nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒04‒19
seven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The ageing of the Maltese workforce and the impact of pension age changes By Aaron G. Grech
  2. Age-Targeted Income Taxation, Labor Supply, and Retirement By Johan Gustafsson
  3. The gender gap in pension wealth in Europe: Evidence from twenty countries By Tairi Room; Orsolya Soosaar
  4. Optimizing the life cycle path of pension premium payments and the pension ambition in the Netherlands By Harry ter Rele; Carolijn de Kok; Nicoleta Ciurila; Peter Zwaneveld
  5. Remittances, ICT and Pension Income Coverage: The International Evidence By Adeabah, David; Asongu, Simplice; Andoh, Charles
  6. Mixed participating and unit-linked life insurance contracts: design, pricing and optimal strategy By Hanna, Vanessa; Hieber, Peter; Devolder, Pierre
  7. Employment Responses to Income Effect: Evidence from Pension Reform By Sebastian Becker; Hermann Buslei; Johannes Geyer; Peter Haan

  1. By: Aaron G. Grech
    Abstract: In recent years the share of the Maltese labour force aged over fifty fell, reflecting migratory flows and rising female employment. However, ageing is still evident when looking at specific sectors and occupations. In these parts of the labour market, pension age changes have been very beneficial in sustaining activity. Contrary to expectations, workers in manual and arduous jobs have not resorted disproportionately to the early exit age, and career lengths have converged across occupations, and somewhat less so across sectors. Older working women have tended to extend their careers more readily than men did. By 2018 the behavioural response to pension age changes is estimated to have boosted GDP by as much as 1.3 percentage points. In sectors like public administration, agriculture and fisheries, water distribution and financial services longer working lives may have accounted for a tenth in the growth in value added registered between 2013 and 2018.
    JEL: J18 J26 H55
  2. By: Johan Gustafsson
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect is however an increase in life-cycle labor supply and consumption.
    Keywords: retirement age, life cycle, tax heterogeneity, savings consumption, leisure
    JEL: D15 J22 J26
    Date: 2021
  3. By: Tairi Room; Orsolya Soosaar
    Keywords: retirement saving behaviour, voluntary retirement savings, mandatory retirement saving system, private pension wealth, gender gap, Europe
    JEL: D14 G23 G11 J32
    Date: 2021–04–08
  4. By: Harry ter Rele (CPB Netherlands Bureau for Economic Policy Analysis); Carolijn de Kok (CPB Netherlands Bureau for Economic Policy Analysis); Nicoleta Ciurila (CPB Netherlands Bureau for Economic Policy Analysis); Peter Zwaneveld (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Pension premium rates and pension benefits are independent of age or family situation in the second pillar of the Dutch pension system. In a life cycle model calibrated on Dutch data we investigate the optimal arrangement of pension premiums and benefits taking into consideration two factors: the fact that incomes generally rise with age and the presence of children in the early years of the household. Our analysis points out that due to these factors lifetime welfare can be raised by a delay of pension premium payments towards later working ages. A lower pension ambition further enhances lifetime welfare. Taking these factors into consideration when designing the pension system increases lifetime welfare by an amount that equals a 3.4 percent increase in lifetime consumption if no borrowing constraints are imposed and 2.8 percent if, more realistically, we impose these constraints. Family size (i.e. number of children) has a large impact on optimal pension premiums and optimal pension ambition. Policy conclusions from our results should carefully weigh the calculated welfare gain against possible negative and positive effects of non-modelled aspects.
    JEL: D91 G11 G23
    Date: 2021–04
  5. By: Adeabah, David; Asongu, Simplice; Andoh, Charles
    Abstract: This study examines the impact of remittances and information and communication technology (ICT) on pension at the country level. Our empirical evidence, based on data from 96 countries, indicate a significant non-linearity between remittances, ICT and pension income coverage. First, we find a convex relation between remittances and pension income coverage, indicating that increases in remittance, initially decreases pension income coverage, but as remittance increases beyond a certain point, so too does pension income coverage. This inflection point, where the effect of remittances turns from negative to positive, is estimated to be around 3.09% of GDP. Second, we document a concave relationship between ICT (i.e. mobile subscription and internet penetration) and pension income coverage. An increase in ICT results in increased pension income coverage. However, when ICT reaches a certain point, any further increase is associated with lower pension income coverage. The estimated optimal point is found to be around 140.14 subscriptions (per 100 people) for mobile phone and 27.93 (per 100 people) for internet penetration, respectively. Other implications are discussed.
    Keywords: Pension income coverage; Remittances; Mobile subscription; Internet penetration; ICT
    JEL: C5 L96 O1
    Date: 2020–08
  6. By: Hanna, Vanessa (Université catholique de Louvain, LIDAM/ISBA, Belgium); Hieber, Peter; Devolder, Pierre (Université catholique de Louvain, LIDAM/ISBA, Belgium)
    Abstract: In many countries, the decline in interest rates has reduced the interest in traditional participating life insurance contracts with investment guarantees and has led to a shift to unit-linked policies without guarantees. We design a novel mixed insurance contract splitting premium payments between a participating and a unit-linked fund. An additional guarantee fee is applied on the unit-linked return in order to increase the investment guarantee of the participating fund. In a utility-based framework, using power utility and prospect theory as preference functions, we show that the mixed product is usually perceived more attractive than a full investment in either the unit-linked or the participating contract. The guarantee fee is beneficial for conservative investors interested in a stronger protection against losses. This is also interesting from a marketing perspective: By the increase of the guarantee in the participating product, zero or negative guaranteed rates can be avoided.
    Keywords: Life and pension insurance ; Participating contract ; Unit-linked contract ; Investment guarantee ; Mixed insurance contracts ; Expected utility ; Cumulative prospect theory
    Date: 2021–02–23
  7. By: Sebastian Becker; Hermann Buslei; Johannes Geyer; Peter Haan
    Abstract: For the design of the pension system, it is crucial to disentangle the employment responses related to the substitution effect and the income effect. In this paper, we provide causal evidence regarding the importance of the income effect, which is generally assumed to be small or non-existent. We exploit a pension reform in Germany that raised pension bene- fits related to children. For the identification, we exploit the discontinuity induced by the reform: only mothers with children born before 1.1.1992 were affected by the pension reform. Children born after this cut-off date did not change pension income. We use a difference-in-differences estimator based on administrative data from the German pension insurance that includes complete individual employment histories. We find that income effects are significant and economically important. We show that the policy led to a reduction in the employment of affected females. Further, we are able to show effect heterogeneity on different dimensions: by treatment intensity, age of the mother, and pre-reform pension wealth.
    Keywords: Natural experiment, female labor supply, pension benefit
    JEL: H55 J13 J22
    Date: 2021

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