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on Economics of Ageing |
| By: | Ohto Kanninen (Palkansaajien tutkimuslaitos); Terhi Ravaska; Jon Gruber; Satu Nivalainen; Roope Uusitalo |
| Abstract: | We exploit a reform in the Finnish public pension system in 2005 to study the effect of financial incentives (wealth effect and substitution effect) and relabeling of pensions on retirement decisions. These effects are distinguishable in the reform due to a heterogeneous, although correlated, impact of the reform on individuals. Relabeling in the reform means renaming the pension type from early retirement to full retirement based on age. Incentives were affected as a function of age and accrual-to-earnings ratio. Wefind that all three effects played a role. We show that the relabeling alone explains mostof the immediate behavioral impact of the reform. |
| Keywords: | Retirement, substitution effect, wealth effect, relabeling, pension reform |
| JEL: | D9 H55 H75 J14 J26 |
| Date: | 2019–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:pst:wpaper:328&r=all |
| By: | Pak, Tae-Young |
| Abstract: | Non-contributory social pension has been widely used to provide minimum income support for disadvantaged seniors. Despite its efficacy in reducing old-age poverty, only a few studies systematically assessed whether the benefits of social pension extend to health outcomes. In this paper, we exploit a reform to the South Korean social pension in 2014 to provide evidence on the health effects of expanding social pension. Using data from the Korean Longitudinal Study of Aging, we estimate a series of difference-in-differences models that compare changes in health of individuals age-eligible for the social pension (age ≥ 65) to those younger than the minimum qualification age (age |
| Keywords: | old-age poverty; non-contributory pension; depression; financial satisfaction; South Korea |
| JEL: | H5 I31 I38 J14 |
| Date: | 2020–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103794&r=all |
| By: | Han, Joseph |
| Abstract: | The phased implementation of the minimum mandatory retirement age (60) from 2016 has expanded the employment of older workers (55-60) but reduced that of young workers (15-29). The negative effect has been particularly pronounced at large companies or firms with a previously low official retirement age. - A difference-in-difference analysis at the establishment level reveals that a 1 person increase in those who could potentially stay owing to the new mandatory retirement age leads to a 0.6 person increase in older workers and a 0.2 person decrease in young workers. - The decline in youth employment was marked at establishments with 100+ employees or those whose retirement age was 55 or below before the statutory change. These results imply that a gradual approach is required to minimize the negative impact of delayed mandatory retirement, and that additional labor market policies are needed particularly for older workers whose employment is not protected. - Increasing the mandatory retirement age is necessary given the rapidly aging population, but the negative impact on employment can only be minimized if it proceeds slowly and in phases. - Employment services tailored to older workers should be provided, particularly for those whose retirement age is not guaranteed, and legal standards need to be improved to facilitate the creation of jobs with flexible hours. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kdifor:277&r=all |
| By: | Shawn Ni (Department of Economics, University of Missouri-Columbia); Michael Podgursky (Department of Economics, University of Missouri-Columbia); Xiqian Wang (Department of Economics, University of Missouri-Columbia) |
| Abstract: | Many states enhanced benefits in teacher retirement plans during the 1990s. This paper examines the school staffing effects of one such enhancement in a major urban school district with mostly high poverty schools. Pension rule changes in 1999 for St. Louis public school teachers resulted in large increases in pension wealth for active teachers, as well as a powerful increase in "push" incentives for earlier retirement. Simple descriptive statistics on retirement patterns before and after the enhancements suggest much earlier retirement resulted. Shorter teaching spells imply a steady state with more teaching vacancies and a larger share of novice teachers in classrooms. To better understand the long run effects of these changes and alternatives policies, the authors estimate a structural model of teacher retirement. Simulations of retirement behavior for a representative senior teacher point to shorter completed teaching spells and earlier retirement age as a result of the enhancements. By contrast, moving from the post-1999 to a DC-type plan would extend the teaching career of a representative senior teacher by roughly two years. |
| Keywords: | Teacher pensions, teacher compensation, state and local pension finance |
| JEL: | J32 J26 H72 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2006&r=all |
| By: | Hanna Aspegren; Jorge Durán; Maarten Masselink |
| Abstract: | The Swedish pension system was among the first to shift to a system of notional accounts. The aim was to render it fair, transparent, and sustainable and the reform enjoyed a broad consensus across the political spectrum. The reform was radical and complemented the public pension with an occupational pension. In addition, while the public pension remained pay-as-you-go, it became a defined-contribution scheme: contributions are fixed and benefits are later computed as a function of these contributions and life expectancy. This paper takes stock 20 years after the reform. It argues that the reform has rendered the system fiscally sustainable and politically stable but raises concerns about benefits' adequacy because the cost of ageing is shifted onto pensioners. Substandard pensions may lead to ad hoc interventions that go against the aim of automatism/transparency. These adjustments may be seen as hidden costs that could ultimately put pressure on the very sustainability the new scheme is supposed to guarantee. |
| Keywords: | Pension reform, Adequacy, Public pension, Occupational pension, Aspegren, Durán, Masselink. |
| JEL: | H55 J32 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecobri:048&r=all |
| By: | Simiao Chen (Heidelberg Institute of Global Health, Heidelberg University); Zhangfeng Jin (College of Economics, Zhejiang University); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This study examines the causal impact of retirement on migration decisions. Using a regression discontinuity (RD) design approach, combined with a nationally representative sample of 228,855 Chinese older adults, we find that retirement increases the probability of migration by 12.9 p.p. (an 80% increase in migration). Approximately 38% of the total migration effects can be attributed to inter-temporal substitution. Retirement-induced migrants are lower-educated, have restricted access to social security, and come from origins with high living costs. Relying on old age support from adult children in migration is a likely mechanism. These findings are consistent with a simple theoretical model of migration for older adults. |
| Keywords: | Retirement, Internal migration, Old age support, China, Regression discontinuity design |
| JEL: | J14 J26 J61 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp303&r=all |
| By: | Shawn Ni (Department of Economics, University of Missouri-Columbia); Michael Podgursky (Department of Economics, University of Missouri-Columbia); Fangda Wang (Department of Economics, University of Missouri-Columbia) |
| Abstract: | In a widely-cited study, Fitzpatrick (2015) found that more than a quarter of Illinois teachers were unwilling to pay 19 cents for pension enhancements worth one dollar in present value. We revisit this finding by tracking the same cohort of teachers to retirement, which permits exact measurement of the annuity received and service years. The vast majority of teachers purchased the upgrade. Among the teachers who did not, the benefit on average had a negative value given their retirement timing. Our analysis finds that Fitzpatrick's instrumental variables fail to capture the underlying heterogeneity of preferences driving this result. |
| Keywords: | teacher's value of pension wealth, unobserved heterogeneity, state and local pension finance |
| JEL: | H75 I21 J26 J45 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2007&r=all |
| By: | Sílvia Garcia-Mandicó; Sergi Jiménez-Martín |
| Abstract: | This paper explores how husbands’ and wives’ retirement behavior is influenced by their own financial incentives from Social Security and private pensions and by “spillover effects” from their spouses’ incentives. Spillover effects are possible due to income effects and complementarity of leisure; if significant, their omission will bias estimates of the effect of changing Social Security policy on retirement. We estimate conditional and unconditional (to the status of the partner) reduced-form models and document some key results. First, married men are more responsive to their incentives than married women: a ten percentage point higher marginal tax on working results in a 0.9% increase in the baseline probability to exit the labor force for men and a 0.1% for women. Second, men are very responsive to their wives’ financial incentives but that women are not responsive to their husbands’ incentives. Policy simulations, however, indicate that omitting spillover results in very moderate biases when estimating the effect of a policy change on the probability of working. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2020-13&r=all |
| By: | Alicia H. Munnell; Gal Wettstein; Abigail N. Walters |
| Abstract: | Over the past couple of decades, Americans have been seeking to work to older ages. The current COVID-19 recession notwithstanding, a long-term trend toward later retirement has sharply increased the labor force participation rate among older individuals. However, working to older ages requires more than a willingness on the part of workers; it requires employers to hire them on terms that are worthwhile. While employers often say they are open to employing older workers, evidence of discrimination in audit studies suggests reason to worry. One question is: Òwhat jobs do employers really want older workers to do?Ó To answer this question, this brief, based on a recent paper, examines a sample of job postings from RetirementJobs.com, a national website that targets older workers. In addition to exploring the characteristics, location, and compensation of these postings, the analysis compares them to two other data sources on job openings: 1) the Job Openings and Labor Turnover Survey (JOLTS), the federal governmentÕs definitive source of aggregate statistics on job openings; and 2) a large general jobs board for workers of all ages. The discussion proceeds as follows. The first section introduces RetirementJobs.com. Twenty percent of its listings are Òdirect postingsÓ by employers aiming explicitly at older workers and 80 percent are cross-listings from CareerBuilder.com, which suggest employer willingness to hire older, as well as younger, workers. The second section reports on the characteristics of the jobs on RetirementJobs.com, and the third section compares the geographic dispersion of the jobs with those in the JOLTS and the characteristics of the jobs with a sample from the general jobs board. The results, at first blush, suggest reason for optimism. While the jobs posted on RetirementJobs.com represent a small fraction of job openings nationally, they nevertheless show the same geographic dispersion as jobs aimed at all age groups, cover a broad swath of occupations, and are likely to be full-time. They also offer higher wages than the postings on the general jobs board, although fewer of them mention health or retirement benefits. A somewhat less positive picture emerges when looking only at the direct postings specifically targeted to older workers. These postings tend to have substantially lower average wages than those aimed at a general audience and are even less likely to mention health or retirement benefits. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2020-13&r=all |
| By: | Marie-Louise Leroux; Pierre Pestieau |
| Abstract: | This paper studies the design of the optimal linear taxation of bequests when individuals differ in wage as well as in their risks of both mortality and old-age dependance. We assume that the government cannot distinguish between bequests motives, that is whether bequests resulted from precautionary reasons or from pure joy of giving reasons. Instead, we assume that it only observes the timing of bequests, that is whether they are made early in life or late in life. We show that, if the government is utilitarian, whether the taxation of early bequests should be given priority over the taxation of late bequests depends on the magnitude of insurance and redistributive concerns. While the efficiency concern unambiguously recom-mends taxation of early bequests, redistributive concerns yield ambiguous results. This indeterminacy comes from the fact that, in case of late death, the government cannot observe the health status of the deceased. Whether the taxation of early bequests should be given priority depends on the specific relationships between wages and both risks of early death and of old-age dependence, as well as on the concavity of the joy of giving utility function. If the government is Rawlsian, it is optimal to tax early bequests if the survival chances of the poorest agents are very low. If they survive, but their chances to remain autonomous are very low, it is then optimal to tax early bequests if the poorest agents contribute relatively less to the taxation of early bequests than to the taxation of late bequests or if the joy of giving utility is extremely concave. |
| Keywords: | Bequest Taxation,Long Term Care,Utilitarianism,Rawlsian Welfare Criterion,Old-Age Dependency, |
| JEL: | H21 H23 I14 |
| Date: | 2020–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2020s-55&r=all |
| By: | Maria Lucia Pace (Università Cattolica del Sacro Cuore, Rome, Italy); Dan Liu (Centre for Health Economics Research and Evaluation (CHERE), University of Technology, Sydney, NSW, Australia); Maria Goddard (Centre for Health Economics, University of York, York, UK); Rowena Jacobs (Centre for Health Economics, University of York, York, UK); Raphael Wittenberg (London School of Economics and Political Science, UK); Gerard McGonigal (Department of Medicine for the Elderly, York Teaching Hospital NHS Foundation Trust, York, UK); Anne Mason (Centre for Health Economics, University of York, UK) |
| Abstract: | Background. Since 2010, adult social care spending has fallen significantly in real terms whilst demand has risen. Reductions in local authority (LA) budgets are expected to have had spill over effects on the demand for healthcare in the English NHS. Motivation. If older people, including those with dementia, have unmet needs for social care, their use of healthcare may increase. Methods. We assembled a panel dataset of 150 LAs, aggregating individual-level data where appropriate. We tested the impact of changes in LA social care resources, which was measured in two ways: expenditure and workforce. The effects on people aged 65+ were assessed on five outcomes |
| Keywords: | Social care, Healthcare, Dementia, Local authority, Cost Shifting |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:chy:respap:174cherp&r=all |
| By: | T. R. B. den Haan; K. W. Chau; M. van der Schans; C. W. Oosterlee |
| Abstract: | In this work, we consider rule-based investment strategies for managing a defined contribution saving scheme under the Dutch pension fund testing model. We found that dynamic rule-based investment can outperform traditional static strategies, by which we mean that the pensioner can achieve the target retirement income with higher probability and limit the shortfall when target is not met. In comparison with the popular dynamic programming technique, the rule-based strategy has a more stable asset allocation throughout time and avoid excessive transactions, which may be hard to explain to the investor. We also study a combined strategy of rule based target and dynamic programming in this work. Another key feature of this work is that there is no risk-free asset under our setting, instead, a matching portfolio is introduced for the investor to avoid unnecessary risk. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2011.02596&r=all |
| By: | KAWATA Yuji; OWAN Hideo |
| Abstract: | The Elderly Employment Stabilization Law revised in 2006 helped the government to increase elderly employment. Although there has been a discussion of whether the re-employment of elderly workers substitutes or complements the employment of young workers, there are few studies that examine potential peer effects of the former group on the latter's productivity or motivation in the workplace. Note that there might be knowledge spillovers from elderly workers to peers, especially younger ones (positive peer effects) but the presence of unmotivated elderly workers might demoralize peers (negative peer effects). This paper investigates such peer effects from the exposure to elderly workers using the employee satisfaction survey of a Japanese firm. We show that elderly workers do not have significant peer effects on coworkers' satisfaction on average. However, the effects are heterogeneous depending on the ability of the elderly workers, reflected in their wages, and the age and job levels of their peers. Namely, regular workers are more satisfied when they work with elderly workers who receive higher wages. Coworkers in their 30s and 40s receive more training and those in their 50s are more satisfied when they work with elderly workers. In contrast, first line managers are less satisfied by the allocation of elderly workers, especially those with high levels of ability. This paper contributes to the discussion on the efficient assignment of elderly workers. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:20084&r=all |
| By: | Antti J. Tanskanen |
| Abstract: | Discrete-choice life cycle models can be used to, e.g., estimate how social security reforms change employment rate. Optimal employment choices during the life course of an individual can be solved in the framework of life cycle models. This enables estimating how a social security reform influences employment rate. Mostly, life cycle models have been solved with dynamic programming, which is not feasible when the state space is large, as often is the case in a realistic life cycle model. Solving such life cycle models requires the use of approximate methods, such as reinforced learning algorithms. We compare how well a deep reinforced learning algorithm ACKTR and dynamic programming solve a relatively simple life cycle model. We find that the average utility is almost the same in both algorithms, however, the details of the best policies found with different algorithms differ to a degree. In the baseline model representing the current Finnish social security scheme, we find that reinforced learning yields essentially as good results as dynamics programming. We then analyze a straight-forward social security reform and find that the employment changes due to the reform are almost the same. Our results suggest that reinforced learning algorithms are of significant value in analyzing complex life cycle models. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.13471&r=all |
| By: | Juergen Jung (Department of Economics, Towson University) |
| Abstract: | We use data from two representative U.S. household surveys, the Medical Expenditure Panel Survey (MEPS) and the Health and Retirement Study (Rand-HRS) to estimate Markov transition probability matrices between health states over the lifecycle from age 20–95. We use non-parametric and parametric methods and control for individual characteristics such as age, gender, race, education, income as well as cohort effects. We align two year transition probabilities from HRS with one year transition probabilities in MEPS using a stochastic root method. We find that the non-parametric counting method and the regression specifications based on ordered logit models produce similar results over the lifecycle. However, the counting method overestimates the probabilities of transitioning into bad health states. In addition, we find that young women have worse health prospects than their male counterparts but once individuals get older, being female is associated with transitioning into better health states with higher probabilities than men. We do not find significant differences of the conditional health transition probabilities between African Americans and the rest of the population. We also find that the lifecycle patterns are stable over time. Finally, we discuss issues with controlling for time effects, sample attrition, and other modeling issues that can arise with categorical outcome variables. |
| Keywords: | Lifecycle profiles of health transition probabilities, Medical Expenditure Panel Survey (MEPS), Health and Retirement Study (RAND-HRS), Markov health transition matrices, conditional health transition probabilities, age-time-cohort effects. |
| JEL: | I10 C14 C23 C25 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:tow:wpaper:2020-06&r=all |
| By: | John P. Hejkal; B. Ravikumar; Guillaume Vandenbroucke |
| Abstract: | We develop a quantitative theory of mortality trends and population dynamics. In our theory, individuals incur time and/or goods costs over their life cycle, to adopt a better health technology that increases their age-specific survival probability. Technology adoption is a source of a dynamic externality: As more individuals adopt the better technology, the marginal benefit of future adoption increases. The allocation of time and/or goods also depends on total factor productivity (TFP): As TFP grows, more resources are allocated to technology adoption. Both channels---the dynamic externality and TFP---result in lower mortality. Our theory is consistent with three key facts: (i) The cross-country correlation between mortality and income is negative, (ii) mortality in poor countries has converged to that of rich countries although the income of poor countries has not, and (iii) mortality decline precedes economic take-off. We calibrate the model to match mortality in France from 1816 to 2010. Quantitatively, the model accounts for 54% of the closing of the mortality gap between France and low-income countries over the past 50 years. |
| Keywords: | Mortality; population dynamics; technology adoption; diffusion |
| JEL: | E13 I12 I15 J11 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:88989&r=all |
| By: | Canta, Chiara; Cremer, Helmuth |
| Abstract: | We study the design of social long-term care (LTC) insurance when informal care is exchange-based. Parents do not observe their children's cost of providing care, which is continuously distributed over some interval. They choose a rule specifying transfers that are conditional on the level of informal care. Social LTC insurance is designed to maximize a weighted sum of parents' and children's utility. The optimal uniform public LTC insurance can fully cover the risk of dependence but parents continue to bear the risk of having children with a high cost of providing care. A nonlinear policy conditioning LTC benets on transfers provides full insurance even for this risk. Informal care increases with the children's welfare weight. Our theoretical analysis is completed by numerical solutions based on a calibrated example. In the uniform case, public care should represent up to 40% of total care but its share decreases to about 30% as the weight of children increases. In the nonlinear case, public care increases with the children's cost of providing care at a faster rate when children's weight in social welfare is higher. It represents 100% of total care for the families with high-cost children. |
| Keywords: | Long-term care; informal care; strategic bequests; asymmetric information |
| JEL: | H2 H5 |
| Date: | 2020–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124871&r=all |
| By: | Alicia H. Munnell; Anqi Chen |
| Abstract: | Though the economy has been overtaken by COVID-19 and the ensuing recession, the Federal ReserveÕs 2019 Survey of Consumer Finances (SCF) still provides a useful update on how retirement balances fared between 2016 and 2019 Ð three years of solid economic growth, strong stock market returns, and continued maturation of the 401(k) system. And given that the market is modestly higher in 2020 and most job losses have been borne by lower-paid workers without retirement plans, 2019 balances may not be dramatically different from today. The big advantage of the SCF is that it provides information not only on 401(k) balances, much of which is available from financial services firms, but also on household holdings in IRAs, which are largely rollovers from 401(k)s. This brief reports on household holdings in these two sources combined. The discussion proceeds as follows. The first section describes the importance of 401(k) plans and IRAs in the retirement income system. The second section documents the trend in individual decisions regarding the accumulation of assets in 401(k)s. The good news is a slight increase in participation rates and greater use of target date funds; the bad news is the lack of universal coverage, flat total contribution rates, high fees, and significant leakages. The third section reports on 401(k)/IRA balances. The SCF shows Ð for households approaching retirement Ð an increase in these balances from $135,000 in 2016 to $144,000 in 2019. These balances will provide a couple with only $570 per month in retirement. Moreover, only about half of households have 401(k)/IRA balances; and, as defined benefit plans phase out in the private sector, the rest will have no source of retirement income other than Social Security. The final section concludes that todayÕs 401(k) system provides meaningful benefits only for the top two quintiles of the income distribution and that, for the employer-sponsored system to work effectively, coverage must be universal. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2020-14&r=all |
| By: | Ariella Kahn-Lang Spitzer; Marisa Shenk; James Mabli |
| Abstract: | In 2018, 14.3 million US households experienced food insecurity, which has been linked to negative health outcomes such as depression and anxiety, diabetes, and hypertension. |
| Keywords: | food access limitations, older adults, meal services, adverse health events, Nutrition Services Program, Medicare claims data, congregate meal, home-delivered meal |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:35f96f37dab1474f8502e46cdc957c8b&r=all |