nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒01‒11
sixteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Pension Policies, Retirement and Human Capital Depreciation in Late Adulthood By Nikolov, Plamen; Adelman, Alan
  2. To work or not to work: factors affecting bridge employment beyond retirement, case of Lithuania By Kristina Zitikyt?
  3. How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme By Chan, Marc K.; Polidano, Cain; Vu, Ha; Wilkins, Roger; Carter, Andrew; To, Hang
  4. Who lacks pension knowledge, why and does it matter? By Elinder, Mikael; Hagen, Johannes; Nordin, Mattias; Säve-Söderbergh, Jenny
  5. Technology, Labour Market Institutions and Early Retirement: Evidence from Finland By Yashiro, Naomitsu; Kyyrä, Tomi; Hwang, Hyunjeong; Tuomala, Juha
  6. Later Retirement and the Labor Market Re-Integration of Elderly Unemployed Workers? By René Böheim; Michael Topf
  7. Life-Care Tontines By Hieber, Peter; Lucas, Nathalie
  8. A Semiparametric Model for Bond Pricing with Life Cycle Fundamental By Zongwu Cai; Jiazi Chen; Linlin Liu
  9. What determines the supply of housing for the elderly, and how is it related to the spread of Covid-19 and future demographic changes? By Kulander, Maria; Wilhelmsson, Mats
  10. JubilaciónActiva By Sergi Jiménez Martín
  11. Pakistan Assessment of Civil Service Pensions By World Bank
  12. Hospital inpatients costs dynamics at older ages: A frequency-severity approach By Avalosse, Hervé; Denuit, Michel; Lucas, Nathalie
  13. Age-Based Policy in the Context of the Covid-19 Pandemic: How Common are MultiGenerational Households? By Van Rens, Thijs; Oswald, Andrew J.
  14. Long-term unemployment subsidies and middle-age disadvantaged workers’ health By José Ignacio Garcia-Pérez; Manuel Serrano-Alarcón; Judit Vall Castelló
  15. El ahorro como complemento para la pensión By Inmaculada Domínguez-Fabián
  16. El necesario enfoque actuarial de los sistemas de pensiones: la relevancia de la esperanza de vida, también en España By Mercedes Ayuso; Jorge Bravo

  1. By: Nikolov, Plamen (State University of New York); Adelman, Alan (State University of New York)
    Abstract: Economists have mainly focused on human capital accumulation and considerably less on the causes and consequences of human capital depreciation in late adulthood. Studying human capital depreciation over the life cycle has powerful economic consequences for decision-making in old age. Using data from China, we examine how a new retirement program affects cognitive performance. We find large negative effects of pension benefits on cognitive functioning among the elderly. We detect the most substantial impact of the program on delayed recall, a significant predictor of the onset of dementia. We show suggestive evidence that the program leads to larger negative impacts among women. We demonstrate that retirement and access to a retirement pension plan plays a significant role in explaining cognitive decline at older ages.
    Keywords: life cycle, cognitive functioning, cognition, aging, health, mental retirement, middle-income countries, LMICs, developing countries, China
    JEL: O12 J24 J26 H55 H75 O15
    Date: 2020–12
  2. By: Kristina Zitikyt? (Faculty of Economics and Business Administration, Vilnius University)
    Abstract: This paper investigates bridge employment beyond retirement, as nowadays it is one of solutions often mentioned to stabilize pension systems in the context of an aging population. The aim of this paper is to identify individual, financial, and other factors that influence retirees to work beyond retirement in Lithuania. This research was done using unique administrative Lithuanian data, allowing to analyze post-retirement employment in Lithuania for the first time. The sample consists of 26,000 new old-age pension recipients from 2015 to 2017. By applying binary models of the probability of being employed beyond retirement, it is found out that a greater acquired retirement record, a higher average wage before retirement, and living in a bigger city with a higher employment rate were positively associated with accepting bridge employment, while a higher sickness rate, higher old-age pension, and earlier receipt of an unemployment benefit were inversely related to accepting such employment. Moreover, being a professional or manager increases the likelihood of bridge employment in comparison to unskilled workers. This probability increases even more if a person works in the public sector. Finally, some social groups were excluded, finding that widows with disabilities or widowed women with worse health are not likely to work beyond retirement and are consequently under a bigger risk of poverty. To sum up, retirees who should stay in the labor market in their old age because of their bad financial situation are less likely to do it. This suggests that persons with bigger needs, lower-skilled workers, and women deserve particular attention in labor market reforms.
    Keywords: bridge employment, post-retirement employment, work after retirement, old-age pension, aging
  3. By: Chan, Marc K. (University of Melbourne); Polidano, Cain (Melbourne Institute of Applied Economic and Social Research); Vu, Ha (Deakin University); Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research); Carter, Andrew (Australian National University); To, Hang (Australian National University)
    Abstract: Concerns over the adequacy of low and middle-income earner contributions to retirement plans have led governments to introduce targeted matching schemes. In this study, we examine the effects of a simple and generous Australian scheme using administrative tax-filer data, exploiting longitudinal changes in eligibility and match rates. We find small increases in the proportion who contribute and bunching at the eligible maximum, but lower average contributions because the matching payment displaces contributions of high contributors. Contributions through unmatched channels are also crowded out. These findings highlight the difficulties of targeting matching schemes and question the merits of simplifying them.
    Keywords: private pension, matching schemes, retirement income, aging population
    JEL: I3 J14 H55
    Date: 2020–12
  4. By: Elinder, Mikael (Department of Economics at Uppsala University); Hagen, Johannes (IFAU - Institute for Evaluation of Labour Market and Education Policy); Nordin, Mattias (Uppsala University, Department of Statistics); Säve-Söderbergh, Jenny (The Swedish Social Insurance Inspectorate)
    Abstract: Recent pension reforms have shifted a larger responsibility towards savers. Individuals therefore need better knowledge of the rules and incentives embedded in the pension system to adequately save and prepare for retirement. In this paper, we use a novel Swedish survey matched with high-quality administrative data to show that many lack, and feel that they lack, such pension-specific knowledge. We also show that the most economically vulnerable groups know the least. Linking pension knowledge to behavior, we find that knowing less is associated with lower preparedness for retirement, even after controlling for financial literacy and subjective knowledge. Moreover, a large majority state the complexity of the pension system, or that they have planned to learn more about pensions but that it just hasn’t happened, as reasons for why they do not have sufficient knowledge. That the complexity of the pension system and individuals’ proclivity to procrastinate are plausible causal factors for low pension knowledge is supported by analyses showing that individuals with low math skills and procrastination tendencies have lower pension knowledge.
    Keywords: bounded rationality; financial literacy; saving; pension system
    JEL: D80 D83 H55
    Date: 2020–12–15
  5. By: Yashiro, Naomitsu (OECD); Kyyrä, Tomi (VATT, Helsinki); Hwang, Hyunjeong (OECD); Tuomala, Juha (VATT, Helsinki)
    Abstract: There are two major barriers to increasing employment of older workers. First, older workers engaged in codifiable, routine tasks are particularly prone to the risk of being displaced by computers and robots. Second, several countries have in place various labour market institutions that encourage early retirement, such as exceptional entitlements or looser criteria for unemployment and disability benefits applied to older individuals. We present evidence that these two factors reinforce each other to push older workers out of employment. We find that older workers who are more exposed to digital technologies are more likely to leave employment, and that this effect is significantly magnified when they are eligible to an extension of unemployment benefits until the earliest age for drawing old age pension. Furthermore, our findings imply that a policy reform that tightens the eligibility for the benefit extension would increase mostly the employment of older workers that are more exposed to digital technologies.
    Keywords: technological change, disability benefits, unemployment benefits, early retirement
    JEL: H55 J26 J65 O33
    Date: 2020–12
  6. By: René Böheim; Michael Topf
    Abstract: We study the effect of lower unearned income on labor supply. To identify the causal effect of an unexpected reduction in unearned income, we exploit a policy reform that lowered survivor pensions in Austria. Men widowed after the survivor pension reform received an approximately 34% lower survivor pension than men widowed before the reform. We follow the employment history of both groups for 150 months and estimate the reform’s effect on labor supply using a regression discontinuity design. The effect of the lower pension is evident immediately after the death of their spouse, is persistent over time, becomes more pronounced over time, and is robust across model specifications. Our baseline result suggests a 3.5 to 5.4 percentage point higher employment rate for survivors in the low pension regime in the long run. The estimated effect corresponds to a labor supply elasticity at the extensive margin with respect to the changes in total income of about -0.9 to -1.3.
    Keywords: labor supply, unearned income, regression discontinuity design.
    JEL: I38 J22 J48
    Date: 2020–12
  7. By: Hieber, Peter (Université catholique de Louvain, LIDAM/ISBA, Belgium); Lucas, Nathalie (Université catholique de Louvain, LIDAM/ISBA, Belgium)
    Abstract: This paper builds on the advantage of pooling mortality and morbidity risks, and their inherent natural hedge. We focus on classical mutual risk pooling schemes, i.e. tontines, and introduce a "life-care tontine", which in addition to retirement income targets the needs of long-term care coverage for an ageing population. This scheme reduces adverse selection costs and is actuarially fair at each time. Pooling heterogeneous risks (i.e. different age groups) is shown to reduce overall risk. The life-care tontine is compared to a classical life-care annuity. Technically, we rely on a backward iteration to deduce the smoothed cashows pattern and the separation of cash-ows in a fixed withdrawal and mortality and/or morbidity credits. We apply our model to real life data, illustrating the adequacy of the proposed tontine scheme.
    Keywords: mutual insurance ; long-term care ; morbidity and mortality risk ; tontines ; pooled annuities ; life-care insurance
    Date: 2020–01–01
  8. By: Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA); Jiazi Chen (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China); Linlin Liu (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China and MOE Key Lab of Econometrics and School of Economics, Xiamen University, Xiamen, Fujian 361005, China)
    Abstract: It is well documented in the literature that individual saving decisions vary with the life cycle and at the macroeconomic level, a changing demographic age structure affects aggregated savings, which then drives a slow movement of interest rates. In this paper, we propose a semiparametric affine arbitrage-free yield curve model with a low-frequency trend structure driven by the entire age distribution through a life cycle impact function. The unified framework not only fully explores the demo- graphic age structure to robustly explain yield trend, but also utilizes efficiently the interest rate term structure to infer the S-shaped age impact function of the whole life cycle. We estimate the model with quarterly U.S. data from 1950s to present. The results show clearly that the model fits U.S. Treasury yields remarkably well in sample and outperforms popular alternative models out of sample. After removing the demography-driven trend especially pertaining to the baby boomerÕs life cycle, the remaining term structure component is stationary with counter-cyclical risk premia.
    Keywords: Demographic distribution, Life cycle, Term structure models, Semi- parametric model, Functional data analysis
    JEL: E43 G12 J11
    Date: 2021–01
  9. By: Kulander, Maria (University of Gävle, Sweden); Wilhelmsson, Mats (Department of Real Estate and Construction Management, Royal Institute of Technology)
    Abstract: As in many other countries, the population in Sweden is getting older. It means that the number of older people in society increases in absolute numbers and relative terms. Consequently, this will mean that the need for elderly housing will increase and the cost of these investments will be high. The following study aims to quantitatively analyse the spatial distribution of the number and size of housing for the elderly in Sweden over 2013-2018. The number of elderly housing per capita is not evenly distributed, and a large part of the explanation is, of course, that the number of older people is not evenly distributed between municipalities. Nevertheless, we can also state that the municipality's income level and tax base, as well as the geographical size and degree of urbanisation, play a role. If the municipality has a surplus or deficit in the supply of special housing for the elderly, it has no correlation with the distribution of Covid-19 cases or with the forecast number of older people in the future.
    Keywords: Elderly; Housing stock; Covid-19; Demographic
    JEL: J11 R23 R31
    Date: 2020–12–28
  10. By: Sergi Jiménez Martín
    Abstract: En este artículo revisamos la regulación internacional sobre compatibilidad y también sobreretraso del cobro de la pensión más allá de la edad normal, para posteriormente analizar losdeterminantes de la decisión de compatibilizar pensión y trabajo en una muestra de paísespresentes en el Survey of Health, aging, retirement in Europe (SHARE). Encontramos que elgrado de compatibilización aumenta con un test de ingresos menor (un menor impuesto a lapensión durante la compatibilización) o, dicho de otra forma, con la compatibilidad plena, esmayor para los más educados y los que tienen mejor salud. Finalmente, terminamos con unabreve reflexión para el caso español proponiéndose la flexibilización y extensión de lajubilación activa a la jubilación ordinaria y anticipada.
    Date: 2021–01
  11. By: World Bank
    Keywords: Social Protections and Labor - Pensions & Retirement Systems
    Date: 2020–02
  12. By: Avalosse, Hervé; Denuit, Michel (Université catholique de Louvain, LIDAM/ISBA, Belgium); Lucas, Nathalie (Université catholique de Louvain, LIDAM/ISBA, Belgium)
    Abstract: This paper studies the dynamics in end-of-life inpatients hospital expenses. A new model is proposed for hospital care expenditures based on a frequency-severity decomposition including age, calendar time, longevity dynamics, and time-to-death. These features are treated as continuous explanatory variables in nonlinear regression models with Poisson, Gamma and Tweedie error structures. Proximity to death is controlled for, as well as longevity improvements by including projected life tables into the proposed model. This allows the analyst to isolate the different effects impacting late-life hospital costs. A detailed case study performed on Belgian data illustrates the modeling strategy proposed in this paper. A comparison with the alternative model targeting total costs, not distinguishing between frequency and severity components, demonstrates the superior explanatory power of the proposed approach, revealing that total costs are mainly driven by their frequency component for the data under consideration.
    Keywords: health insurance ; projected life tables ; time-to-death model ; Generalized Additive Model (GAM)
    Date: 2020–01–01
  13. By: Van Rens, Thijs (University of Warwick, CAGE and IZA); Oswald, Andrew J. (University of Warwick, CAGE and IZA)
    Abstract: Are general lockdowns an appropriate response to the threat of Covid-19? Recent cost-benefit studies do not favour the case for them. Instead, since the virus practises a form of age discrimination (approximately 90% of coronavirus deaths are older than 65), some analysts have suggested an alternative. It is that younger citizens -- the generation worst affected by lockdowns and the one that will predominantly pay the eventual tax bill for furlough -- should be allowed to return to work to sustain the economy. Lockdown advocates argue that this would be dangerous, because older people would get infected by young workers living in the same home. We explore that claim. We find that 96% of UK workers under age 40 do not live with anyone over 65. In fact, 92% of all UK workers live in a household without anyone over 65 years old – and that holds true for white and BAME workers. Releasing young workers would thus expose only a small fraction of older citizens to intra-household transmission, although we recognize that the absolute number of people infected might eventually become considerable, and some vulnerable citizens could potentially be at risk if they live in large households. In general this paper’s results illustrate the potential value of fine-tuning the lifting of restrictions. Our findings buttress the cost-benefit case for age-based policies.
    Keywords: coronavirus; labor market; recession; COVID-19. JEL Classification: I18
    Date: 2020
  14. By: José Ignacio Garcia-Pérez (Department of Economics, Universidad Pablo de Olavide & FEDEA;); Manuel Serrano-Alarcón (NOVA National School of Public Health, NOVA University of Lisbon Center for Research in Economics and Health, Universitat Pompeu Fabra;); Judit Vall Castelló (Department of Economics, Universitat de Barcelona & Institut D’economia De Barcelona (IEB), Center for Research in Economics and Health, Universitat Pompeu Fabra;)
    Abstract: We estimate the labour market and health effects of a long-term unemployment (LTU) subsidy targeted to middle aged disadvantaged workers. In order to do so, we exploit a Spanish reform introduced in July 2012 that increased the age eligibility threshold to receive the subsidy from 52 to 55. Using a within-cohort identification strategy, we show that men ineligible for the subsidy were more likely to leave the labour force. In terms of health outcomes, although we do not report impacts on hospitalizations when considering the whole sample, we do find significant results when we separate the analysis by main diagnosis and gender. More specifically, we show a reduction by 12.9% in hospitalizations due to injuries as well as a drop by 2 percentage points in the probability of a mental health diagnosis for men who were eligible for the LTU subsidy. Our results highlight the role of long-term unemployment benefits as a protecting device for the health (both physical and mental) of middle aged, low educated men who are in a disadvantaged position in the labour market.
    Keywords: disadvantaged workers, unemployment subsidies, health effects
    JEL: H52 I23 I28 J24
    Date: 2020
  15. By: Inmaculada Domínguez-Fabián
    Abstract: En este trabajo se analizan los productos de previsión social complementaria en España teniendo en cuenta su evolución hasta el momento actual. En el caso de España la fiscalidad de estos productos, tanto desde el ámbito del individuo como del empresario que los promueve, ha sufrido continúas modificaciones, las cuales no siempre han contribuido a estimular el ahorro para la jubilación. El entorno digital en el que nos encontramos hace que también haya que considerar productos de ahorro para la jubilación, que pueden ser denominados como no tradicionales. La elevada inversión inmobiliaria en España, y su objetivo de inversión para el futuro, hace que los productos de previsión, relacionados con ella, sean también objeto de este trabajo.
    Date: 2021–01
  16. By: Mercedes Ayuso; Jorge Bravo
    Abstract: La esperanza de vida es probablemente la medida biométrica más relevante en el ámbito de las pensiones. En España, siendo un concepto ampliamente instaurado en el diseño de productos de ahorro a largo plazo y a diferencia de lo que ocurre en numerosos países de nuestro entorno, todavía no ha sido plenamente implementado en el diseño de nuestras pensiones públicas. La sostenibilidad, suficiencia y equidad de nuestro sistema de pensiones requiere incorporar en su diseño las probabilidades de supervivencia de los individuos a lo largo de su vida pasiva, una vez alcanzada la edad de jubilación: solo estimando de forma adecuada el número esperado de años de vida a partir de la salida del mercado laboral podremos estimar de forma adecuada las necesidades previsionales y de cobertura para nuestros mayores. La evolución de la longevidad, en el sentido de un número esperado de años de vida cada vez mayor en edades avanzadas, ha de tenerse en cuenta en la reforma de nuestro sistema de pensiones. De no hacerlo, podemos encontrarnos con infraestimaciones en los cálculos realizados.
    Date: 2021–01

This nep-age issue is ©2021 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.