nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒04‒26
fifteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Repenser la réforme des retraites à l’aune de la diversité des régimes et des projets individuels By François Facchini
  2. On the Investment Strategies in Occupational Pension Plans By Frank Bosserhoff; An Chen; Nils Sorensen; Mitja Stadje
  3. Population aging, relative prices and capital flows across the globe By Andrea Papetti
  4. Effects of formal home care on spousal health outcomes By Judite Goncalves; Francisco von Hafe; Luis Filipe
  5. A public micro pension programme in Brazil: Heterogeneity among states and setting up of benefit age adjustment By Renata Gomes Alcoforado; Alfredo D. Eg\'idio dos Reis
  6. From “Table 29” to the actuarial balance sheet: is it really that big a leap? By Anne M. Garvey; Juan Manuel Pérez-Salamero González; Manuel Ventura-Marco; Carlos Vidal-Meliá
  7. Trends in Employer-Sponsored Retirement Plan Access and Participation Rates: Reconciling Different Data Sources By Teresa Ghilarducci; Siavash Radpour; Michael Papadopoulos
  8. Age and Health Related Inheritance Taxation By Marie-Louise Leroux; Pierre Pestieau
  9. Mental Health Costs of Lockdowns: Evidence from Age-Specific Curfews in Turkey By Altindag, Onur; Erten, Bilge; Keskin, Pinar
  10. Who Does the Earned Income Tax Credit Benefit? A Monopsony View By Aida Farmand; Owen Davis
  11. Trajectories of Healthcare Services for Elder Persons - A Retrospective Study in Sherbrooke, Quebec By Lourdes Zubieta; Michel Raîche; Pauline Gervais; Réjean Hébert
  12. Can Older Workers Be Retrained? Canadian Evidence from Worker-Firm Linked Data By Fang, Tony; Gunderson, Morley; Lee, Byron
  13. The Effect of Retirement on Mental Health: Indirect Treatment Effects and Causal Mediation By Salm, Martin; Siflinger, Bettina; Xie, Mingjia
  14. An Examination of Demographic Differences in Obtaining Investment and Financial Planning Information By Paul Bechly
  15. Real interest rates and demographic developments across generations: A panel-data analysis over two centuries By Lucas Marc Fuhrer; Nils Herger

  1. By: François Facchini (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In 2019, Jean-Paul Delevoye and the "Conseil d'Orientation des Retraites" (COR) are proposing a reform of the French pension system. This reform wants to create a universal scheme and a pension system by points. This article is a critique of this project. It argues that it does not solve the five major problems of the French pension system implemented in 1946. French system is a pay-as-you go system funded by employees' contributions and a balancing contribution paid by enterprises in the sector, calculated in proportion. A pay-as-you go system impose, firstly, a social cost on each renegotiation of retirement conditions. Second, it does not take into account the diversity of individual, family and economic situations of each citizen. Thirdly, it crowds out all alternative pension schemes. Fourthly, it perpetuates an inefficient pension financing model which, fifthly, is the cause of major inequalities in retirement between generations. A point system does not solve any of these problems. It is urgent in these conditions to give more freedom to each individual to find the pension scheme that best suits him or her. Market solutions in this new architecture could take their full place in the debate that is taking place today in France in a context of social and political insurrection.
    Keywords: retraite,France,système de retraite à point,capitalisation,répartition,crise
    Date: 2020–05
  2. By: Frank Bosserhoff; An Chen; Nils Sorensen; Mitja Stadje
    Abstract: Demographic changes increase the necessity to base the pension system more and more on the second and the third pillar, namely the occupational and private pension plans; this paper deals with Target Date Funds (TDFs), which are a typical investment opportunity for occupational pension planners. TDFs are usually identified with a decreasing fraction of wealth invested in equity (a so-called glide path) as retirement comes closer, i.e., wealth is invested more risky the younger the saver is. We investigate whether this is actually optimal in the presence of non-tradable income risk in a stochastic volatility environment. The retirement planning procedure is formulated as a stochastic optimization problem. We find it is the (random) contributions that induce the optimal path exhibiting a glide path structure, both in the constant and stochastic volatility environment. Moreover, the initial wealth and the initial contribution made to a retirement account strongly influence the fractional amount of wealth to be invested in risky assets. The risk aversion of an individual mainly determines the steepness of the glide path.
    Date: 2021–04
  3. By: Andrea Papetti (Bank of Italy)
    Abstract: This paper develops a multi-country two-sector overlapping-generations model to study the impact of demographic change on the relative price of nontradables and current account balances. An aging population expands the relative demand for nontradables, exerting upward pressure on their relative price (structural transformation), and entails a willingness to save more, as households discount higher survival probabilities, and invest less, as firms face increasing labor scarcity. The general equilibrium reduction of the real interest rate (secular stagnation) dampens the increase in the relative price as savings become less profitable, thus lowering consumption at older ages. The model robustly predicts that faster-aging countries will face greater increases in the relative price of nontradables and unprecedented accumulations of net foreign asset positions (global imbalances) over the twenty-first century.
    Keywords: population aging, relative prices, capital flows, overlapping generations, tradable nontradable, secular stagnation, structural transformation, global imbalances
    JEL: E21 F21 J11 O11 O14
    Date: 2021–04
  4. By: Judite Goncalves; Francisco von Hafe; Luis Filipe
    Abstract: This study estimates the impacts of formal home care provided by paid professionals on spousal health outcomes. We use data from the Survey of Health, Ageing, and Retirement in Europe, a panel of older adults living in several European countries, and match new formal home care users to non-users to account for the endogeneity of the decision to seek formal home care. After considering underlying mechanisms, our results suggest that at least in the short run, the use of formal home care does not impact spousal physical or mental health. We also find that formal home care use increases spousal informal caregiving —along the extensive margin—, although in our sample and short time horizon, spousal informal caregiving does not seem to impact health.
    Keywords: Formal home care, informal care, caregiver burden, spouse caregivers, health index, health shocks, statistical matching
    JEL: C29 D19 I19
    Date: 2021
  5. By: Renata Gomes Alcoforado; Alfredo D. Eg\'idio dos Reis
    Abstract: Brazil is the 5th largest country in the world, despite of having a ``High Human Development'' it is the 9th most unequal country. The existing Brazilian micro pension programme is one of the safety nets for poor people. To become eligible for this benefit, each person must have an income that is less than a quarter of the Brazilian minimum monthly wage and be either over 65 or considered disabled. That minimum income corresponds to approximately $2$ dollars per day. This paper analyses quantitatively some aspects of this programme in the Public Pension System of Brazil. We look for the impact of some particular economic variables on the number of people receiving the benefit, and seek if that impact significantly differs among the 27 Brazilian Federal Units. We search for heterogeneity. We perform regression and spatial cluster analysis for detection of geographical grouping. We use a database that includes the entire population that receives the benefit. Afterwards, we calculate the amount that the system spends with the beneficiaries, estimate values \textit{per capita} and the weight of each UF, searching for heterogeneity reflected on the amount spent \textit{per capita}. In this latter calculation we use a more comprehensive database, by individual, that includes all people that started receiving a benefit under the programme in the period from 2nd of January 2018 to 6th of April 2018. We compute the expected discounted benefit and confirm a high heterogeneity among UF's as well as gender. We propose achieving a more equitable system by introducing `age adjusting factors' to change the benefit age.
    Date: 2021–04
  6. By: Anne M. Garvey (Department of Economics and Management Sciences, University of Alcalá, Madrid (Spain).); Juan Manuel Pérez-Salamero González (Department of Financial Economics and Actuarial Science, University of Valencia, Valencia. (Spain).); Manuel Ventura-Marco (Department of Financial Economics and Actuarial Science, University of Valencia, Valencia. (Spain).); Carlos Vidal-Meliá (Department of Financial Economics and Actuarial Science, University of Valencia (Spain).; research affiliate with the Instituto Complutense de Análisis Económico (ICAE), Complutense University of Madrid (Spain).)
    Abstract: EU regulations since 2017 have required all Member States to disclose their accrued-to-date pension liabilities (ADL) using a standard actuarial cost method and some common assumptions. This applies to both Social Security (SS) schemes and unfunded defined benefit (DB) schemes covering civil servants. These pension liabilities have to be disclosed in a supplementary table referred to as Table 29. An actuarial balance sheet (ABS) can be defined as a financial statement that lists a pension system's obligations to contributors and pensioners at a particular date, together with the amounts of the assets (financial and in particular those from contributions) that underwrite those commitments. The ABS can be used to assess the solvency of SS schemes, whereas Table 29 cannot. This paper develops a methodology to (easily) transform Table 29 into an ABS and compile its associated income statement (IS). To enable policymakers to better understand how the model would function, the paper also contains a country case study based on data from the most recently published Table 29 for Spain. According to our best estimate assumptions, it can be said that the Spanish pension system is partially insolvent because only part of the pension entitlements is backed up by assets, and that the system's sustainability has markedly deteriorated over the period 2015-2018.
    Keywords: Accountability; Actuarial Balance Sheet; Pension Liabilities; Social Security; Spain; Table 29; Useful Information.
    JEL: G22 H55 H83
    Date: 2021–03
  7. By: Teresa Ghilarducci; Siavash Radpour; Michael Papadopoulos (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Analysts and representatives of the news media often get confused about American workers’ retirement plan coverage due to the complexities behind multiple data sources. Namely, differing methodologies used by each source report different results. This research note updates previous attempts1 to explain the data differences and reports trends between 2000 and 2020 in two measures of employer-sponsored retirement plan coverage: access rate (the share of workers who are offered a retirement plan at work and are eligible to participate in them) and participation rate (the share of all workers who are participating in retirement plans offered at work). We also break down retirement plan access and participation rates by race, gender, and socio-economic status to report disparities in coverage.
    Keywords: older workers, recession, COVID-19, coronavirus, downward mobility, poverty, unemployment, wages, involuntary retirement, retirement, 401k, Medicare, Older Workers Bureau, racial disparities, disparities, inequality, coverage, retirement coverage
    JEL: E24 J30 J38 J60 J88 J58
    Date: 2021–01
  8. By: Marie-Louise Leroux; Pierre Pestieau
    Abstract: This paper studies the design of an optimal non linear inheritance taxation 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 result from precautionary reasons or from pure joy of giving reasons. Instead, we assume that it only observes whether bequests are made early in life or late in life, and in the latter case, whether the donor is autonomous or not. The main result is that, under asymmetric information, in addition to labour income taxation, early bequests of the low-productivity agent should be distorted downward, that is, they should be taxed so as to relax incentive constraints.
    Keywords: bequest taxation, long term care, utilitarianism, old-age dependency, non linear taxation
    JEL: H21 H23 I14
    Date: 2021
  9. By: Altindag, Onur (Bentley University); Erten, Bilge (Northeastern University); Keskin, Pinar (Wellesley College)
    Abstract: Using a strict, age-specific lockdown order for adults aged 65 and older in Turkey, we examine the mental health consequences of an extended period of tight mobility restrictions on senior adults. Adopting a regression discontinuity design, we find that the curfew-induced decline in mobility substantially worsened mental health outcomes, including somatic and nonsomatic symptoms of mental distress (approximately 0.2 standard deviation). Exploring potential channels, we document an increase in social and physical isolation, with no evidence of robust changes in labor market outcomes or intrahousehold conflict for this subpopulation.
    Keywords: COVID-19, mental health, lockdown, regression discontinuity, Turkey
    JEL: I18 I31 O15
    Date: 2021–04
  10. By: Aida Farmand; Owen Davis (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: The Earned Income Tax Credit (EITC) targets refundable tax credits to low-income workers, incentivizing labor supply and raising the incomes of tens of millions of Americans. One possible consequence of subsidizing low-wage work, however, is to reduce wage growth. A monopsony model of the EITC is developed in order to analyze its impacts on labor market outcomes, which are identified by exploiting variation in state EITC supplements. A first set of results focused on the food service industry find that the EITC increases employment and reduces turnover among young women. Further results suggest that the EITC reduces wages for workers without college degrees. These findings prompt a reconsideration of the redistributive effects of the EITC, particularly for groups like older low-wage workers who face slower wage growth as a result of the policy but do not receive the same level of benefits on average
    Keywords: Retirement income, Social Security claiming, Older worker labor supply
    JEL: H55 J26 J32
    Date: 2021–03
  11. By: Lourdes Zubieta; Michel Raîche; Pauline Gervais; Réjean Hébert
    Abstract: This is a longitudinal study using health administrative data of a cohort of 65+ adults, living in the city of Sherbrooke, Quebec, Canada from Jan 2011 to Dec 2015. We merged five databases including all individual visits to emergency room (ER), hospitalisations (CH), geriatric wards, admissions to intermediate and long term care (IC, LTC) facilities, and home care (HC) services. The objectives of this study were: 1) to provide a 5-year portrait of the use of health services of the 65+ population in the city of Sherbrooke, Quebec, 2) to identify the most common trajectories followed by elder patients over five years, and 3) to gather evidence on the relationship between the intensity of HC and further ER visits and hospitalisations. The cohort of services’ users represents 59% of Sherbrooke’s 65+ population. The most frequent trajectory found was ER and CH, which speaks of a health care system hospital - centered. The majority of deaths occurred during a hospital stay (CH, ~55%) or in a long-term care facility (LTC, ~28%). We also found 1 652 (8.4%) admissions to LTC facilities, with 43% of them coming straight from a hospital for an average of one month before LTC admission. Individuals having received at least one home care visit represent 34% of the original cohort and generated 52% of services excluding home care. Data visualisation diagrams indicate that earlier HC visits were followed by less ER visits and even less hospitalisations, when compared with users receiving HC later on our study interval. Finally, we found an important reduction of home care services, mainly for those users with high intensity of services; this fact underlines the system’s inability to refocus health care services on home care.
    Keywords: Healthcare,User Trajectories,Home Care,Data Visualisation,
    Date: 2021–04–16
  12. By: Fang, Tony (Memorial University of Newfoundland); Gunderson, Morley (University of Toronto); Lee, Byron (China Europe International Business School)
    Abstract: Based on Statistics Canada's worker-firm matched Workplace and Employee Survey, our econometric analysis indicated that the average probability of receiving training was 9.3 percentage points higher for younger (25-49) compared to older (50+) workers. Slightly more than half of that gap is attributed to older workers having a lower propensity to receive training after controlling for the characteristics that affect training. Their lower propensity to receive training tended to prevail across 54 different training measures. We find that older workers can be trained, but this requires training that is designed for their needs including: slower and self-paced instruction; hands-on practical exercises; modular training components that build in stages; familiarizing them with new equipment; and minimizing required reading and the amount of material covered.
    Keywords: training, older workers, worker-firm matched data, Canada
    JEL: J14 J18 J24
    Date: 2021–04
  13. By: Salm, Martin (Tilburg University, School of Economics and Management); Siflinger, Bettina (Tilburg University, School of Economics and Management); Xie, Mingjia (Tilburg University, School of Economics and Management)
    Date: 2021
  14. By: Paul Bechly
    Abstract: Financial literacy and financial education are important components of modern life. The importance of financial literacy is increasing for financial consumers because of the weakening of both government and employer-based retirement systems. Unfortunately, empirical research shows that financial consumers are not fully informed and are not able to make proper choices even when appropriate information is available. More research is needed as to how financial consumers obtain investment and financial planning information. A primary data study was conducted to understand the differences between the demographic categories of gender, age, education-level, and income-level with the means of obtaining investment and financial planning information. In this research study, which selected a population from the LinkedIn platform, statistical differences between gender, age, education-level, and income-level were confirmed. These differences helped to confirm prior research in this field of study. Practical opportunities for commercial outreach to specific populations became evident through this type of research. Providers of investment and financial planning information can access their targeted audience more effectively by understanding the demographic profile of the audience, as well as the propensity of the demographic profile of the audience to respond. As this type of research is relatively easy to construct and administer, commercial outreach for providers of investment and financial planning information can be conducted in a cost-efficient and effective manner.
    Date: 2021–04
  15. By: Lucas Marc Fuhrer; Nils Herger
    Abstract: This paper empirically examines the effect of population growth on long-term real interest rates. Although this effect is well founded in macroeconomic theory, the corresponding empirical results have been rather tenuous and surprisingly unstable. As the demographic interest rate impact is theoretically based on intergenerational relationships, we not only contemplate gross population growth rates but also distinguish between demographic growth resulting from a birth surplus and net migration. Within a panel covering 12 countries and the years since 1820, our results suggest that there is a positive, statistically significant, and stable effect from the birth surplus on real interest rates. Conversely, the corresponding effect of net migration seems to be much more volatile. Hence, our results suggest that it is mainly population growth occurring through a birth surplus that affects the equilibrium real interest rate.
    Keywords: Demographics, population growth, real interest rate
    JEL: E43 E52 J11
    Date: 2021

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