nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒07‒27
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Age-Specific Entrepreneurship and PAYG Public Pensions in Germany By Burkhard Heer; Mark Trede
  2. Wealth Distribution and Retirement Preparation Among Early Savers By Alice Henriques Volz; Lindsay Jacobs; Elizabeth Llanes; Kevin B. Moore; Jeffrey P. Thompson
  3. Lifetime events and the well-being of older people. By Aassve, Arnstein; Luppi, Francesca; Pronzato, Chiara; Pudney, Steve
  4. Pensions and Social Justice: From Standard Retirement to Reverse Retirement By Grégory Ponthière
  5. Optimal intergenerational transfers: Public education and pensions By Monisankar Bishnu; Shresth Garg; Tishara Garg; Tridip Ray
  6. Diversity in Family Life Course Patterns and Intra-Cohort Wealth Disparities in Late Working Age By Nicole Kapelle; Sergi Vidal
  7. Would Population Aging Change the Output Effects of Fiscal Policy? By Jiro Honda; Hiroaki Miyamoto
  8. Valuing mortality risk in the time of covid-19 By Hammitt, James K.
  9. Socioeconomic Decline and Death: Midlife Impacts of Graduating in a Recession By Schwandt, Hannes; von Wachter, Till
  10. Economic Growth and Population Transition inChina and India 1990-2018 By Chaurasia, Aalok Ranjan
  11. Why Does Consumption Fluctuate in Old Age and How Should the Government Insure It? By Richard Blundell; Margherita Borella; Jeanne Commault; Mariacristina De Nardi
  12. El sistema de pensiones en Colombia: institucionalidad, gasto público y sostenibilidad financiera By Azuero Zúñiga, Francisco
  13. El sistema de pensiones en Chile: institucionalidad, gasto público y sostenibilidad financiera By Bentancor, Andrea

  1. By: Burkhard Heer; Mark Trede
    Abstract: We present new empirical evidence on the distribution of earnings, income and wealth among entrepreneurs in Germany. We document that both earnings and income are more concentrated among entrepreneurs than among workers and describe a large-scale overlapping-generations model that can replicate these findings. As an application, we compute the equilibrium effects of a reform of the German pay-as-you-go pension system in which entrepreneurs must also contribute and receive a pension. We show that in the presence of mobility between workers and entrepreneurs, the expected lifetime utility of all newborn households unanimously declines due to the general equilibrium effects of lower aggregate savings, and welfare losses amount to approximately 5% of total consumption. In addition, the integration of self-employed workers into the social security system in Germany does not help to improve its fiscal sustainability, and only an increase in the retirement age to 70 years will help to finance pensions at the present level beyond the year 2050.
    Keywords: Entrepreneurship, aging, income distribution, overlapping
    JEL: H55 D31 J11 L26 C68
    Date: 2020–07
  2. By: Alice Henriques Volz; Lindsay Jacobs; Elizabeth Llanes; Kevin B. Moore; Jeffrey P. Thompson
    Abstract: This paper develops a new combined wealth measure using data from the Survey of Consumer Finances, by augmenting data on net worth with estimates of defined benefit (DB) pension wealth and expected Social Security wealth. We use this combined wealth concept to explore retirement preparation among groups of households in their pre-retirement years (40-49 and 50-59) and also to explore the concentration of wealth. We find evidence of moderate, but rising, shortfalls in retirement preparation. We also show that including DB pension and Social Security wealth results in markedly lower measures of wealth concentration. Trends toward higher concentration over time are also somewhat moderated.
    Keywords: Inequality; Pensions; Retirement; Wealth; Social security
    JEL: D30 H50 J10
    Date: 2020–06–12
  3. By: Aassve, Arnstein; Luppi, Francesca; Pronzato, Chiara; Pudney, Steve (University of Turin)
    Abstract: This paper investigates the relationships between physical health, work, family history and mental well-being of people aged 50+ years and tests whether their children’s education, family formation and work circumstances also affect their level of depression. We use data for 10 European countries from six waves of the Survey of Health Ageing Retirement in Europe, from which we can observe current circumstances, past events and changes of conditions over time for older parents and their adult children. We find strong beneficial effects of being retired and detrimental effects of bad health conditions. A problematic family of origin, as well as grief over the death of spouses or children, persists over the entire life. Regarding non-coresident adult children, we observe that having children in better working and family conditions beneficially affects parental mental well-being. Geographical variability allows testing of whether the effects vary across different cultural contexts and institutions. Important context heterogeneities emerge: unemployment is more burdensome in countries with more difficult labour market conditions, sickness is less heavy in countries with better healthcare systems and divorce is less bearable in countries characterized by more traditional family values.
    Date: 2020–02
  4. By: Grégory Ponthière (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - UPEM - Université Paris-Est Marne-la-Vallée)
    Keywords: Pensions,social justice,mortality,life cycle
    Date: 2020–06
  5. By: Monisankar Bishnu; Shresth Garg; Tishara Garg; Tridip Ray
    Abstract: In presence of imperfections in education loan market, the standard policy response of intervening solely on education front, funded through taxes and transfers, necessarily hurts the initial working population. The literature suggests compensating them via pay-as-you-go pensions as a possible solution. But for various reasons sustainability of PAYG pensions is under serious doubt. We carry out the optimal policy exercise of a utilitarian government in a dynamically efficient economy with pension and education support obeying the Pareto criterion. We find that expansion of one instrument along with the other emerges as the optimal response, however, once the complete market level of education is achieved, the optimal policy suggests phasing pensions out. Eventually, government leads the economy to an equilibrium with zero pension and the Golden Rule level of education. This is achieved by exploiting only market opportunities without relying on other factors including human capital externalities, general equilibrium effects or sociopolitical factors.
    Keywords: Public education, PAYG pension, intergenerational transfers, welfare state
    Date: 2020–06
  6. By: Nicole Kapelle; Sergi Vidal
    Abstract: Against the backdrop of soaring wealth inequalities in older age, this research addresses the relationship between increasingly diverse family life courses and widening wealth differences between individuals as they age. We holistically examined how childbearing and marital histories matter for West German baby boomer cohorts’ personal wealth at ages 51 to 59. We proposed that wealth penalties associated with departures from culturally and institutionally supported family patterns accumulate overtime and can explain wealth inequalities at older ages. We tested our thesis using longitudinal data from the German Socio-Economic Panel Study (SOEP, v34, waves 2002-2017). We first identified typical family trajectory patterns between ages 16 and 50 using multichannel sequence analysis and cluster analysis. We then modeled personal wealth ranks at ages 51 to 59 as a function of family patterns. Results showed that departures from a standard family pattern consisting of a stable marriage with (on average, two) children was associated with lower wealth ranks at older age. We also found higher wealth penalties for greater deviation and lower penalties for moderate deviation from the standard family pattern. Addressing entire family trajectories, our research extended and nuanced our knowledge of the role of earlier family behavior for later economic wellbeing. By using personal-level wealth data instead of household-level data, we were able to identify substantial gender differences in the study associations. Our research also recognizes the importance of combining marital and childbearing histories to assess the relationship between family life courses and wealth inequality.
    Keywords: Family, Life Course, Inequality/Social Stratification
    Date: 2020
  7. By: Jiro Honda; Hiroaki Miyamoto
    Abstract: Would population aging affect the effectiveness of fiscal stimulus? Despite the renewed focus on population aging, there are few empirical studies on the output effects of fiscal policy in aging economies. Our study fills this gap by analyzing this issue in OECD countries. We find that, as population ages, the output effects of fiscal spending shocks are weakened. We also find that, while high-debt countries generally face weaker fiscal multipliers, high-debt aging economies face even weaker multipliers. These results point to important policy implications: population aging would call for a larger fiscal stimulus to support aggregate demand during recession and thus require larger fiscal space to allow a wider swing of the fiscal position without creating concerns for fiscal sustainability. Our analysis also suggests that policy measures to promote labor supply could help increase the output effect of fiscal stimulus in aging economies.
    Date: 2020–06–12
  8. By: Hammitt, James K.
    Abstract: In evaluating the appropriate response to the covid-19 pandemic, a key parameter is the rate of substitution between mortality risk and wealth or income, conventionally summarized as the value per statistical life (VSL). For the United States, VSL is estimated as approximately $10 million, which implies the value of preventing 100,000 covid-19 deaths is $1 trillion. Is this value too large? There are reasons to think so. First, VSL is a marginal rate of substitution and the potential risk reductions are non-marginal. The standard VSL model implies the rate of substitution of wealth for risk reduction is smaller when the risk reduction is larger, but the implied value of non-marginal risk reductions decreases slowly until the value accounts for a substantial share of income, after which it decreases sharply; average individuals are predicted to be willing to spend more than half their income to reduce one-year mortality risk by only 1 in 100. Second, mortality risk is concentrated among the elderly, for whom VSL may be smaller and who would benefit from a persistent risk reduction for a shorter period because of their shorter life expectancy. Third, the pandemic and responses to it have caused substantial losses in income that should decrease VSL. In contrast, VSL is plausibly larger for risks (like covid-19) that are dreaded, uncertain, catastrophic, and ambiguous. These arguments are evaluated and key issues for improving estimates are highlighted.
    Keywords: value per statistical life; pandemic; age-dependence; ambiguity aversion; risk perception
    Date: 2020–06
  9. By: Schwandt, Hannes; von Wachter, Till
    Abstract: This paper uses several large cross-sectional data sources and a new approach to estimate midlife effects of entering the labor market in a recession on mortality by cause and various measures of socioeconomic status. We find that cohorts coming of age during the deep recession of the early 1980s suffer increases in mortality that appear in their late 30s and further strengthen through age 50. We show these mortality impacts are driven by disease-related causes such as heart disease, lung cancer, and liver disease, as well as drug overdoses. At the same time, unlucky middle-aged labor market entrants earn less and work more while receiving less welfare support. They are also less likely to be married, more likely to be divorced, and experience higher rates of childlessness. Our findings demonstrate that temporary disadvantages in the labor market during young adulthood can have substantial impacts on lifetime outcomes, can affect life and death in middle age, and go beyond the transitory initial career effects typically studied.
    JEL: E32 I10 J10
    Date: 2020–01
  10. By: Chaurasia, Aalok Ranjan
    Abstract: This paper analyses the trend in economic growth and population transition in China and India during 1990-2018 through a comparative perspective. The analysis follows a decomposition framework which argues that economic growth has a pure demographic component and a pure economic component and it is the latter which actually contributes to improving the standard of living. Using the data available through the World Bank, United Nations Population Division and International Labour Organization, the paper reveals that most of the economic growth in China during 1990-2018 has contributed to improving the standard of living. By contrast, a substantial proportion of economic growth in India has been the result of the demographic factors that contribute little to improve the quality of life of the people. The paper concludes that China needs to explore possibilities of productive utilisation of the old people to sustain economic growth whereas India requires reinvigorating the economic system and accelerating population transition to improve the quality of life of its people.
    Keywords: Economic growth, population transition, China, India, standard of living
    JEL: J11
    Date: 2020–06–14
  11. By: Richard Blundell; Margherita Borella; Jeanne Commault; Mariacristina De Nardi
    Abstract: In old age, consumption can fluctuate because of shocks to available resources and because health shocks affect utility from consumption. We find that even temporary drops in income and health are associated with drops in consumption and most of the effect of temporary drops in health on consumption stems from the reduction in the marginal utility from consumption that they generate. More precisely, after a health shock, richer households adjust their consumption of luxury goods because their utility of consuming them changes. Poorer households, instead, adjust both their necessary and luxury consumption because of changing resources and utility from consumption.
    JEL: D1 D11 D12 D14 E2 E21 H2 H31 H51
    Date: 2020–06
  12. By: Azuero Zúñiga, Francisco
    Abstract: En este informe se estudia la evolución del sistema de pensiones de Colombia en el período reciente analizando su institucionalidad, su gasto público y su sostenibilidad financiera. Forma parte de un proyecto de la Comisión Económica para América Latina y el Caribe (CEPAL) que busca estudiar los sistemas pensionales de la región, especialmente en lo relacionado con sus efectos sobre las finanzas públicas y sobre su sostenibilidad futura.
    Date: 2020–07–14
  13. By: Bentancor, Andrea
    Abstract: En este informe se estudia la evolución del sistema de pensiones de Chile en el período 2000-2017 analizando su institucionalidad, su gasto público y su sostenibilidad financiera. Forma parte de un proyecto de la Comisión Económica para América Latina y el Caribe (CEPAL) que busca estudiar los sistemas pensionales de la región, especialmente en lo relacionado con sus efectos sobre las finanzas públicas y sobre su sostenibilidad futura.
    Date: 2020–07–14

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