nep-age New Economics Papers
on Economics of Ageing
Issue of 2020‒10‒12
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Forecasting the Old-Age Dependency Ratio to Determine a Sustainable Pension Age By Rob J Hyndman; Yijun Zeng; Han Lin Shang
  2. Is the Selfish Life-Cycle Model More Applicable in Japan and, If So, Why? A Literature Survey By Charles Yuji Horioka
  3. Saving for retirement through the public pension system: Evidence from the self-employed in Spain By Ander Iraizoz
  4. Pension Information and Women's Awareness By Marta Angelici; Daniela Del Boca; Noemi Oggero; Paola Profeta; Maria Cristina Rossi; Claudia Villosio
  5. Self-Selection in Physical and Mental Health among Older Intra-European Migrants By Amelie F. Constant; Nadja Milewski
  6. Disentangling Retirement and Savings Responses By Maarten Lindeboom; Raymond Montizaan
  7. A Study of the COVID-19 Outbreak and Response in Connecticut Long-Term Care Facilities: Final Report By Patricia Rowan; Reena Gupta; Rebecca Lester; Michael Levere; Kristie Liao; Jenna Libersky; Debra Lipson; Andrea Wysocki; Julie Robison; Patricia Bowen
  8. Framing the Predicted Impacts of COVID-19 Prophylactic Measures in Terms of Lives Saved Rather Than Deaths Is More Effective for Older People By Biroli, Pietro; Bosworth, Steven J.; Della Giusta, Marina; Di Girolamo, Amalia; Jaworska, Sylvia; Vollen, Jeremy
  9. An economic model of the Covid-19 pandemic with young and old agents: Behavior, testing and policies By Luiz Brotherhood; Philipp Kircher; Cezar Santos; Michèle Tertilt
  10. Social Protection Systems in Latin America and the Caribbean: Costa Rica By Isabel Román
  11. Social Protection Systems in Latin America and the Caribbean: Dominican Republic By Milena Lavigne; Luis Hernán Vargas
  12. Are Older People Aware of Their Cognitive Decline? Misperception and Financial Decision Making By Mazzonna, Fabrizio; Peracchi, Franco

  1. By: Rob J Hyndman; Yijun Zeng; Han Lin Shang
    Abstract: We forecast the old-age dependency ratio for Australia under various pension age proposals, and estimate a pension age scheme that will provide a stable old-age dependency ratio at a specified level. Our approach involves a stochastic population forecasting method based on coherent functional data models for mortality, fertility and net migration, which we use to simulate the future age-structure of the population. Our results suggest that the Australian pension age should be increased to 68 by 2030, 69 by 2036, and 70 by 2050, in order to maintain the old-age dependency ratio at 23%, just above the 2018 level. Our general approach can easily be extended to other target levels of the old-aged dependency ratio and to other countries.
    Keywords: coherent forecasts, demographic components, functional time series, pension age
    JEL: J11 J14 C22
    Date: 2020
  2. By: Charles Yuji Horioka (Research Institute for Economics and Business Administration, Kobe University, Asian Growth Research Institute, Institute of Social and Economic Research, Osaka University, and National Bureau of Economic Research, Japan)
    Abstract: The selfish life-cycle model or hypothesis is, together with the dynasty or altruism model, the most widely used theoretical model of household behavior in economics, but does this model apply in the case of a country like Japan, which is said to have closer family ties than other countries? In this paper, we first provide a brief exposition of the simplest version of the selfish life-cycle model and then survey the literature on household saving and bequest behavior in Japan in order to answer this question. The paper finds that almost all of the available evidence suggests that the selfish life-cycle model applies to at least some extent in all countries but that there is more consistent support for this model in Japan than in the United States and other countries. It then explores possible explanations for why the life-cycle model is more consistently supported in Japan than in other countries, attributing this finding to government policies, institutional factors, economic factors, demographic factors, and cultural factors. Finally, it shows that the findings of the paper have many important implications for economic modeling and for government tax and expenditure policies.
    Keywords: Age structure; Altruism; Bequest motives; Borrowing constraints; Consumption; Culture; Dissaving; Dynasty model; Elderly; Family ties; Household saving; Inheritances; Intergenerational transfers; Japan; Life-cycle model; Religiosity; Retirement; Ricardian equivalence; Saving motives; Selfishness; Social norms
    JEL: D11 D12 D14 D64 E21 J14
    Date: 2020–09
  3. By: Ander Iraizoz (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - 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, PSE - Paris School of Economics)
    Abstract: Using the fact that the Spanish self-employed voluntarily choose their contributions to Social Security, I study the effect of financial incentives on public pension savings for self-employed workers in Spain. For this, I implement a difference-in-differences approach exploiting the change in public pension saving incentives induced by the 1997 pension reform. I find that the Spanish self-employed significantly respond to the financial incentives for public pension savings. However, the estimated response could be considered modest relative to the magnitude of the return to contributions provided by pension formulas in Spain. I provide evidence suggesting that the lack of salience of the return to contributions could be one of the main drivers of such a modest response, highlighting the importance of information and salience on the responsiveness of self-employed workers to saving incentives.
    Keywords: Public Pension,Self-Employed,Social Security,Retirement Savings
    Date: 2020–09
  4. By: Marta Angelici; Daniela Del Boca; Noemi Oggero; Paola Profeta; Maria Cristina Rossi; Claudia Villosio
    Abstract: We explore the role of financial and pension information in increasing women’s knowledge and awareness of their future pension status, and consequently, in reducing the gender pension gap. A representative sample of 1249 Italian working women were interviewed to assess their knowledge about pensions and financial issues and about their own savings and personal wealth planned for retirement. The responses showed that their knowledge and awareness of retirement planning was limited. We then ran a randomized experiment to evaluate the effect of increased information regarding pensions on women’s awareness, knowledge, and behaviors. Women in the treated group were provided information in the form of three short online tutorials. A follow-up survey shows that these women became more interested and aware of pension schemes and retirement options after completing the tutorials and were more likely to be better informed and keen to obtain further information. When looking at changes in behavior, we find that treated women who are closer to retirement are more likely to believe that they would make different work-life decisions if they received specific pension information in a timely fashion. They are also more likely to have a supplementary pension fund if they are concerned about their standard of living after retirement.
    Keywords: women, pension, savings, financial education
    JEL: H31 J22
    Date: 2020
  5. By: Amelie F. Constant; Nadja Milewski
    Abstract: The Healthy Immigrant Paradox found in the literature by comparing the health of immigrants to that of natives in the host country, may suffer from serious cultural biases. Our study evades such biases by utilizing a destination-origin framework, in which we compare the health of emigrants to that of their compatriots who stay in the country of origin. Isolating cultural effects can best gauge self-selection and host country effects on the health of emigrants with longer time abroad. We study both the physical and mental dimensions of health among European-born emigrants over 50, who originate from seven European countries and now live elsewhere in Europe. We use the Survey of Health, Ageing and Retirement in Europe and apply multi-level modeling. Regarding the physical health we find positive self-selection, beneficial adaptation effects, and effects from other observables for some but not all countries. With the notable exception of the German émigrés, we cannot confirm selection in mental health, while additional years abroad have only weak effects. Overall, living abroad has some favorable effects on the health of older emigrants. The economic similarity of countries and the free intra-European mobility mitigate the need for initial self-selection in health and facilitate the migration experience abroad.
    Keywords: panel data, physical health, mental health, older population, emigrants, multi-level models, Europe
    JEL: C23 F22 J11 J14 J15 J61 I12 I14 O52
    Date: 2020
  6. By: Maarten Lindeboom (Vrije Universiteit Amsterdam); Raymond Montizaan (Maastricht University)
    Abstract: In January 2006, the Dutch government implemented a pension reform that substantially reduced the public pension wealth of workers born in 1950 or later. At the same time, a tax-facilitated savings plan was introduced that implied a large savings subsidy for all workers, irrespective of birth year. This paper uses linked administrative and survey data to assess the effect of the reform on the savings and retirement expectations and realizations of two virtually identical male cohorts that differ only in treatment status, the treated having been born in 1950 and the controls having been born in 1949. We show that retirement expectations are in line with realizations and that the reform increased the labor supply for the larger part of the workers, namely, those without sufficient means to substantially increase private savings to counter the effect of the reform. These workers have zero substitution rates between private and public wealth. On the other hand, there is a group of mostly high-wage workers who participate in the tax-facilitated savings plan and increase their private savings to fully counter the impact of the drop in public wealth. An unintended side effect of the introduction of the tax-facilitated savings plan is that high-wage earners who are not affected by the drop in pension wealth retire even sooner than initially planned.
    Keywords: Natural experiment, regression discontinuity, retirement, savings, public pension wealth
    JEL: H55 J26
    Date: 2020–09–29
  7. By: Patricia Rowan; Reena Gupta; Rebecca Lester; Michael Levere; Kristie Liao; Jenna Libersky; Debra Lipson; Andrea Wysocki; Julie Robison; Patricia Bowen
    Abstract: This report details Mathematica’s assessment of the COVID-19 outbreak in Connecticut long-term care facilities, as well as a set of short-term and long-term recommendations to help Connecticut and long-term care facilities prepare for a potential second wave of COVID-19 and prevent future infectious disease outbreaks.
    Keywords: nursing homes, COVID-19, long-term care, Connecticut, assisted living
  8. By: Biroli, Pietro (University of Zurich); Bosworth, Steven J. (University of Reading); Della Giusta, Marina (University of Reading); Di Girolamo, Amalia (University of Birmingham); Jaworska, Sylvia (University of Reading); Vollen, Jeremy (University of Zurich)
    Abstract: This paper contributes to the literature on public health communication by studying how the framing of a message relaying the forecast impact of COVID-19 prevention measures affects compliance behaviour amongst both the young and old. A representative sample of survey respondents in the UK and US, along with selected respondents in Italy, were presented with forecasts for the number of deaths from COVID-19 in their countries with and without public adherence to various preventive behaviours. We experimentally varied whether this information was presented in terms of likely deaths or lives saved. The lives saved frame increases reported protective behaviours, but only amongst older respondents. We present evidence consistent with the hypothesis that framing is likelier to affect decisions whose consequences are felt by oneself (i.e. protective behaviours by the elderly) rather than solely others (i.e. protective behaviours amongst the young).
    Keywords: framing, protective behaviours, cooperation, age, gender, COVID-19
    JEL: D03 D83 D84 D85 J16 J24
    Date: 2020–09
  9. By: Luiz Brotherhood; Philipp Kircher; Cezar Santos; Michèle Tertilt
    Abstract: This paper investigates the importance of the age composition in the Covid-19 pandemic. We augment a standard SIR epidemiological model with individual choices on work and non-work social distancing. Infected individuals are initially uncertain unless they are tested. We find that older individuals socially distance themselves substantially in equilibrium. Confining the old even more reduces their welfare. Confining the young extends the duration of the epidemic, with negative consequences on the old if the epidemic cannot be controlled after confinement. Testing and quarantines save lives, even if conducted just on the young, as does separation of activities by age. Combining policies can increase the welfare of both the young and the old.
    JEL: C63 D62 E17 I10 I18
    Date: 2020
  10. By: Isabel Román (IPC-IG)
    Abstract: "In the mid-20th century, Costa Rica designed a universal social protection system dedicated to the promotion of citizenship and fundamental social rights. The institutionalisation of social policy, the development of universal policies for health care, security, education, housing and basic services (water and electricity), together with significant economic growth, allowed for a continuous improvement in human development and significant, internationally recognized achievements. Among these are the reduction in infant mortality, which dropped from 123 children per 1000 born in 1940, to 61.5 in 1970 and 9.1 in 2011; the increase in life expectancy, which rose from 55.6 years in 1950 to 79.3 in 2011; and the reduction of poverty incidence, from 50 per cent of households in 1950 to 20 per cent at the end of the century." (…)
    Keywords: Social Protection Systems, Latin America, Caribbean, Costa Rica
    Date: 2019–12
  11. By: Milena Lavigne (IPC-IG); Luis Hernán Vargas (IPC-IG)
    Abstract: "During the 20th century, the political and social development of the Dominican Republic was marked by the dictatorship of Rafael Trujillo (1930–1961), who forged the institutional and legal bases of Dominican social policies, and successive governments headed by Joaquín Balaguer (1960–1962, 1966–1978 and 1986–1996). During the 1990s, the Dominican government started once more to implement social policies, among which we can highlight the Fund for the Promotion of Community Initiatives (PROCOMUNIDAD), the countrys first poverty reduction programme. During the 2000s, some social reforms were undertaken, such as the creation of the Social Cabinet and reform of the pension system, which set up a model of individual capitalisation. Finally, after the economic crisis that affected the Dominican Republic in 2003, programmes aiming to reduce malnutrition (Comer es Primero) and poverty (Solidaridad) began to be implemented".(…)
    Keywords: Social Protection Systems, Latin America, Caribbean, Dominican Republic
    Date: 2019–11
  12. By: Mazzonna, Fabrizio (USI Università della Svizzera Italiana); Peracchi, Franco (University of Rome Tor Vergata)
    Abstract: We investigate whether older people correctly perceive their own cognitive decline, and the potential financial consequences of misperception. First, we document the fact that older people tend to underestimate their cognitive decline. We then show that those who experienced a severe cognitive decline, but are unaware of it, are more likely to suffer wealth losses compared to those who are aware or did not experience a severe decline. These losses largely reflect decreases in financial wealth and are mainly experienced by wealthier people who were previously active on the stock market. Our findings support the view that financial losses among older people unaware of their cognitive decline are the result of bad financial decisions, not of rational disinvestment strategies.
    Keywords: aging, cognitive ability, household finance, HRS
    JEL: J14 J24 C23
    Date: 2020–09

This nep-age issue is ©2020 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.