi nakamura; Daito Ishikawa
  17. Long Term Care Insurance with State-Dependent Preferences By De Donder, Philippe; Leroux, Marie-Louise

  1. By: Gérard-François Dumont (ENeC - Espaces, Nature et Culture - CNRS - Centre National de la Recherche Scientifique - UP4 - Université Paris-Sorbonne)
    Abstract: Analyzing pension prospects in Europe first requires taking the current measure and then examining the projections. This makes it possible to specify unavoidable parameters. To overcome the issue of pension funding, different solutions can be proposed. But, we must study them taking into account essential elements.
    Abstract: Analyser les perspectives des retraites en Europe nécessite d'abord d'en prendre la mesure actuelle, puis d'en examiner les projections. Cela permet de préciser des paramètres incontournables. Pour surmonter la question du financement des retraites, différentes solutions peuvent être proposées. Mais, il faut les étudier en tenant compte d'éléments essentiels.
    Keywords: pension,retirement,Europe,division,distribution,capitalization,dependency ratio,demography,population,mortality,Bismarck,life expectancy,assets,population aging: aging,retraite,répartition,capitalisation,taux de dépendance,démographie,mortalité,espérance de vie,actifs,vieillissement
    Date: 2019–12
  2. By: Sabina Hod?i? (Faculty of Tourism and Hospitality Management, University of Rijeka); Lucija Rogi? Duman?i? (Faculty of Economics and Business, University of Zagreb); Emira Be?i? (Croatian Bureau of Statistics)
    Abstract: The pension systems in European Union member states are very diverse, due to traditions how to provide retirement income, and to phases of the reform process. This system is also very important in the context of the social security of every individual or the society in which is settled. Since the system is influenced by changes in demographic fluctuations, living conditions, economic growth and so forth, it is very challenging for every European Union member state to keep the financial stability. To solve that problem, this paper aims to examine the financial stability of pension system in the European Union member states in the period 2003-2018. To obtain empirical results panel data analysis has been applied. The results showed that countries with higher old-age dependency ratio, life expectancy at age 65, replacement rate and poverty rate and public debt will also have higher pension expenditure, in average, while factors related to labour market negatively affects the pension spending.
    Keywords: pension system, pension expenditure, financial stability, panel model, European Union
    JEL: H55 J21 J26
    Date: 2019–10
  3. By: M. Carmen Boado-Penas; Julia Eisenberg; Ralf Korn
    Abstract: Birth rates have dramatically decreased and, with continuous improvements in life expectancy, pension expenditure is on an irreversibly increasing path. This will raise serious concerns for the sustainability of the public pension systems usually financed on a pay-as-you-go (PAYG) basis where current contributions cover current pension expenditure. With this in mind, the aim of this paper is to propose a mixed pension system that consists of a combination of a classical PAYG scheme and an increase of the contribution rate invested in a funding scheme. The investment of the funding part is designed so that the PAYG pension system is financially sustainable at a particular level of probability and at the same time provide some gains to individuals. In this sense, we make the individuals be an active part to face the demographic risks inherent in the PAYG and re-establish its financial sustainability.
    Date: 2019–12
  4. By: Cruz-Martinez, Gibran (CSIC)
    Abstract: This article criticises the social policy literature for equating universalism to the universal coverage of citizens. The current so-called ‘universal’ social protection systems guarantee social citizen rights, while the revisited truly universalism guarantees social human rights for everyone. Crisp-set qualitative comparative analysis (csQCA) is used to map and track the level of exclusiveness or inclusiveness into social pensions in the existing 30 social pension programmes on 28 Latin American and Caribbean (LAC) countries. The article examines the various paths of eligibility requirements in social pensions conditioning three specific outcomes: (1) access for every older-age individual (truly universal), (2) access for every category of immigrant (no targeting by citizenship or residency) and (3) access for older-age immigrants with legal resident status (targeting by residency but not by citizenship). The research makes several contributions. First, it offers a useful inventory of the eligibility requirements for access to the 30 social pensions in LAC. Second, it proposes an analytical framework to redefine universalism after considering the migration-social policy nexus. Contrary to what the literature claims, there are no universal social pensions in the region. Third, the analysis indicates that only in two countries, Cuba and Jamaica, social pensions have immigrant-friendly targeting rules, requiring neither citizenship nor any length of residency to become a beneficiary. A total of 12 countries require citizenship and 24 of them a certain number of years of residency. Moreover, the overwhelming majority of social pensions are means-tested. Finally, the csQCA allows identifying patterns of targeting mechanisms and is used to propose five exploratory regimes of inclusionary social pensions. The article calls for protected international mobility of the older-age population in the form of a truly universalistic system in which the entire aged population has the right to a social pension. Only then, countries would truly adhere to Article 22 of the Universal Declaration of Human Rights.
    Date: 2019–09–13
  5. By: Péter Hudomiet (RAND); Michael D. Hurd (RAND); Susann Rohwedder (RAND)
    Abstract: Recent literature has documented a widening gap in mortality in the United States between individuals with high socioeconomic status (SES) and low SES. An important question is whether this trend will continue. In this paper we document trends and inequalities in the health status at ages 54 to 60 of individuals born between 1934 and 1959. We do so by using detailed subjective and objective measures of health in the Health and Retirement Study to examine contributors to mortality inequality and to forecast life expectancy. We found that the health of individuals 54 to 60 years old has generally declined in recent years. In particular, we found large increases in obesity rates, notable increases in diabetes and reported levels of pain, and lower self-reported health and subjective survival probabilities. We also found strong evidence for increasing health inequalities, as the health of individuals in these cohorts with high SES remained largely stable while that for individuals with low SES declined. When we forecast life expectancies using these predictor variables, as well as gender- and SES-specific time trends, we predict overall life expectancy to increase further. However, the increase is concentrated among high SES individuals, suggesting growing mortality inequality. Results are similar among men and women.
    Date: 2019–09
  6. By: Cruz-Martinez, Gibran (CSIC)
    Abstract: Whether social protection benefits should be assigned to all (universal) or kept only for those who meet specific criteria (targeting) remains one of the most contentious questions in social policy research. The purpose of this article is to revisit three assumptions on the two main social policy options for the provision of social benefits to older persons. Each assumption is assessed through counterfactual reasoning using a combination of literature review and statistical analysis with a global perspective. The study finds that (i) 79 countries would be economically able to shift from targeted noncontributory pensions to basic universal noncontributory pensions with less than 1.2 per cent of the respective national gross domestic products; (ii) 16 countries have means‐tested/region‐tested noncontributory pensions more expensive than a hypothetical basic universal social pension; (iii) an arbitrary threshold of “economic development” is not a limitation for implementing social pensions; and (iv) at least 17 countries with relatively low economic development have successfully implemented social pensions without means targeting. Therefore, contrary to what several international organizations and scholars have argued, universal social pensions are politically and economically viable and efficient strategies to alleviate income poverty.
    Date: 2019–07–30
  7. By: Charles Yuji Horioka (Research Institute for Economics and Business Administration, Kobe University, Osaka University, Asian Growth Research Institute, and National Bureau of Economic Research); Emin Gahramanov (American University of Sharjah); Aziz Hayat (Deakin University); Xueli Tang (Deakin University)
    Abstract: In this paper, we conduct a theoretical and empirical analysis of the impact of bequest motives on the work and retirement behavior of households in Japan using micro data from the Preference Parameters Study of Osaka University. Our empirical findings are consistent with our theoretical model and show that respondents with an altruistic or strategic/exchange bequest motive work more at the intensive margin than those without any bequest motive but that respondents with a strategic or exchange bequest motive work less at the extensive margin (i.e., retire earlier) than those without any bequest motive. Our findings for the strategic or exchange motive suggest that respondents with such a motive tend to work harder than others before they retire so that they can earn more, leave a larger bequest to their children, and elicit more care from them but that they tend to retire earlier than others so that they can start receiving care for themselves and their spouses from their children sooner. A policy implication of our findings is that the exchange of bequests for the care of parents by children may be very sensitive to the inheritance tax framework.
    Keywords: Altruistic bequest motive, Bequest motives, Exchange bequest motive, Inheritances, Japan, Labor supply, Retirement, Strategic bequest motive, Working hours
    JEL: D64 J14 J22 J26
    Date: 2019–12
  8. By: Charles Yuji Horioka (Research Institute for Economics and Business Administration, Kobe University, Osaka University, Asian Growth Research Institute, and National Bureau of Economic Research)
    Abstract: In this paper, we first discuss the simplest version of the life cycle model, which is arguably the most widely used theoretical model in economics, and then consider whether or not the life cycle model applies in the case of Japan using a variety of methodologies and data and placing emphasis on the author’s own research. In particular, we survey the literature on the impact of the age structure of the population on the saving rate, on the saving behavior of retired households, on saving motives, on the importance of bequests, on bequest motives, on the prevalence of altruism, and on the importance of borrowing (liquidity) constraints and show that almost all previous research suggests that the life cycle model is more applicable in Japan than it is in other countries. Thus, the answer to the question posed in the title of this paper is an unqualified “yes.” Finally, we discuss the policy implications of our finding that the life cycle model applies in the case of Japan.
    Keywords: Age structure of the population, Altruism, Bequests, Bequest motives, Borrowing constraints, Consumption, Elderly, Households, Household saving, Inheritances, Intergenerational transfers, Life cycle hypothesis, Life cycle model, Liquidity constraints, Old age, Retirees, Saving, Saving motives, Selfishness
    JEL: D12 D14 D64 E21 J14
    Date: 2019–12
  9. By: Hannah Van Borm; Ian Burn; Stijn Baert (-)
    Abstract: Research has shown that hiring discrimination is a barrier for older job candidates in many OECD countries. However, little research has delved into why older job candidates are discriminated against. Therefore, we have conducted an online scenario experiment involving recruiters to empirically investigate 15 potential stigma related to older age drawn from a systematic review of the literature. We found that older age particularly signals to recruiters that the applicant has lower technological skill, flexibility, and trainability levels. Together, these perceptions explain about 41% of the effect of age on the probability of being invited to a job interview. In addition, we found that the negative association between age and invitation probability is smaller when recruiters work for firms with a higher percentage of older employees.
    Keywords: hiring, statistical discrimination, age, stereotypes
    JEL: J71 J14 J24 J23
    Date: 2019–12
  10. By: Sabbadini, Pierre M. (Université Catholique de Louvain / Catholic University of Louvain (UCLouvain) (Wallonia, Belgium))
    Abstract: This contribution explains the genesis and the functioning of the supplementary free pension for employees or "PLCS" In Belgium. Since March 2019, the PLCS has allowed employees in the private sector to build up an additional pension linked to their professional activity in the absence of (sufficient) provisions in this regard within their company. This contribution then provides a critical analysis of the characteristics of the PLCS in relation to the mechanisms existing within the second and third pillars of pensions.
    Date: 2020–01–03
  11. By: M. Koray Kalafatcilar; M. Utku Ozmen
    Abstract: Demographic transition has been shaping the age structure of emerging countries, leading to huge swings between the working-age and the dependent population. Given the different labor income and consumption behaviors of these groups, the aggregate variables are affected even though personal behaviors remain unchanged. In this paper, we focus on one of these macroeconomic variables: inflation. First, we aim to clarify the inflationary impact by age cohort and try to measure the overall effect. Our empirical findings suggest that while the dependent population (net dis-savers) is associated with inflationary pressures, the working-age population (savers) is associated with deflationary pressures. Combining the demographic developments of last two decades with our empirical findings, we conclude that the shift of age distribution towards the working-age population has generated disinflationary effects in emerging countries and helped them leave behind the era of high-inflation.
    Keywords: Demography, Life-cycle behavior, Inflation
    JEL: J11 E31
    Date: 2019
  12. By: Andrea BONFATTI; Selahattin Ä°MROHOROÄžLU; KITAO Sagiri
    Abstract: Although populations are aging in all economies, projections for coming decades describe differential timing and extent of aging. Advanced economies are aging earlier and faster than the developing and emerging economies, with Japan leading the way. In a world with integrated capital markets, these differences in demographic trends, with different social security environments, will have differential implications on national or regional capital accumulation, investment, factor prices and capital flows across borders. This paper develops a general equilibrium model of the world economy under imperfect capital mobility, populated by overlapping generations of individuals in three regions: the High-income (HI) and Middle-income (MI) regions and Japan. We compute equilibrium transitions from the 1990s toward a future balanced growth path and numerically characterize the first few decades. Our findings highlight the quantitative importance of the differential aging mechanism in studying capital flows across regions. In particular, we find that the projected decline in national saving in Japan, not matched with a similar decline in domestic investment, will lead to a reversal of capital flows into Japan, which will become a net borrower before 2050. The reason for Japan's attractiveness for foreign capital from the MI region is the initially rising but soon flattening path of its capital labor ratio while the MI region experiences a monotonically increasing capital labor ratio. This projection, coupled with the slow speed with which the MI region's TFP catches up with that of Japan, necessitates an outflow of capital from the MI region to the HI region and Japan in order for the world capital market to clear.
    Date: 2019–12
  13. By: Bo E. Honoré (Institute for Fiscal Studies and Princeton); Thomas Jorgensen (Institute for Fiscal Studies and University of Copenhagen); Áureo de Paula (Institute for Fiscal Studies and University College London)
    Abstract: This paper introduces measures for how each moment contributes to the precision of the parameter estimates in GMM settings. For example, one of the measures asks what would happen to the variance of the parameter estimates if a particular moment was dropped from the estimation. The measures are all easy to compute. We illustrate the usefulness of the measures through two simple examples as well as an application to a model of joint retirement planning of couples. We estimate the model using the UK-BHPS, and we ?nd evidence of complementarities in leisure. Our sensitivity measures illustrate that the precision of the estimate of the complementarity is primarily driven by the distribution of the di?erences in planned retirement dates. The estimated econometric model can be interpreted as a bivariate ordered choice model that allows for simultaneity. This makes the model potentially useful in other applications.
    Date: 2019–07–05
  14. By: Chen, Hung-Ju; Miyazaki, Koichi
    Abstract: This study develops an overlapping generations model with human capital accumulation and endogenous labor supply of the old to examine the effects of an old agent's labor productivity on labor supply, educational investments, and economic growth. We present a unique existence of the balanced-growth-path (BGP) equilibrium and find that a rise in an old agent's labor productivity induces more labor supply of the old. Moreover, the growth rate at the BGP equilibrium is hump-shaped in an old agent's labor productivity. As an old agent's labor productivity grows, this growth rate first increases then decreases, which implies that there is no clear negative relationship between an old agent's labor productivity and economic growth.
    Keywords: Human capital; OLG; Labor productivity; Labor supply of the old
    JEL: J24 J26 O11
    Date: 2019–12–03
  15. By: Sandra Leitner; Robert Stehrer
    Abstract: The future of employment and labour demand growth in the dawning era of intelligent robots and other new technologies is heavily debated. This paper argues that this discussion needs to be complemented by a second trend which has been unfolding in Europe for some time, namely the demographic decline. Various demographic scenarios for many EU countries point towards a significant decline in the working-age population in the near future which puts the functioning of labour markets at risk as labour shortages become increasingly more likely and subsequently threaten economic growth. In this context, this paper gives an overview of recent trends in the growth of real value added, labour productivity and employment as well as of demographic scenarios. Based on these trends, the hypothetical increase of labour productivity growth which would be required to keep real GDP growth at its current level, despite the projected reduction in the workforce, is calculated. Results show that the hypothetical labour productivity growth rate required is about one percentage point higher than the actual growth rate, suggesting that the current labour productivity growth rate in the EU needs to more than double. A complementary econometric analysis shows that even though robots exhibit a positive impact on labour productivity growth, this is not (yet) strong enough to close the gap between the recent and the hypothetical labour productivity trend growth rate which would be required.
    JEL: J11 O33 O47
    Date: 2019–10
  16. By: takashi nakamura (Associate Professor, Tokyo City University); Daito Ishikawa (Suncoh Consultants Co.)
    Abstract: Japan has been facing problems related to decline of population and aging. Especially, many municipalities in local countryside area are continuously population decreasing. In spite of this, municipalities of the social growth of the population increase exist. This study targets social growth of the population at Japanese Local Countryside area. The study analyzed population social increase or decrease according to 1896 municipalities of all over Japan from 2010 to 2015. Thereafter, we squeezed the municipalities of social growth of the population without three major metropolitan areas (Tokyo, Nagoya and Osaka) and research the factor of social population increase. As a result the following points were demonstrated. A. There are many municipalities of the social growth of the populations around a local central city. These municipalities are characterized with a bedroom community to local central city. B. There are seen municipalities of the Social growth of the population at a resort and a sightseeing spot. There are many immigrants of the foreigner in such an area.C. There is a municipality of the social growth of the population by a company invitation with the creation of the industrial area.D. There are some local mountainous municipalities of social growth of the population by immigrant invitation measures such as cash supply for the marriage, delivery, the entrance to school, a little less than 5 million yen subsidy for house newly building, instruction by the expert to agriculture and forestry marine products industry beginner, etc.
    Keywords: Regional Development, Social Growth of the Population, Immigrant invitation measures
    JEL: O20 R58 Q01
    Date: 2019–10
  17. By: De Donder, Philippe; Leroux, Marie-Louise
    Abstract: We study the demand for actuarially fair Long Term Care (LTC hereafter) insurance in a setting where autonomous agents only care for daily life consumption while dependent agents also care for LTC expenditures. We assume that dependency decreases the marginal utility of daily life consumption. We rst obtain that some agents optimally choose not to insure themselves, while no agent wishes to buy complete insurance. We then show that the comparison of marginal utility of income (as opposed to consumption) across health states depends on (i) whether agents do buy LTC insurance at equilibrium or not, (ii) the comparison of the degree of risk aversion for consumption and for LTC expenditures, and (iii) the income level of agents. Our results then oer testable implications that can explain (i) why few people buy Long Term Care insurance and (ii) the discrepancies between various empirical works when measuring the extent of state-dependent preferences for LTC.
    Keywords: Long Term Care Insurance Puzzle; Actuarially Fair Insurance; Risk Aversion
    JEL: D11 I13
    Date: 2019–12

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