nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒09‒07
sixteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Sustainability of Social Security in the Aging Economy from the Perspective of Improving Health By Tomoaki Kotera
  2. Demographic Origins of the Decline in Labor's Share By Andrew Glover; Jacob Short
  3. The Impact of Social Security on Pension Claiming and Retirement: Active vs. Passive Decisions By Rafael Lalive; Arvind Magesan; Stefan Staubli
  4. Childhood Circumstances and Health Inequality in Old Age: Comparative Evidence from China and the United States By Chen, Xi; Yan, Binjian; Gill, Thomas M.
  5. Market Behaviour Versus Tax Planning Responses to Changes in Marginal Income Tax Rates Among Older Couples By Messacar, Derek
  6. Relabeling, Retirement and Regret By Jonathan Gruber; Ohto Kanninen; Terhi Ravaska
  7. Comorbidity Factors Influence COVID-19 Mortality Much More than Age By Steven Gjerstad; Andrea Molle
  8. Evolving Internet Use Among Canadian Seniors By Schimmele, Christoph; Davidson, Jordan
  9. Exploring the Relationship between Care Homes and Excess Deaths in the COVID-19 Pandemic: Evidence from Italy By Alacevich, Caterina; Cavalli, Nicolò; Giuntella, Osea; Lagravinese, Raffaele; Moscone, Francesco; Nicodemo, Catia
  10. COVID-19 Age-Mortality Curves Are Flatter in Developing Countries By Demombynes,Gabriel
  11. Older Workers Need Not Apply? Ageist Language in Job Ads and Age Discrimination in Hiring By Burn, Ian; Button, Patrick; Munguia Corella, Luis; Neumark, David
  12. Age Appropriate Wisdom? Ethnobiological Knowledge Ontogeny in Pastoralist Mexican Choyeros By Eric Schniter; Shane J. Macfarlan; Juan J. Garcia; Gorgonio Ruiz-Campos; Diego Guevara Beltran; Brenda B. Bowen; Jory C. Lerback
  13. Le Transfert Canadien en Santé doit être bonifié afin d’assurer les services dans un contexte de vieillissement accéléré By Raquel Fonseca; Pierre-Carl Michaud; Julien Navaux
  14. Union Membership Peaks in Midlife By David G. Blanchflower; Alex Bryson
  15. A Stochastic Control Approach to Defined Contribution Plan Decumulation: "The Nastiest, Hardest Problem in Finance" By Peter A. Forsyth
  16. The Long-term Effects of Employer-sponsored Pension Plans on Non-workplace Returns on Investments By Messacar, Derek; Morissette, Rene

  1. By: Tomoaki Kotera (Economist, Institute for Monetary and Economic Studies, Bank of Japan (currently, Assistant Professor, Graduate School of Economics and Management, Tohoku University, E-mail:
    Abstract: An aging economy is widely believed to increase the recipients of Social Security and thus increase the fiscal burden. However, since the health condition of the elderly today is better than before and may continue to improve in the future, the number of elderly workers may increase. This paper studies the quantitative role of old workers in the sustainability of Social Security in an aging economy by developing a computable overlapping generations model with heterogeneous agents in a general equilibrium framework. The distinctive feature of the model is the incorporation of health status linked to survival probability, medical expenditures, and disutility of labor. The model simulation shows that old workers play a significant role in mitigating the fiscal cost and the effect remains pronounced when Social Security reform is implemented. It also highlights the crucial role of the projected future health status of the population in quantifying the fiscal cost.
    Keywords: Elderly Workers, Health, Social Security Reform, Benefit Claim, Overlapping Generations
    JEL: H55 I13 J22
    Date: 2020–08
  2. By: Andrew Glover; Jacob Short
    Abstract: Since 1980, the earnings share of older workers has risen in the United States, simultaneous with a historic decline in labor's share of income. We hypothesize that an aging workforce has contributed to the decline in labor's share. We formalize this hypothesis in an on-the-job search model, in which employers of older workers may have substantial monopsony power due to the decline in labor market dynamism that accompanies age. This manifests as a rising wedge between a worker's earnings and marginal product over the life-cycle. We estimate the age profile of these wedges using cross-industry responses of labor shares to changes in the age-distribution of earnings. We find that a sixty-year-old worker receives half of her marginal product relative to when she was twenty, which, together with recent demographic trends, can account for 59% of the recent decline in the U.S. labor share. Industrial heterogeneity in this age profile is consistent with the monopsony-power mechanism: highly unionized industries exhibit no relationship between age and payroll shares.
    Keywords: demographics, labor share, earnings distribution, income distribution
    JEL: J11 J31 E25
    Date: 2020–08
  3. By: Rafael Lalive; Arvind Magesan; Stefan Staubli
    Abstract: We exploit a unique Swiss reform to identify the importance of passivity, claiming social security benefits at the Full Retirement Age (FRA). Sharp discontinuities generated by the reform reveal that raising the FRA while imposing small early claiming penalties significantly delays pension claiming and retirement, but imposing large penalties and holding the FRA fixed does not. The nature of the reform allows us to identify that between 47 and 69% of individuals are passive, while imposing additional structure point identifies the fraction at 67%. An original survey of Swiss pensioners reveals that reference-dependent preferences is the main source of passivity.
    JEL: H55 J21 J26
    Date: 2020–07
  4. By: Chen, Xi (Yale University); Yan, Binjian (Nanjing University); Gill, Thomas M. (Yale University)
    Abstract: This paper estimates the extent to which childhood circumstances contribute to health inequality in old age and evaluates the importance of major domains of childhood circumstances to health inequalities in the USA and China. We link two waves of the China Health and Retirement Longitudinal Study (CHARLS) in 2013 and 2015 with the newly released 2014 Life History Survey (LHS), and two waves of the Health and Retirement Study (HRS) in 2014 and 2016 with the newly released 2015 Life History Mail Survey (LHMS) in the USA, to quantify health inequality due to childhood circumstances for which they have little control. Using the Shapley value decomposition approach, we show that childhood circumstances may explain 7-16 percent and 14-30 percent of health inequality in old age in China and the USA, respectively. Specifically, the contribution of childhood circumstances to health inequality is larger in the USA than in China for self-rated health, mental health, and physical health. Examining domains of childhood circumstance, regional and rural/urban status contribute more to health inequality in China, while family socioeconomic status (SES) contributes more to health inequality in the USA. Our findings support the value of a life course approach in identifying the key determinants of health in old age. Distinguishing sources of health inequality and rectifying inequality due to early childhood circumstances should be the basis of policy promoting health equity.
    Keywords: life course approach, inequality of opportunity, self-rated health, mental health, frailty, childhood circumstances
    JEL: I14 J13 J14 O57
    Date: 2020–07
  5. By: Messacar, Derek
    Abstract: This paper investigates the extent to which older Canadian taxfilers, aged 60 to 69, respond to predictable changes in marginal tax rates created by the tax and transfer system by exhibiting sorting behaviour in taxable income. Using administrative tax data for the years from 2001 to 2012, the analysis assesses how individuals respond to changes in marginal tax rates created at the lower bounds of the second, third and fourth federal tax brackets; the lower bounds of the second and third provincial and territorial tax brackets; and the thresholds at which the Old Age Security and Employment Insurance benefits start being clawed back through recovery taxes.
    Keywords: Tax rate, Pension income, Old age security pensions, Income taxes, Employment insurance benefits, Administrative data
    Date: 2018–11–19
  6. By: Jonathan Gruber; Ohto Kanninen; Terhi Ravaska
    Abstract: Focal retirement ages are a central feature of Social Security programs around the world, and provide a potentially powerful tool for policy makers who are interested in reforming retirement systems to address the growing funding shortfalls. But these tools often come hand in hand with significant changes in the financial structure of Social Security that can have independent, and potentially deleterious, impacts on retirees. In this paper, we use a major reformulation of the retirement system in Finland, featuring a relabeling of retirement ages with modest and continuous changes in financial incentives allows us to separately estimate the impact of relabeling from financial incentives in driving retirement decisions. We find that relabeling is particularly powerful as a determinant of date of retirement. Both graphical evidence and estimated hazard models reveal an enormous change in retirement when individuals face a newly defined “normal retirement” age. We also present a new approach to assessing the welfare implications of induced earlier retirement: looking at the impact on return to work. We show that the marginal workers induced to retire by relabeling are much more likely to return to work over the next three years than is the typical worker. This suggests that there is a marginal increase in regret among those who respond to this change in retirement ages.
    JEL: H55 J26
    Date: 2020–07
  7. By: Steven Gjerstad (Chapman University); Andrea Molle (Chapman University)
    Abstract: This paper demonstrates that once we control for comorbidity factors, age has a minor effect on COVID-19 mortality. This has implications for the treatment of current and recovered COVID-19 patients, including health screenings of recovered COVID-19 patients, triage decisions for patients in critical care, and prioritization of vaccinations when one is developed. The coronavirus epidemic in Italy has strained hospital resources, including ICU beds and ventilators for those experiencing acute respiratory failure. Studies of COVID-19 in China [1], Italy [2], and the United States [3] show that fatality rates increase rapidly with age, especially beyond age 60. The same studies and others also show that fatalities increase substantially with comorbidity factors, such as heart disease, hypertension, diabetes, stroke, and liver disease [1, 4, 5]. These morbidity factors are known to increase rapidly with age [6, 7, 8]. Among the elderly the higher incidence of heart disease, diabetes, hypertension, and other comorbidity factors lead to their increased mortality from COVID-19. If it is primarily comorbidity factors that lead to death with COVID-19 patients and not age, then patient treatment will be more effective if physicians are aware that these factors lead to much greater risk than age does.
    Date: 2020
  8. By: Schimmele, Christoph; Davidson, Jordan
    Abstract: Since 2016, Internet use rates among Canadians aged 15 to 64 have reached near-saturation (97.2%) levels. However, the diffusion of information and communications technology (ICT), including the Internet, has proceeded at a much slower pace among Canadians aged 65 and older. Given that Canada is an aging society, knowing about the factors associated with Internet use among seniors is crucial for ensuring their access to it. This study uses four cycles of the General Social Survey (2007, 2010, 2013 and 2016) to describe changes in Canadian seniors’ rates of Internet use, and examines the sociodemographic factors associated with such use.
    Keywords: Technology, Seniors, Internet use
    Date: 2019–07–10
  9. By: Alacevich, Caterina (Pompeu Fabra University); Cavalli, Nicolò (Bocconi University); Giuntella, Osea (University of Pittsburgh); Lagravinese, Raffaele (University of Bari); Moscone, Francesco (Brunel University); Nicodemo, Catia (University of Oxford)
    Abstract: We explore the relationship between the spatial distributions of excess deaths and care home facilities during the COVID-19 outbreak in Italy. Using registry-based mortality data (January 1st- March 31st, 2015-2020) for Lombardy, one of the areas hit most severely, we estimate that municipalities with care homes present significantly higher excess death rates among the elderly (+41%). We find that this effect is not driven by the size of care homes and of the vulnerable population that they host. Rather, our results suggest that the excess deaths did not occur only within care homes and these facilities acted as one of the possible catalysts in the diffusion of COVID-19 in the whole elderly population of their surrounding territory.
    Keywords: care homes, COVID-19, excess mortality
    JEL: I10 I18 I30
    Date: 2020–07
  10. By: Demombynes,Gabriel
    Abstract: A greater share of reported COVID-19 deaths occur at younger ages in low- and middle-income countries (LMICs) compared to high-income countries (HICs). Based on data from 26 countries, people age 70 and older constitute 37 percent of deaths attributed to COVID-19 in LMICs on average, versus 87 percent in HICs. Only part of this difference is accounted for by differences in population age structure. In this paper, COVID-19 mortality rates are calculated for each age group by dividing the number of COVID-19 deaths by the underlying population. The resulting age-mortality curves are flatter in countries with lower incomes. In HICs, the COVID-19 mortality rate for those ages 70-79 is 12.6 times the rate for those ages 50-59. In LMICs, that ratio is just 3.5. With each year of age, the age-specific mortality rate increases by an average of 12.6 percent in HICs versus 7.1 percent in LMICs. This pattern holds overall and separately for men's and women's mortality rates. It reflects some combination of variation across countries in age patterns of infection rates, fatality rates among those infected, and under-attribution of deaths to COVID-19. The findings highlight that experiences with COVID-19 in wealthy countries may not be generalizable to developing countries.
    Date: 2020–07–01
  11. By: Burn, Ian (University of Liverpool); Button, Patrick (Tulane University); Munguia Corella, Luis (University of California, Irvine); Neumark, David (University of California, Irvine)
    Abstract: We study the relationships between ageist stereotypes – as reflected in the language used in job ads – and age discrimination in hiring, exploiting the text of job ads and differences in callbacks to older and younger job applicants from a resume (correspondence study) field experiment (Neumark, Burn, and Button, 2019). Our analysis uses methods from computational linguistics and machine learning to directly identify, in a field-experiment setting, ageist stereotypes that underlie age discrimination in hiring. The methods we develop provide a framework for applied researchers analyzing textual data, highlighting the usefulness of various computer science techniques for empirical economics research. We find evidence that language related to stereotypes of older workers sometimes predicts discrimination against older workers. For men, our evidence points to age stereotypes about all three categories we consider – health, personality, and skill – predicting age discrimination, and for women, age stereotypes about personality. In general, the evidence is much stronger for men, and our results for men are quite consistent with the industrial psychology literature on age stereotypes.
    Keywords: ageist stereotypes, age discrimination, job ads, machine learning
    JEL: J14 J7
    Date: 2020–07
  12. By: Eric Schniter (Chapman University); Shane J. Macfarlan (University of Utah); Juan J. Garcia (University of Utah); Gorgonio Ruiz-Campos (Universidad Autónoma de Baja California); Diego Guevara Beltran (University of Arizona); Brenda B. Bowen (University of Utah); Jory C. Lerback (University of Utah)
    Abstract: We investigate whether age profiles of ethnobiological knowledge development are consistent with predictions derived from life history theory about the timing of productivity and reproduction. Life history models predict complementary knowledge profiles developing across the lifespan for women and men as they experience changes in embodied capital and the needs of dependent offspring. We evaluate these predictions using an ethnobiological knowledge assessment tool developed for an off-grid pastoralist population, known as Choyeros, from Baja California Sur, Mexico. Our results indicate that while individuals acquire knowledge of most dangerous items and edible resources by early adulthood, knowledge of plants and animals relevant to the age and sex divided labor domains and ecologies (e.g., women’s house gardens, men’s herding activities in the wilderness) continues to develop into middle adulthood but to different degrees and at different rates for men and women. As the demands of offspring accumulate for parents with age, reproductive aged adults continue to develop their knowledge to meet their children’s needs. After controlling for vision, post-reproductive adults’ show the greatest ethnobiological knowledge. These findings extend our understanding of the evolved human life history by illustrating how changes in embodied capital and the needs of dependent offspring predict the development of men’s and women’s ethnobiological knowledge across the lifespan.
    Keywords: Traditional ecological knowledge; ethnobiological knowledge; learning; embodied capital; life history theory; Baja California Sur, México
    Date: 2020
  13. By: Raquel Fonseca; Pierre-Carl Michaud; Julien Navaux
    Abstract: On le répète depuis 20 ans au moins, le Québec fait face à un défi démographique majeur. Si les années 2010 ont vu les premiers boomers arriver à la retraite, les années 2020 seront marquées par une augmentation de l’espérance de vie aux grands âges, qui va s’accélérer entre 2030 et 2040. Il en résulte que la part des moins de 75 ans dans la population sera en décroissance à partir de 2030. En même temps, plusieurs estimations montrent que la capacité des actifs de financer les dépenses publiques sera limitée. Cela s’explique en partie par une stagnation du bassin de travailleurs et ceci pour une longue période. Au final, notre système de santé représente un enjeu incontournable tant d’un point de vue intergénérationnel, qu’en termes de soutenabilité budgétaire.
    Keywords: , Transfert canadien en matière de santé,Vieillissement,Québec
    Date: 2020–08–11
  14. By: David G. Blanchflower; Alex Bryson
    Abstract: Using data from 68 countries on over 8 million respondents over forty years we show union membership peaks in midlife – usually around workers’ late 40s or early 50s. In doing so we extend Blanchflower’s (2007) earlier study, incorporating a further 39 countries and another decade or so of data. We also found it in every US state and the District of Columbia as well as across industries. The fact that this relationship exists in virtually every country across the world challenges a key precept in industrial relations, namely that institutions matter: they appear to matter little, at least in the case of the hump-shaped relationship between unionization and age. The union membership rates at the age peak in the United States and the United Kingdom have lowered over time, while the age at which the peak has occurred has increased in both countries. In part this is due to increasing union membership rates among those over the age of sixty-five. Declines in membership by birth cohort have lowered union density rates as the older cohorts with historically higher membership rates leave labor markets.
    JEL: J14 J50 J51
    Date: 2020–08
  15. By: Peter A. Forsyth
    Abstract: We pose the decumulation strategy for a Defined Contribution (DC) pension plan as a problem in optimal stochastic control. The controls are the withdrawal amounts and the asset allocation strategy. We impose maximum and minimum constraints on the withdrawal amounts, and impose no-shorting no-leverage constraints on the asset allocation strategy. Our objective function measures reward as the expected total withdrawals over the decumulation horizon, and risk is measured by Expected Shortfall (ES) at the end of the decumulation period. We solve the stochastic control problem numerically, based on a parametric model of market stochastic processes. We find that, compared to a fixed constant withdrawal strategy, with minimum withdrawal set to the constant withdrawal amount, the optimal strategy has a significantly higher expected average withdrawal, at the cost of a very small increase in ES risk. Tests on bootstrapped resampled historical market data indicate that this strategy is robust to parametric model misspecification.
    Date: 2020–08
  16. By: Messacar, Derek; Morissette, Rene
    Abstract: What is the effect of having an employer-sponsored pension plan (EPP) on financial performance in non-workplace investments? This paper offers new insight into this unresolved empirical issue, using administrative data on over 345,000 taxfilers from Canada.
    Keywords: Tax filers, Pension plans, Financial performance indicators, Administrative data
    Date: 2019–01–14

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