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on Economics of Ageing |
| By: | Bernard M.S. van Praag; J. Peter Hop |
| Abstract: | Pensions may be provided for in a modern society by a mix of several methods, namely by voluntary individual savings, mandatory fully-funded occupational pension systems, mandatory social security financed by pay-as-you-go, and old-fashioned hoarding in cash. Here, we call the specific mixture of the four systems the pension composition. We assume that individual workers decide on their own individual savings, that the fully-funded occupational system is decided upon by the age cohort of the median worker (MW), and that the social security is decided upon by the median voter (MV). In this behavioral approach we distinguish between several social groups, where individuals belong to several groups simultaneously and where the interests of the different groups are only partly coinciding. For a given demography and interest rate, the joint result of the decisions of the different age cohorts is a Pareto equilibrium. For ease of exposition we assume that individual and collective pension savings are the only sources of capital supply. When capital supply equals demand from industry there is equilibrium in the capital market with a corresponding equilibrium interest rate. In this paper we assume a demography with one hundred age brackets and we investigate how changes in the birth rates, survival rates, and the retirement age affect the pension composition and the capital market equilibrium. Our conclusion is that the demographic effects are considerable not only for the resulting pension composition but also for macro-economic variables such as the wage rate, the interest rate, and the capital-income ratio. It follows that the pension composition in general and social security in particular is determined by the demography and cannot be modified at will as a long-term political instrument. We find that this is relevant for the present century, where birth and mortality rates in most western countries are steeply declining. |
| Keywords: | demography, funded pensions, unfunded pensions, social security, interest rate, overlapping generations, individual savings |
| JEL: | H55 H75 J10 J26 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8057&r=all |
| By: | Leonardo Villar; Alejandro Becerra; David Forero; María A. Ortega |
| Abstract: | La transición demográfica y el acelerado proceso de envejecimiento de la población en los países latinoamericanos implicará un crecimiento continuo del número de adultos mayores en situación de vulnerabilidad. El sistema pensional contributivo afronta una barrera estructural para ofrecer acceso a los trabajadores más allá del sector formal, lo cual es particularmente grave en países como Colombia, con una alta participación de la informalidad en su mercado laboral. En estos contextos, los mecanismos no contributivos y semi-contributivos son vehículos de política pública que están en la capacidad de ofrecer protección económica a la vejez y aumentar la cobertura de la población mayor. En este documento se analizan las características que debe tener un beneficio no contributivo bien diseñado, que aumente la cobertura pero no desincentive la cotización al sistema contributivo de seguridad social, a través de tres aspectos: el valor del subsidio, su cobertura o focalización, y su interacción con los demás pilares. A partir de las mejores prácticas y la experiencia internacional de Chile, Brasil, Bolivia y Nueva Zelanda, se hace una propuesta de reforma al programa Colombia Mayor resaltando la forma en que éste puede complementarse con el pilar semi-contributivo de los Beneficios Económicos Periódicos – BEPS. |
| Keywords: | Sistemas de Pensiones, Pensiones de Jubilación, Reforma Pensional, Sistema de Protección Social, Adulto Mayor, Colombia Mayor, Beneficios Económicos Periódicos, BEPS, Cobertura, Costos FiscalesNo Contributivo, Política Pública, Protección Económica, Seguridad Social, Vejez, Colombia. Pension Schemes, Retirement Pensions, Benefit Plans, Pension System, Non-contributory Pensions, Matching Contributions, Coverage, Fiscal Costs, Multi-pillar System, Retirement Pensions, Public Policy, Social Security, Old Age |
| Date: | 2020–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:col:000123:017935&r=all |
| By: | Lorenz, Svenja; Pfister, Mona; Zwick, Thomas |
| Abstract: | This paper shows that increasing the normal retirement age and introducing pension deductions for retirement before normal retirement age in Germany did not prolong employment of older men. The reason for this surprising result is that employers encouraged their employees to use the bridge options unemployment or partial retirement instead of the early retirement option for the long-term insured. Bridge options allowed employers to terminate employment considerably earlier than the pension for long-term insured. Employers however had to compensate their employees for the substantially higher costs of the bridge options. Therefore mainly employers with high employment adaption costs induced employees to use a bridge option during the implementation phase of the pension reform. |
| Keywords: | cohort-specific pension reform,early retirement,partial retirement,unemployment,labor supply,labor demand |
| JEL: | J14 J18 J22 J26 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20007&r=all |
| By: | Danilo Cavapozzi (Department of Economics, University Of Venice Cà Foscari); Chiara Dal Bianco (University of Padua) |
| Abstract: | Inability to cope with Information and Communication Technology (ICT) might represent a threat for older individuals’ social inclusion. This paper analyses the effect of retirement on the familiarity with ICT of older individuals. To account for the potential endogeneity of retirement with respect to ICT knowledge we instrument retirement decision with the age-eligibility for early and statutory retirement pension schemes. Using data from the Survey of Health Ageing and Retirement in Europe we show that retirement reduces the computer literacy and the frequency of internet utilization for men and women. This effect is heterogeneous for women with respect to their propensity to opt for early or statutory retirement schemes. The exit from the labour market does not reduce ICT familiarity for the former, but it does for the latter. The negative retirement effect on ICT knowledge is stronger for white-collar workers, whose occupations require a more intense use of these skills as compared with blue-collar jobs. |
| Keywords: | Computer use, internet, retirement, instrumental variables, compliers |
| JEL: | J14 J21 J24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2020:01&r=all |
| By: | Maaike Diepstraten (CPB Netherlands Bureau for Economic Policy Analysis); Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Bram Wouterse (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | We examine the impact of the accessibility of an older individual’s house on her use of nursing home care. We link administrative data on the accessibility of all houses in the Netherlands to data on long-term care use of all older persons from 2011-2014. We find that older people living in more accessible houses are less likely to use nursing home care. The effects increase with age and are largest for individuals aged 90 or older. The effects are stronger for people with physical limitations than for persons with cognitive problems. We also provide suggestive evidence that older people living in more accessible houses substitute nursing home care by home care. |
| JEL: | I11 I13 H51 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:397.rdf&r=all |
| By: | Egbert Jongen (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis); Tilbe Atav (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | The increase in the statutory retirement age reduced the number of pensioners. About one third of this drop results in additional employment. Net savings for the government are about 80% of direct savings on retirement (AOW) benefits. These are the main findings of the discussion paper ‘The effects of the increase in the retirement age in the Netherlands’. In this paper CPB studies the effects of the recent increases in the statutory retirement age. In the empirical analysis we use differences-in-differences, looking at the labour market outcomes of different birth cohorts that face different statutory retirement ages, and administrative data. The findings of this research have been used in the background document (in Dutch) `Arbeidsparticipatie en gewerkte uren tot en met 2060’. |
| JEL: | J14 J26 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:408.rdf&r=all |
| By: | Richard Peach; Joseph Tracy; Andrew F. Haughwout |
| Abstract: | The homeownership rate?the percentage of households that own rather than rent the homes that they live in?has fallen sharply since mid-2005. In fact, in the second quarter of 2016 the homeownership rate fell to 62.9 percent, its lowest level since 1965. In this blog post, we look at underlying demographic trends to gain a deeper understanding of the large increase in the homeownership rate from 1995 to 2005 and the subsequent large decline. Although there is reason to believe that the homeownership rate may begin to rise again in the not-too-distant future, it is unlikely to fully recover to its previous peak levels. This is a disconcerting finding for those who view homeownership as an integral part of the American Dream and a key component of income security during retirement. |
| Keywords: | Headship Rate; age-specific population growth; Homeownership Rate |
| JEL: | R3 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87178&r=all |
| By: | Nicole Bosch (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | This paper investigates the incidence of pension contributions using a unique longitudinal administrative dataset covering individual employees at different pension funds in the Netherlands for the period 2006-2012. With a panel-based difference-indifference approach, we estimate the response of wages, labor cost and hours worked to both marginal and average contribution rates, which provides us insight into the mechanisms underlying incidence. In contrast to the standard demand and supply model of labor we fi nd that average contribution rates matter more for incidence than marginal rates. Moreover, we fi nd that a substantial part of the burden (some 70%) is borne by employers. This is in line with the statutory contribution rates (on average 70-30 for employers and employees) but could also be explained by other factors such as non-salience or bargaining. Together our findings indicate that incidence is best explained by a bargaining model of wages, at least in the short and medium term considered in our analysis. |
| JEL: | D91 G11 G23 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:388.rdf&r=all |
| By: | Murray, Cameron |
| Abstract: | Economically, there can be only one retirement income system. This system allocates goods and services at the time they are needed to retirees who do not have alternative non-work income sources to sustain a socially acceptable level of welfare. Superannuation does not fulfil the requirements of a retirement income system. Instead, it is best thought of as a growth-sapping, resource-wasting, tax-advantaged asset purchase scheme for the wealthy, which may ultimately have little effect on reducing reliance on the age pension system. The age pension vastly outperforms superannuation as a retirement income system across three key areas: macroeconomic cost, macroeconomic efficiency, and fairness. Vested interests perpetuate economic myths to avoid scrutiny of the superannuation system, such as 1) that the age pension system is financially constrained, 2) that pre-funding via asset purchases increases the capacity of a retirement income system, and 3) that superannuation is a payment from employers rather than from wages. Scrapping the superannuation system would massively improve Australia’s economic performance, and thus the performance of our retirement income system, the age pension. This can be done by forcing employers to pay what is now superannuation directly into wage accounts and allowing all super fund holders to withdraw up to a maximum amount each year during a transition period, after which all super balances will receive no special tax treatment. The age pension system could also be enhanced in both size (payment rates, including rent assistance) and scope (reducing the age that people qualify from 67 to 60), vastly increasing the fairness and efficiency of Australia’s retirement income system and economy as a whole. |
| Date: | 2020–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:957kz&r=all |
| By: | Murray, Cameron |
| Abstract: | Population ageing due to longevity is one of the greatest successes of the modern era. However, it is widely thought to dramatically reduce workforce participation and overall output resulting in significant economic costs. This widely held view is wrong. Ageing countries have higher economic growth and the improved health and longevity of older people increases their economic contributions. High immigration is also thought to combat population ageing and be a remedy for these non-existent costs of ageing. This is wrong. Low immigration can affect the age structure by helping to stabilise the population, but high immigration has almost no long-run effect besides increasing the total population level. This creates bigger problems in the future. It is also widely thought that simply investing in infrastructure will accommodate high immigration and population growth at little cost. This too is wrong. Diseconomies of scale are a feature of rapid infrastructure expansion due to (1) the need to retrofit built-up cities, (2) the dilution of irreplaceable natural resources, and (3) the scale of investment relative to the stock of infrastructure. This ageing-immigration-infrastructure story is wrong on all three of its major points. Population ageing should be seen as the successful result of improvements in medical and health practices that have improved longevity and fostered a long-lived and economically productive society. |
| Date: | 2020–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:s3grd&r=all |
| By: | Ayşegül Şahin; Christian Grisse (Federal Reserve Bank of Richmond); Thomas Klitgaard |
| Abstract: | The employment-to-population ratio?the share of adults that are employed?has historically been much higher in the United States than in Europe. However, the gap narrowed dramatically in the last decade and had almost disappeared by the end of 2009. In this post, we show that the narrowing employment gap is due to three factors: declining U.S. employment rates across almost all age-gender groups; more women working in Europe, particularly prime-age and older workers; and rising employment for older European men. We link most of these shifts to the influence of underlying trends (many reflecting changes in European social policies) and to differences in labor market performance during the Great Recession. |
| Keywords: | Europe United States employment rate |
| JEL: | F00 J00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86758&r=all |
| By: | Bercholz, Maxime; Bergin, Adele; Callan, Tim; Garcia Rodriguez, Abian; Keane, Claire |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp640&r=all |
| By: | Kureishi, Wataru; Paule-Paludkiewicz, Hannah; Tsujiyama, Hitoshi; Wakabayashi, Midori |
| Abstract: | We study whether and how time preferences change over the life cycle, exploiting representative long-term panel data. We estimate the age patterns of discount rates from age 25 to 80. In order to identify age effects, we have to disentangle them from cohort and period factors. We address this identification problem by estimating individual fixed effects models, where we substitute period effects with determinants of time preferences that depend on calendar years. We find that discount rates decrease with age and the decline is remarkably linear over the life cycle. |
| Keywords: | Time Preferences,Preference Stability,Age,Discount Rates |
| JEL: | D01 D12 D91 J10 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:267&r=all |