nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒03‒02
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Pensions and household savings: cross-country heterogeneity in Europe By Roger, Muriel; Savignac, Frédérique; d’Addio, Anna
  2. Performance and Challenges of the Income Protection System for Older People in Ecuador By Apella,Ignacio Raul
  3. Sharing of longevity basis risk in pension schemes with income-drawdown guarantees By Ankush Agarwal; Christian-Oliver Ewald; Yongjie Wang
  4. The Employment Effects of the Social Security Earnings Test By Alexander M. Gelber; Damon Jones; Daniel W. Sacks; Jae Song
  5. Demographic Trends and Growth in Japan and the United States By Thomas Klitgaard; Preston Mui
  6. Beyond the direct impact of retirement: coordination by couples in preventive and risky behaviors By Steve Briand
  7. Inflation and Japan's Ever-Tightening Labor Market By Bianca De Paoli; Harry Wheeler; Thomas Klitgaard
  8. Working and disability expectancies at old ages: the role of childhood circumstances and education By Lorenti, Angelo; Dudel, Christian; Hale, Jo Mhairi; Myrskylä, Mikko
  9. More Gray, More Volatile? Aging and (Optimal) Monetary Policy By Baksa, Dániel; Munkácsi, Zsuzsa
  10. Observatorio Demográfico de América Latina y el Caribe 2019: Proyecciones de población = Demographic Observatory of Latin America and the Caribbean 2019: Population projections By -
  11. Does an increase in formal care affect informal care? Evidence among the French elderly. By Elsa Perdrix; Quitterie Roquebert

  1. By: Roger, Muriel; Savignac, Frédérique; d’Addio, Anna
    Abstract: We address the question of whether the heterogeneity in savings is partly due to differences in pension wealth across individuals and across countries, using a European harmonised wealth survey (HFCS) combined with estimates of pension wealth (OECD). First, we find significant displacement effects of mandatory pension wealth on non-pension financial wealth at the mean, and a statistically significant crowd-out estimate on the probability of owning real estate property. Second, there is heterogeneity in the mean savings offset depending on age, risk attitudes and country. Third, the offset follows different patterns along the non-pension wealth distribution across countries. JEL Classification: D31, D91, H55
    Keywords: life cycle, pensions, social security, wealth
    Date: 2020–02
  2. By: Apella,Ignacio Raul
    Abstract: The purpose of this work is to analyze the performance of the Ecuadorian pension system, its challenges, and available policy options. Therefore, the study analyzes coverage, financing sufficiency, and sustainability indicators that were created based on information from the Encuesta Nacional de Empleo, Desempleo y Subempleo (National Employment, Unemployment and Underemployment Survey) that was carried out over 2003-16. Likewise, actuarial simulations are made by using the World Bank pension reform options simulation toolkit. The findings show that, although in the latest 13 years there has been coverage extension, resulting from an increase in reported employment and an extension of noncontributory pensions, current coverage is still insufficient. In addition to the challenge posed to coverage extension, in the medium term, population aging would exert some pressure on financial sustainability that, within the current framework, would imply a deficit trend starting in the mid-2030s. However, some public policy areas, parametric as well as structural, have been identified that, together with an extension of noncontributory coverage, may provide a more supportive and sustainable scheme.
    Keywords: Inequality,Pensions&Retirement Systems,Social Protections&Assistance,Access of Poor to Social Services,Disability,Services&Transfers to Poor,Economic Assistance,Social Development&Poverty
    Date: 2019–08–13
  3. By: Ankush Agarwal; Christian-Oliver Ewald; Yongjie Wang
    Abstract: This work studies a stochastic optimal control problem for a pension scheme which provides an income-drawdown policy to its members after their retirement. To manage the scheme efficiently, the manager and members agree to share the investment risk based on a pre-decided risk-sharing rule. The objective is to maximise both sides' utilities by controlling the manager's investment in risky assets and members' benefit withdrawals. We use stochastic affine class models to describe the force of mortality of the members' population and consider a longevity bond whose coupon payment is linked to a survival index. In our framework, we also investigate the longevity basis risk, which arises when the members' and the longevity bond's reference populations show different mortality behaviours. By applying the dynamic programming principle to solve the corresponding HJB equations, we derive optimal solutions for the single- and sub-population cases. Our numerical results show that by sharing the risk, both manager and members increase their utility. Moreover, even in the presence of longevity basis risk, we demonstrate that the longevity bond acts as an effective hedging instrument.
    Date: 2020–02
  4. By: Alexander M. Gelber; Damon Jones; Daniel W. Sacks; Jae Song
    Abstract: We investigate the impact of the Social Security Annual Earnings Test (AET) on the employment decisions of older Americans. The AET reduces Social Security benefits by one dollar for every two dollars earned above the exempt amount. Using a differences-in-differences design, we find that the employment rate of those predicted to become subject to the AET decreases substantially relative to those not predicted to become subject to it. The point estimates suggest that the AET reduces the employment rate of Americans aged 63-64 by at least 1.2 percentage points.
    JEL: H55 J22 J26
    Date: 2020–01
  5. By: Thomas Klitgaard; Preston Mui (Research and Statistics Group)
    Abstract: Japan?s population is shrinking and getting older, with the population falling at a 0.2 percent rate this year and the working-age population (ages 16 to 64) falling at a much faster rate of almost 1.5 percent. In contrast, the U.S. population is rising at a 0.7 percent annual rate and the working-age population is rising at a 0.2 percent rate. So far, supporting the growing share of Japan?s population that is 65 and over has been the substantial increase in the share of working-age women entering the labor force. In contrast, U.S. labor force participation rates have been falling for both men and women. Japan?s labor market adjustments help explain the steady, albeit, modest growth in output per person despite the surge in the 65 and over cohort. Indeed, Japan has been able to match U.S. per capita growth since 2000.
    Keywords: demographic population labor force participation female Japan United States growth
    JEL: E2 F00 J00
  6. By: Steve Briand (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: This paper investigates changes in health behaviors upon retirement among couples using European SHARE survey data. Contrary to previous analyses studying retirement effect in a purely individual framework, or only measuring spillover effects, the econometric strategy controls for coordination by couples in health behaviors, also dealing with the endogeneity of both spouses' retirements. Using variations in official retirement ages for identification, estimations of simultaneous equations models confirm an always positive and statistically significant correlation between spouses' behaviors. Results show no global impact of retirement on smoking and obesity and limited impact on physical activities. However, retirement strongly reduce binge drinking behaviors. Exploring sources of heterogeneity, additional results show that individuals with low job physical burden have healthier lifestyles while results for other individuals are more mixed. Furthermore, with regard to spillover effects, women are particularly sensitive to men's retirement when they are retired themselves, while the inverse occurs for men. JEL codes: J26, I12, D19, C35.
    Keywords: Retirement,health behaviors,couple's coordination
    Date: 2020–02–05
  7. By: Bianca De Paoli; Harry Wheeler (Research and Statistics Group); Thomas Klitgaard
    Abstract: Japan offers a preview of future U.S. demographic trends, having already seen a large increase in the population over 65. So, how has the Japanese economy dealt with this change? A look at the data shows that women of all ages have been pulled into the labor force and that more people are working longer. This transformation of the work force has not been enough to prevent a very tight labor market in a slowly growing economy, and it may help explain why inflation remains minimal. Namely, wages are not responding as much as they might to the tight labor market because women and older workers tend to have lower bargaining power than prime-age males.
    Keywords: Japan inflation unemployment rate vacancies demographics labor force working-age population
    JEL: E2 F00 E5
  8. By: Lorenti, Angelo; Dudel, Christian (Max Planck Institute for Demographic Research); Hale, Jo Mhairi; Myrskylä, Mikko
    Abstract: The ability to work at older ages depends on health and education. Both accumulate starting very early in life. We assess how childhood disadvantages combine with education to affect working and health trajectories. Applying multistate period life tables to data from the Health and Retirement Study (HRS) for the period 2008-2014, we estimate how the residual life expectancy at age 50 is distributed in number of years of work and disability, by number of childhood disadvantages, gender, and race/ethnicity. Our findings indicate that number of childhood disadvantages is negatively associated with work and positively with disability, irrespective of gender and race/ethnicity. Childhood disadvantages intersect with low education resulting in shorter lives, and redistributing life years from work to disability. Among the highly educated, health and work differences between groups of childhood disadvantage are small. Combining multistate models and inverse probability weighting, we show that the return of high education is greater among the most disadvantaged.
    Date: 2020–02–18
  9. By: Baksa, Dániel; Munkácsi, Zsuzsa
    Abstract: The empirical and theoretical evidence on the impact of population aging on inflation is mixed, and there is no evidence regarding the volatility of inflation. Using advanced economies’ data and a DSGE-OLG model - a multi-period general equilibrium framework with overlapping generations - we find that aging leads to downward pressure on inflation and higher inflation volatility. Our paper shows how aging affects the short-term cyclical behavior of the economy and the transmission channels of monetary policy. We also examine the interplay between aging and optimal central bank policies. As aging redistributes wealth among generations, generations behave differently, and the labor force becomes more scarce. Our model suggests that aging makes monetary policy less effective, and aggregate demand less elastic to changes in the interest rate. Moreover, in grayer societies, central banks should react more strongly to nominal variables to compensate for higher inflation volatility.
    Keywords: aging; monetary policy transmission; optimal monetary policy; inflation targeting
    JEL: E31 E52 J11
    Date: 2020–02
  10. By: -
    Abstract: El Observatorio Demográfico 2019 reúne indicadores seleccionados de las estimaciones y proyecciones de población a nivel nacional de los 38 países de América Latina y el Caribe. Las estimaciones y proyecciones de los 20 países de América Latina fueron elaboradas por el CELADE-División de Población de la CEPAL junto con la División de Población de las Naciones Unidas (DPNU). Las cifras de los países del Caribe fueron elaboradas por la DPNU. Cabe señalar que la información correspondiente a las estimaciones y proyecciones de la población nacional de los países de América Latina y el Caribe se encuentra disponible en formato de hojas de cálculo en el sitio web del CELADE-División de Población de la CEPAL ( Adicionalmente, las cifras publicadas en este Observatorio, así como las ocho variantes adicionales que elabora la DPNU, se encuentran disponibles en el sitio web de la DPNU ( Además, se incluye un capítulo en el que se analizan las tendencias recientes de la población de la región. En las notas técnicas del documento se enumeran las fuentes de datos consideradas para cada país.
    Date: 2020–02–18
  11. By: Elsa Perdrix; Quitterie Roquebert
    Abstract: This paper investigates the causal impact of formal care use on informal care among formal care users. We propose an original instrument for formal care use, using local disparities in the price of formal care providers. Using the French survey CARE, we implement a two-part model to show the effect of formal care on the extensive and on the intensive margin of informal care. An exogenous increase in formal care is found to slightly decrease the probability to use informal care. Heterogeneity tests show this negative effect is mainly driven by caregiving for daily life activities, provided by women and secondary caregivers. At the intensive margin, however, informal care is not significantly affected by a formal care increase. Reforms extending the generosity of public policies for formal care use can thus be expected to have a limited effect on informal care use, concentrated on specific caregivers.
    Keywords: long term care, informal and formal care, instrumental variable.
    JEL: I10 J14 I18
    Date: 2019

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