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on Economics of Ageing |
| By: | Lusardi, Annamaria; Mitchell, Olivia S; Oggero, Noemi |
| Abstract: | Poor financial capability can erode well-being in later life. To explore debt and debt management among older Americans, age 51-61, we designed and analyzed a new module in the 2018 Health and Retirement Study along with information from the 2018 National Financial Capability Study. Even though this group should be at the peak of their retirement savings, it nevertheless carries debt due to student loans and unpaid medical bills; having children also contributes to carrying debt close to retirement. By contrast, the financially literate have more positive financial perceptions and behaviors. Specifically, being able to answer one additional financial literacy question correctly is associated with a higher probability of reporting an above average credit record and planning for retirement. Higher financial literacy is also linked to being less likely to carry excessive debt, being contacted by debt collectors, and carrying medical debt or student loans, even after accounting for a large range of demographics and other characteristics. Evidently, financial knowledge can help limit debt exposure at older ages. |
| Keywords: | debt; financial fragility; financial literacy; medical bills; Mortgages; retirement; Student Loans |
| JEL: | G40 G41 G51 G53 H31 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15568&r= |
| By: | Sanchez-Romero, Miguel; Schuster, Philip; Prskawetz, Alexia |
| Abstract: | As the heterogeneity in life expectancy by socioeconomic status increases, pen sion systems become more regressive implying wealth transfers from short to long lived individuals. Various pension reforms aim to reduce these inequali ties that are caused by ex-ante differences in life expectancy. However, these pension reforms may themselves induce redistribution effects since a) life ex pectancy is not perfectly correlated to socioeconomic status and b) pension reforms themselves will have an impact on life cycle decisions (education, con sumption, health, labor supply) and ultimately also on life expectancy and the composition of the population. To account for these feedback effects of pension reforms in heterogenous aging societies we propose an OLG framework that is populated by heterogeneous individuals that initially differ by their learning ability and disutility from the effort of attending schooling. These initial hetero geneities imply differences in ex ante life expectancies. Within this framework we study two pension reforms that aim to account for these differences in ex ante life expectancies. We show that by including the feedback of pension reforms on individual behavior, new redistributions may result. |
| Keywords: | Overlapping generations,Mortality and fertility differentials,Inequality,Life cycle,Pensions,Progressivity |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:233949&r= |
| By: | Wolfgang Frimmel; Martin Halla; Jörg Paetzold; Julia Schmieder |
| Abstract: | We estimate the impact of parental health on adult children's labor market outcomes. We focus on health shocks which increase care dependency abruptly. Our estimation strategy exploits the variation in the timing of shocks across treated families. Empirical results based on Austrian administrative data show a significant negative impact on labor market activities of children. This effect is more pronounced for daughters and for children who live close to their parents. Further analyses suggest informal caregiving as the most likely mechanism. The effect is muted after a liberalization of the formal care market, which sharply increased the supply of foreign care workers. |
| Keywords: | informal care, formal care, aging, health, labor supply, labor migration |
| JEL: | J14 J22 I11 I18 R23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp13774&r= |
| By: | Clark, Robert; Lusardi, Annamaria; Mitchell, Olivia S |
| Abstract: | Early in the COVID-19 pandemic, much of the US economy was closed to limit the virus' spread, and several emergency interventions were implemented. Our analysis of older (45-75) respondents fielded in April-May of 2020 indicates that about one in five respondents was financially fragile and would have difficulty facing a mid-size emergency expense. Some subgroups were at particular risk of facing financial difficulties, especially younger respondents, those with larger families, Hispanics, and the low income. Moreover, the more financially literate were better able to handle such shocks, indicating that knowledge can provide some additional protection during a pandemic. |
| Keywords: | financial literacy; financial resilience; older population; vulnerable groups |
| JEL: | D14 G53 I38 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15532&r= |
| By: | Daniel S. Hamermesh; Michał Myck; Monika Oczkowska |
| Abstract: | By age 77 a plurality of women in wealthy Western societies are widows. Comparing older (aged 70+) married women to widows in the American Time Use Survey 2003-18 and linking the data to the Current Population Survey allow inferring the short- and longer-term effects of an arguably exogenous shock—husband’s death—and measuring the paths of adjustment of time use to it. Widows differ from otherwise similar married women, especially from married women with working husbands, by cutting back on home production, mainly food preparation and housework, mostly by engaging in less of it each day, not doing it less frequently. French, Italian, German, and Dutch widows behave similarly. Widows are alone for 2/3 of the time they had spent with their spouses, with a small increase in time with friends and relatives shortly after becoming widowed. Evidence from the European countries shows that widows feel less time stress than married women but are also less satisfied with their lives. Following older women in 18 European countries before and after a partner’s death shows that widowhood reduces their feelings of time pressure. U.S. longitudinal data demonstrate that it increases feelings of depression. Most of the adjustment of time use in response to widowhood occurs within one year of the husband’s death; but feelings of reduced time pressure and of depression persist much longer. |
| JEL: | I31 J14 J22 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28752&r= |
| By: | Lancia, Francesco; Russo, Alessia; Worrall, Tim S |
| Abstract: | Optimal intergenerational insurance is examined in a stochastic overlapping generations endowment economy with limited enforcement of risk-sharing transfers. Transfers are chosen by a benevolent planner who maximizes the expected discounted utility of all generations while respecting the participation constraint of each generation. We show that the optimal sustainable intergenerational insurance is history dependent. The risk from a shock is unevenly spread into the future, generating heteroscedasticity and autocorrelation of consumption even in the long run. The optimum can be interpreted as a social security scheme characterized by a minimum welfare entitlement for the old and state-contingent entitlement thresholds. |
| Keywords: | Intergenerational insurance; Limited Commitment; Risk Sharing; stochastic overlapping generations |
| JEL: | D64 E21 H55 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15540&r= |
| By: | Westerhout, Ed (Tilburg University, School of Economics and Management); Meijdam, Lex (Tilburg University, School of Economics and Management); Ponds, Eduard (Tilburg University, School of Economics and Management); Bonenkamp, Jan |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:63418f60-e248-4dc9-aac8-ffefd6da93a4&r= |
| By: | Mika Akesaka; Peter Eibich; Chie Hanaoka; Hitoshi Shigeoka |
| Abstract: | The poor live paycheck to paycheck and are repeatedly exposed to strong cyclical income fluctuations. We investigate whether such income fluctuations affect risk preference among the poor. If risk preference temporarily changes around payday, optimal decisions made before payday may no longer be optimal afterward, which could reinforce poverty. By exploiting Social Security payday cycles in the US, we find that risk preference among the poor relying heavily on Social Security changes around payday. Rather than cognitive decline before payday, the deterioration of mental health and relative deprivation may play a role. We find similar evidence among the Japanese elderly. |
| JEL: | D81 D91 I32 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28784&r= |
| By: | Levy, Matthew; Schiraldi, Pasquale |
| Abstract: | This paper studies the non-parametric identification of the discount factor and utility function in the class of dynamic discrete-continuous choice (DDCC) models. In contrast to the discrete-only model we show the discount factor is identified. Our results further highlight why Euler equation estimation approaches that ignore agents' discrete choices are inconsistent. We estimate utility and discount factors for a consumption- savings-retirement choice problem using the Panel Study of Income Dynamics (PSID). We show that the relative risk aversion parameter and the intertemporal elasticity of substitution are separately identified, and that the latter varies across agents due to the wealth-dependence of the surplus from the discrete choice. This surplus also implies that the value function may be locally convex in wealth, and we find that a simulated Universal Basic Income (UBI) policy counterintuitively benefits wealthier working households more than poorer ones due to this effect. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15719&r= |
| By: | Mary Kaltenberg; Adam B. Jaffe; Margie E. Lachman |
| Abstract: | Previous research suggests creative ability peaks in the age decades of the 30s and early 40s, and declines thereafter, with some variation across fields. Building from the cognitive aging literature, we expect differences in the rate of creation and qualitative nature of creative works by age. Cognitive processes show aging-related changes with increases in experience-based knowledge (pragmatics or crystallized abilities) and decreases in the ability to process novel information quickly and efficiently (mechanics or fluid abilities). We describe a new database created by combining the publicly available patent data with information on inventor ages scraped from directory websites on the web for approximately 1.2 million U.S.-resident inventors patenting between 1976 and 2017. Our results suggest that cross-sectional and within-inventor patenting rates are similar, peaking at around the early 40s for both women and men. We find varying results for attributes of patents in relation to age, some of which are consistent with cognitive aging theory. For solo inventors, backward citations and originality, which are connected to experience, were found to increase with age. Forward citations, number of claims, and generality measures, as well as a citation-based measure of disruptiveness decline on average with inventor age. A similar pattern was found for performance in teams based on the average age of inventors in the team. Exploration of age diversity showed that teams with a wider age range had patents that are slightly more important (i.e., with more forward citations). The findings have the potential to advance scholarship on the life course of innovation with implications for workplace policies. |
| JEL: | O31 O34 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28769&r= |