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on Economics of Ageing |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper studies the fiscal and macroeconomic impact of different reform options. It analyzes the impact of an increase in the contribution rate, a reduction of benefits, and an increase in the retirement age. Although all reform options can lead to the fiscal sustainability of the system, there are important macroeconomic trade-offs among them. Although the Luxembourg’s pension system is sound over the near term, further reforms are needed to ensure its long-term sustainability. This paper explored the fiscal and macroeconomic impact of several reform options: an increase in the contribution rate, a reduction of benefits, and an increase in the retirement age. Although all these reforms would help ensuring fiscal long-term sustainability, there are important macroeconomic trade-offs. Even though an increase in contribution rates can be implemented immediately, it introduces distortions in the labor market which lead to a decline in GDP in addition to a decline in consumption. |
| Keywords: | Pension spending;Aging;Pensions;Pension reform;Retirement;ISCR,CR,GDP,pension system,retirement age,consumption,income |
| Date: | 2019–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/131&r=all |
| By: | Schön, Matthias |
| Abstract: | This paper shows that demographic change plays an important role in the formation of a country's net foreign asset position. An ageing population both lowers the demand and increases the supply of capital in an economy. Fewer workers reduce the required capital stock. As a longer life span leads to a longer retirement phase individuals save more. Simultaneously, necessary adjustments of pay-as-you-go pension systems to an ageing society affect aggregate savings. Taking Germany as an example, this paper applies a two-region model with endogenous savings and labour supply that is augmented with demographic data projections for OECD countries. It shows that demographic change in Germany is an important determinant of the current account. Counterfactual pension reform simulations show that a fixed pension level increases the current account while a fixed pension contribution rate lowers it. An increase in the retirement age results in a strong negative effect on the current account as it reduces the capital supply and increases the capital demand in an economy. |
| Keywords: | Demographic Change,Current Account,Pension System |
| JEL: | E27 E62 F21 H55 J11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:642020&r=all |
| By: | Grigoli, Francesco; Koczan, Zsoka; Topalova, Petia |
| Abstract: | Population aging in advanced economies could have significant macroeconomic implica- tions, unless more individuals choose to participate in labor markets. In this context, the steep increase in the share of older workers who remain economically active since the mid- 1990s is an overlooked yet encouraging trend. We identify the drivers of the rise in participa- tion of the elderly relying on cross-country and individual-level data from advanced economies over the past three decades. Our findings suggest that the bulk of the increase in their par- ticipation is driven by gains in educational attainment and changes in labor market policies, such as the tax benefit system, and pension reforms. Urbanization and the increasing role of services also contributed, while automation weighed on their participation. |
| Keywords: | Automation,elderly,labor force participation,pension |
| JEL: | J11 J21 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:762&r=all |
| By: | Patrick Button (Tulane University, NBER, and IZA); Mashfiqur R. Kahn (Bates White Consulting) |
| Abstract: | The United States Social Security Amendments of 1983 (SSA1983) increased the full retirement age (FRA) and increased penalties for retiring before the FRA. This cut to retirement benefits caused spillover effects on Social Security Disability Insurance (SSDI) applications and receipt by making SSDI relatively more generous. We explore if stronger disability and age discrimination laws moderated these spillovers, using variation whereby many state laws are broader or stronger than federal law. We estimate the effects of these laws on SSDI applications and receipt using a difference-in-differences approach, comparing cohorts affected by SSA1983 to similarly aged unaffected cohorts, across states. We find that a broader definition of disability, where only a medically diagnosed condition is required to be covered under state law, significantly reduces SSDI applications induced by SSA1983, but has no effect on SSDI receipt, likely because the foregone applications were for those with less severe conditions that were unlikely to have been approved for SSDI. We find some evidence that other broader or stronger features of state disability discrimination laws reduce both SSDI applications and receipt. We do not find much evidence that age discrimination laws reduce spillovers to SSDI. These results suggest that broader and stronger disability discrimination laws reduce employment barriers, allowing older individuals to work longer, possibly reducing reliance on SSDI and costly applications to SSDI. |
| Keywords: | Disability, aging, discrimination, employment law; disability insurance; Social Security, Americans with Disability Act, Age Discrimination in Employment Act, Social Security Amendments of 1983 |
| JEL: | H55 J71 J78 K31 J14 J26 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:20-326&r=all |
| By: | Katherine G. Abraham (University of Maryland, IZA, and NBER); Brad J. Hershbein (W.E. Upjohn Institute for Employment Research); Susan N. Houseman (W.E. Upjohn Institute for Employment Research) |
| Abstract: | The share of workers who are self-employed rises markedly with age. Given policy concerns about inadequate retirement savings, especially among those with lower education, and the resulting interest in encouraging employment at older ages, it is important to understand the role that self-employment arrangements play in facilitating work among seniors. New data from a survey module fielded on a Gallup telephone survey distinguish independent contractor work from other self-employment and provide information on informal and online platform work. The Gallup data show that, especially after accounting for individuals who are miscoded as employees, self-employment is even more prevalent at older ages than suggested by existing data. Work as an independent contractor is the most common type of self-employment. Roughly one-quarter of independent contractors age 50 and older work for a former employer. At older ages, self-employment generally—and work as an independent contractor specifically—is more common among the highly educated, accounting for much of the difference in employment rates across education groups. We provide suggestive evidence that differences in opportunities for independent contractor work play an important role in the lower employment rates of less-educated older adults. |
| Keywords: | Contract work, independent contractor, self-employment, online platform, retirement, Gallup |
| JEL: | J14 J22 J26 J62 M55 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:10-323&r=all |
| By: | Rosangela Bando; Sebastian Galiani; Paul Gertler |
| Abstract: | Public expenditures on non-contributory pensions are equivalent to at least 1 percent of GDP in several countries in Latin America and is expected to increase. We explore the effect of non-contributory pensions on the well-being of the beneficiary population by studying the Pensiones Alimentarias program established by law in Paraguay, which targets older adults living in poverty. Households with a beneficiary increased their level of consumption by 44 percent. The program improved subjective well-being in 0.48 standard deviations. These effects are consistent with the findings of Bando, Galiani and Gertler (2020) and Galiani, Gertler and Bando (2016) in their studies on the non-contributory pension schemes in Peru and Mexico. Thus, we conclude that the effects of non-contributory pensions on well-being in Paraguay are comparable to those found for Peru and Mexico and add to the construction of external validity. |
| JEL: | I18 I3 I31 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28318&r=all |
| By: | World Bank |
| Keywords: | Social Protections and Labor - Pensions & Retirement Systems |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33497&r=all |
| By: | Alexey, Kurbatskiy; Nikita, Artamonov; Timur, Khalimov |
| Abstract: | This paper focuses on the interconnection between the economic growth and the age structure. It is assumed that while modeling economic growth, we should take in consideration such indicators, as the ones that describe age distribution of people, which also, in some degree, explain the supply of human capital. In this paper we carried out an econometric analysis of the age structure’s impact on economic development in regions of Russian Federation based on panel data from 2001 to 2016. The panel has been tested for unit root (CIPS-test) and spatial correlations (Moran’s I, Moran’s test, RW-test). The basic regression model in the paper is the panel linear regression with spatial lag and spatial autocorrelated error term (SARAR regression). The choice of regression model is based on the results of panel data tests. Although the coefficients for some age groups are significant in the model, their marginal responses are insignificant due to spillover effects. As a result, it is shown, that the greatest positive effect on economic growth is from age category 25-39 years. The impacts of the significant age categories are estimated. |
| Keywords: | demography, economic growth, aging, age structure, GRP. |
| JEL: | J1 J11 R11 |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105273&r=all |
| By: | Hiilamo, Aapo |
| Abstract: | Background A record number of older individuals have household debt, but little is known about possible links between debts and their mental wellbeing. This study examines the extent to which different aspects of household indebtedness predict mental wellbeing among this population. Methods A sample of 17,091 individuals (72,700 observations) aged 50 and over in England was derived from waves 1 - 8 of the English Longitudinal Study of Ageing. Mental wellbeing was assessed by two outcome measures: number of depressive symptoms (CES-D 8) and quality of life (CASP-19 score). The predictors of mental wellbeing were examined using quartiles of non-zero overall debt amount, debt-to-income and debt-to-non-housing wealth ratios as alternative measures of debt burden. Linear regression models estimated the associations of mortgage and non-mortgage debt measures with mental wellbeing while adjusting for observable socioeconomic confounding factors. Individual fixed effect models were used to control for all time-constant factors among a longitudinal subsample. Results Individuals in the highest debt-to-wealth quartile were particularly at risk of lower mental wellbeing, that is, a higher number of depressive symptoms and lower quality of life. After covariate adjustment, non-mortgage debt predicted lower mental wellbeing on both measures but mortgage debt was only linked to lower quality of life. Among the subsample who experienced changes in high non-mortgage debt levels, a small association of these changes with mental wellbeing outcomes were observed. Asymmetric within-individual estimation showed that both getting rid of and acquiring new debts during the study period predicted symmetrically (small) increases and decreases, respectively, in mental wellbeing. Conclusion These findings indicate that among older individuals in England, non-mortgage debt status is linked to poor mental wellbeing. High, non-mortgage, debt-to-wealth ratios may help identify risk of mental wellbeing issues in older people with debts. |
| Keywords: | household debt; depression; quality of life; mental wellbeing; ageing; social determinants of mental health; OA journal |
| JEL: | R14 J01 |
| Date: | 2020–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:106507&r=all |
| By: | Karen Eggleston ⓡ; Yong Suk Lee ⓡ; Toshiaki Iizuka |
| Abstract: | In one of the first studies of service sector robotics using establishment-level data, we study the impact of robots on staffing in Japanese nursing homes, using geographic variation in robot subsidies as an instrumental variable. We find that robot adoption increases employment by augmenting the number of care workers and nurses on flexible employment contracts, and decreases difficulty in staff retention. Robot adoption also reduces the monthly wages of regular nurses, consistent with reduced burden of care. Our findings suggest that the impact of robots may not be detrimental to labor and may remedy challenges posed by rapidly aging populations. |
| JEL: | I11 J14 J23 O30 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28322&r=all |
| By: | Jessamyn Schaller (Claremont McKenna College, Robert Day School of Economics); Chase Eck (University of Arizona, Department of Economics) |
| Abstract: | While there has been broad interest in the direct effects of major life events on older households that experience them, little attention has been paid to the intergenerational transmission of those effects— how negative shocks in parents’ households affect the outcomes of their adult children—or to the role that grown children play in helping their parents recover from adverse events. We use regression and event study approaches to examine within-family changes in monetary transfers and informal care following wealth loss, involuntary job displacement, spousal death, and health shocks in retirement-aged households. We find that giving to adult children is responsive to changes in parents’ wealth and earned income. We document large reductions in the likelihood of making financial transfers to children following wealth loss and job displacement, particularly in households with low accumulated wealth. We also find that parents increase their transfers following spousal death and reduce them with the onset of disability or poor health. We find that upstream transfers are also responsive to life events— children, particularly those with low-wealth parents, increase their financial transfers and in-kind assistance following adverse shocks in their parents’ households. |
| Keywords: | intergenerational transfers, health, job loss, divorce |
| JEL: | D64 I10 J63 J12 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:19-313&r=all |
| By: | von Siemens, Ferdinand |
| Abstract: | Although the elderly are more vulnerable to COVID-19, the empirical evidence suggests that they do not behave more cautiously in the pandemic than younger individuals. This theoretical model argues that some individuals might not comply with the COVID-19 measures to reassure themselves that they are not vulnerable, and that the incentives for such self-signaling can be stronger for the elderly. The results suggest that communication strategies emphasizing the dangers of COVID-19 could backfire and reduce compliance among the elderly. |
| Keywords: | motivated beliefs,compliance behavior,age,health,COVID-19 |
| JEL: | C70 D91 D82 I12 I18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:299&r=all |
| By: | Anantharaman, Divya; Kamath, Saipriya; Li, Shengnan |
| Abstract: | Corporate defined-benefit (DB) pension sponsors in the US are increasingly on a path of “derisking” – by moving pension assets away from equities and towards fixed-income securities that better match the obligations, or by transferring obligations off their balance sheets entirely, via settlements with insurance companies or lump-sum payouts to beneficiaries. In this study, we examine whether the Tax Cut and Jobs Act of 2017 (“TCJA”) served as a driver of pension derisking. Examining behavior in the window between the TCJA’s announcement and its lower tax rate going into effect, we document that sponsors with stronger incentives to derisk their pensions tend to contribute more into their plans in that window, while deductions can still be taken at the higher tax rate – specifically, sponsors expecting large and uncertain contribution requirements for pensions in the future, facing high regulatory costs to maintaining plans, and with competing demands on cash flows. Examining behavior after the TCJA goes into effect, we document that the firms with the largest TCJA-triggered contributions also engage in more derisking subsequently, both by shifting asset allocations and by transferring obligations to other parties. In sum, our findings point to the TCJA having acted as a trigger for what could be a fundamental reorganization of the DB pension landscape in the US. |
| Keywords: | TCJA; defined-benefit plans; voluntary contributions; derisking; pension asset allocation; pension settlements or buyouts |
| JEL: | J32 K34 H32 H26 G23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108535&r=all |
| By: | Gopi Shah Goda; Jialu Liu Streeter |
| Abstract: | Wealth varies considerably across the population and changes significantly over the lifecycle. In this paper, we trace out trajectories of wealth across several key life milestones, including marriage, homeownership, childbirth, divorce, disability, health shocks, retirement and widowhood using multiple decades of longitudinal panel data. We estimate both changes over the ten-year period before and after each milestone and assess whether those changes occur gradually or sharply after the milestone. We find evidence of significant long-run increases in wealth associated with homeownership and retirement, and significant long-run reductions in wealth associated with divorce, health shocks, and disability. In general, these changes appear to occur gradually rather than immediately after the milestone. Our results also indicate a large degree of heterogeneity across demographics, socioeconomic status and risk protection from insurance. In particular, those with lower levels of socioeconomic status and those without access to risk protection experience smaller wealth gains (or larger wealth losses) following life-course transitions. These results identify populations and life stages where individuals are most vulnerable to large reductions in wealth. |
| JEL: | G51 I13 J1 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28329&r=all |
| By: | Ian Burn; Daniel Firoozi; Daniel Ladd; David Neumark |
| Abstract: | We explore whether ageist stereotypes in job ads are detectable using machine learning methods measuring the linguistic similarity of job-ad language to ageist stereotypes identified by industrial psychologists. We then conduct an experiment to evaluate whether this language is perceived as biased against older workers. We find that language classified by the machine learning algorithm as closely related to ageist stereotypes is perceived as ageist by experimental subjects. The scores assigned to the language related to ageist stereotypes are larger when responses are incentivized by rewarding participants for guessing how other respondents rated the language. These methods could potentially help enforce anti-discrimination laws by using job ads to predict or identify employers more likely to be engaging in age discrimination. |
| JEL: | J14 J71 K31 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28328&r=all |