nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒06‒15
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. ain: The Effect of Pension Subsidies on the Retirement Timing of Older Women By Han Ye
  2. Differentiating Retirement Age to Compensate for Health Differences By Vincent Vandenberghe
  3. Individual Attitudes towards Immigration in Aging Populations By Rana Comertpay; Andreas Irmen; Anastasia Litina
  4. Is Rising Household Debt Affecting Retirement Decisions? By Butrica, Barbara A.; Karamcheva, Nadia S
  5. Ex Ante Inequality of Opportunity in Health among the Elderly in China: A Distributional Decomposition Analysis of Biomarkers By Ding, Lanlin; Jones, Andrew M.; Nie, Peng
  6. Health versus Wealth: On the Distributional Effects of Controlling a Pandemic By Andy Glover; Jonathan Heathcote; Dirk Krueger; Jose Victor Rios-Rull
  7. EDGE-M3: A Dynamic General Equilibrium Micro-Macro Model for the EU Member States By Diego d’Andria; Jason DeBacker; Richard W. Evans; Jonathan Pycroft; Wouter van der Wielen; Magdalena Zachlod-Jelec
  8. Death, Demography and the Denominator: New Influenza-18 Mortality Estimates for Ireland By Colvin, Christopher L.; McLaughlin, Eoin
  9. Does Early Access to Pension Wealth Improve Health? By Kim, Seonghoon; Koh, Kanghyock
  10. Optimal Investing after Retirement Under Time-Varying Risk Capacity Constraint By Weidong Tian; Zimu Zhu
  11. The macroeconomic determinants of Covid19 mortality rate and the role of post subprime crisis decisions By Olivier Damette; Stéphane Goutte
  12. Can Older Workers Work from Home? By Anqi Chen; Alicia H. Munnell

  1. By: Han Ye
    Abstract: I estimate the effect of additional pension benefits on women’s retirement decisions by examining a German pension subsidy program. The subsidies have a kinked relationship with the recipients’ past pension contributions, creating a sharply different slope of benefits for similar women on either side of the kink point. I find that a 100 euro increase in the monthly benefit induces female recipients to claim their pensions six months earlier. Recipients also adjust their labor supply by using unemployment insurance (UI) as a stepping stone to retirement and by reducing time spent in marginal employment. A back-of-the-envelope calculation suggests that the ratio of behavioral to mechanical costs for this subsidy program is 0.25, which is smaller than that of other income support programs.
    Keywords: pension subsidy, pension generosity, retirement, regression kink design
    JEL: H55 J18 J21 J26
    Date: 2020–05
  2. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Population ageing in Europe calls for an overall rise of the age of retirement. However, most observers agree that the latter should be differentiated to account for individuals' heterogeneous health when they grow older. This paper explores the relevance of this idea using European SHARE panel data. It first quantifies the health gradient across European countries, and within each of them across sociodemographic groups (i.e. genderXeducation) at typical retirement age. It then estimates the degree of retirement age differentiation that would be needed to equalise expected health at the moment of retirement. Results point at the need of a very high degree of differentiation to equalise expected health, across and within European countries. But the paper also shows that systematic retirement age differentiation would fail to match a significant portion of the full distribution of health status. In a world synonymous with systematic health-based retirement age differentiation, there would still be a lot of what health economists call F-mistakes ([F]ailure of treatment ie. no retirement for people in poor health) and E-mistakes ([E]xcessive treatment ie. people in good health going for retirement).
    Keywords: Ageing, Health, Retirement Policy
    JEL: J14 I1 J26
    Date: 2020–04–14
  3. By: Rana Comertpay (CREA, Université du Luxembourg); Andreas Irmen (CREA, Université du Luxembourg); Anastasia Litina (University of Ioannina, Greece)
    Abstract: This research empirically establishes the hypothesis that the process of population aging in a society as a whole affects the attitudes of its members towards immigration. Hence, an aging social environment exerts an effect on the attitudes of individuals towards immigration after accounting for their age and other individual characteristics. We test this hypothesis in a multilevel analysis of individuals living in 25 European OECD countries over the period 2002-2017. Our measure of “societal population aging” is the old-age dependency ratio. “Attitudes” are taken from immigration related questions in eight consecutive rounds of the European Social Survey. For these attitudes we find non-linear, U-shaped relationships. Hence, the effect of societal population aging on individual attitudes towards immigration is negative in young societies and positive in old ones.
    Keywords: Population Aging, Attitudes, Immigration, Culture.
    JEL: J1 Z1
    Date: 2019
  4. By: Butrica, Barbara A. (Urban Institute); Karamcheva, Nadia S (Congressional Budget Office)
    Abstract: Household debt among older Americans approaching retirement has increased dramatically over the past couple of decades. Older households have become increasingly more indebted and more leveraged. While mortgages remain the predominant type of debt among households in their 50s and 60s, in recent years, student loan debt has also risen among these households. Using household survey data to examine how late life debt affects retirement decisions, we find that more indebted older adults are more likely to work, less likely to be retired, and on average expect to work longer than those with less debt.
    Keywords: older adults, household debt, mortgages, student loan debt, retirement, social security
    JEL: J21 J26
    Date: 2020–04
  5. By: Ding, Lanlin; Jones, Andrew M. (University of York); Nie, Peng (Xi’an Jiaotong University)
    Abstract: We present a comprehensive analysis of ex ante inequality of opportunity (IOp) in health among Chinese adults aged 60+ and decompose the contributions of different sets of circumstances. Data are drawn from the 2011 and 2015 waves of the China Health and Retirement Longitudinal Study (CHARLS) linked with the 2014 CHARLS Life History Survey. We use a range of blood-based biomarkers, and apply a re-centered influence function (RIF) approach and a Shapley-Shorrocks decomposition to partition the contribution of circumstances across different quantiles of the biomarker distributions. We find that IOp accounts for between 3.75% and 29.57% of total health inequality in old age across the range of biomarkers. Shapley-Shorrocks decompositions show that spatial circumstances such as urban/rural residence and province of residence are the dominant determinants of IOp for most of the biomarkers. Distributional decompositions further reveal that the relative contributions to IOp in health of household socioeconomic status and health and nutrition conditions in childhood increase towards the right tails of the distribution for most of the biomarkers, where the clinical risk is focused.
    Keywords: biomarkers, CHARLS, China, inequality of opportunity, Shapley-Shorrocks decomposition, unconditional quantile regressions
    JEL: D63 I12 I14
    Date: 2020–05
  6. By: Andy Glover (Federal Reserve Bank of Kansas City); Jonathan Heathcote (Federal Reserve Bank of Minneapolis); Dirk Krueger (University of Pennsylvania); Jose Victor Rios-Rull (University of Minnesota)
    Abstract: To slow the spread of COVID-19, many countries are shutting down non-essential sectors of the economy. Older individuals have the most to gain from slowing virus diffusion. Younger workers in sectors that are shuttered have the most to lose. In this paper, we build a model in which economic activity and disease progression are jointly determined. Individuals differ by age (young and retired), by sector (basic and luxury), and by health status. Disease transmission occurs in the workplace, in consumption activities, at home, and in hospitals. We study the optimal economic mitigation policy of a utilitarian government that can redistribute across individuals, but where such redistribution is costly. We show that optimal redistribution and mitigation policies interact, and reflect a compromise between the strongly diverging preferred policy paths of different subgroups of the population. We find that the shutdown in place on April 12 is too extensive, but that a partial shutdown should remain in place through the fall. People prefer deeper and longer shutdowns if a vaccine is imminent, especially the elderly.
    Keywords: COVID-19, economic policy, redistribution
    JEL: I14 I18 J14 J17
    Date: 2020–05
  7. By: Diego d’Andria (European Commission - JRC); Jason DeBacker; Richard W. Evans; Jonathan Pycroft; Wouter van der Wielen (European Commission - JRC); Magdalena Zachlod-Jelec (European Commission - JRC)
    Abstract: This paper provides a technical description of the overlapping generations model used by the Joint Research Centre to analyse tax policy reforms, including in particular pension and demographic issues. The main feature of the EDGE-M3 model lies in its high level of disaggregation and the close connection between microeconomic and macroeconomic mechanisms which makes it a very suitable model to analyse the redistributive impact of policies. EDGE-M3 features eighty generations and seven earnings-ability types of individuals. To facilitate a realistic dynamic population structure EDGE-M3 includes Eurostat’s demographic projections. In terms of calibration, the EDGE-M3 family of overlapping generations models is heavily calibrated on microeconomic data. This al-lows the introduction of the underlying individuals’ characteristics in a macro model to the greatest extent possible. In particular, it includes the richness of the tax code by means of income tax and social insurance contribution rate functions estimated using data from the EUROMOD microsimulation model. This feature allows in particular a close connection between the macro and the micro model. In addition, the earnings profiles of the seven heterogeneous agent types are estimated using survey data. Finally, the labour supply, bequests and consumption tax calibration are all done using detailed microeconomic data, making the model highly suitable for the analysis of intra- and intergenerational analysis of tax policy.
    Keywords: computable general equilibrium, overlapping generations, heterogeneous ability, fiscal policy, microsimulation
    Date: 2020–05
  8. By: Colvin, Christopher L.; McLaughlin, Eoin
    Abstract: Using the Irish experience of the Spanish flu, we demonstrate that pandemic mortality statistics are sensitive to the demographic composition of a country. We build a new demographic database for Ireland's 32 counties with vital statistics on births, ageing, migration and deaths. We then show how age-at-death statistics in 1918 and 1919 should be reinterpreted in light of these data. Our new estimates suggest the very young were most impacted by the flu. New studies of the economic impact of Influenza-18 must better control for demographic factors if they are to yield useful policy-relevant results. Covid-19 mortality statistics must go through a similar procedure so policymakers can better target their public health interventions.
    Keywords: demographic economics,pandemics,age-adjusted mortality,Spanish flu,Ireland
    JEL: N34 I18 Q54
    Date: 2020
  9. By: Kim, Seonghoon (Singapore Management University); Koh, Kanghyock (Korea University)
    Abstract: We examine the health impacts of early access to public pension wealth by exploiting a unique policy in Singapore allowing individuals to withdraw a proportion of their pension savings after their 55th birthday. For the identification, we employ a regression discontinuity design by comparing individuals before and after their 55th birthday. To address anticipated and lagged health impacts, we adopt the donut regression discontinuity approach. Using nationally representative monthly panel data, we find that early access to pension wealth improves self-reported overall health.
    Keywords: regression discontinuity design, early access to pension wealth, health
    JEL: I10 H55
    Date: 2020–04
  10. By: Weidong Tian; Zimu Zhu
    Abstract: This paper explores an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the optimal investing problem as an optimal portfolio choice problem under a time-varying risk capacity constraint. Under the specific condition on model parameters, we show that the value function is a $C^2$ solution of the HJB equation and derive the optimal investment strategy in terms of second-order ordinary differential equations. The optimal portfolio is nearly neutral to the stock market movement if the portfolio's value is at a sufficiently high level; but, if the portfolio is not worth enough to sustain the retirement spending, the retiree actively invests in the stock market for the higher expected return. In addition, we solve an optimal portfolio choice problem under a leverage constraint and show that the optimal portfolio would lose significantly in stressed markets. This paper shows that the time-varying risk capacity constraint has important implications for asset allocation in retirement.
    Date: 2020–05
  11. By: Olivier Damette (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UL - Université de Lorraine - UNISTRA - Université de Strasbourg); Stéphane Goutte (Cemotev - Centre d'études sur la mondialisation, les conflits, les territoires et les vulnérabilités - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines)
    Abstract: We investigate, for the first time, the empirical drivers of the Covid-19 crosscountry mortality rates at a macroeconomic level. The intensity of the pandemic (number of infected people), the demographic structure (proportion of people age 65 or above) and the openness degree (number of tourists arrivals) seem to be significant predictors in addition to health infrastructures (number of hospital beds, physicians). We also find that the subprime crisis and the austerity policies conducted in certain countries, by reducing the public health expenditures in the last ten years and altering the adaptation capacity of the health system, have probably intensified the tragic consequences of the Covid-19 pandemic. Pollution seems to have only played a marginal role as well as control strategies (travel restrictions, testing policy). We do not find consistent effects against the Covid-19 virus due to past exposal to other types of epidemics like Malaria or Tuberculosis.
    Keywords: Covid-19 pandemic,fatalities,macroeconomic drivers,health infrastructure,health spending,Covid-19 control strategies,pollution,immunity,austerity policies
    Date: 2020–05–26
  12. By: Anqi Chen; Alicia H. Munnell
    Abstract: A major issue concerning the COVID-19 pandemic is how it will affect future employment options for older workers. Public health officials have made it clear that older people are more at risk of complications from the virus, meaning they may be the last to return to work. Therefore, their ability to survive financially will depend on their ability to work from home. So, the question becomes how many older workers can work from home. This brief builds on recent research that identified occupations that can be done remotely. The new analysis links these jobs to a dataset of individual workers to examine any differences by age, earnings, education, and gender. The somewhat surprising result is that roughly the same percentage of older and younger adults can work from home. The ability to work from home, however, does depend on education, which means that it is highly correlated with earnings. The discussion proceeds as follows. The first section describes the recent study used here as a basis for identifying occupations where working at home is a possibility. The second section presents the results by age and earnings by linking the occupations with the Annual Social and Economic Supplement of the Current Population Survey (CPS). The findings show that about 45 percent of older workers are in occupations with the ability to work remotely and that this ability is strongly correlated with earnings. The third section discusses further results by earnings, education, and gender. The final section concludes that the findings are a good news/bad news story for older workers. The good news is that they are as well situated as younger workers in terms of occupations that allow remote work. The bad news is that only about 45 percent of older workers are in such occupations. Thus, as the economy opens up, the other 55 percent, who cannot work from home and tend to be lower paid, will face either health risks Ð returning to work before the virus is under control Ð or economic risks Ð delaying work until the environment is safe, which may exhaust their resources.
    Date: 2020–06

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