nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒05‒24
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Demographic Change, Technological Advances, and Growth: A Cross-Country Analysis By Park, Cyn-Young; Shin, Kwanho; Kikkawa, Aiko
  2. What a drag it is getting old? Mental health and loneliness beyond age 50 By van Ours, Jan C.
  3. Redistributive effects of pension reforms: Who are the winners and losers? By Sanchez-Romero, Miguel; Schuster, Philip; Prskawetz, Alexia
  4. Optimal Demand for Medical and Long-Term Care By Johannes Schünemann; Holger Strulik; Timo Trimborn
  5. Spillover Effects of Retirement: does health vulnerability matter? By Dominic Byrne; Do Won Kwak; Kam Ki Tang; Myra Yazbeck
  6. Widows’ Time, Time Stress and Happiness: Adjusting to Loss By Hamermesh, Daniel S.; Myck, Michal; Oczkowska, Monika
  7. Financial planning & optimal retirement timing for physically intensive occupations By Edouard Ribes
  8. Impact of Social Transfers on Depressive Symptoms: Evidence from the South African Old Age Pension By Adeola Oyenubi; Joseph Ajefu
  9. Valuing the Global Mortality Consequences of Climate Change Accounting for Adaptation Costs and Benefits By Carleton, Tamma; Delgado, Michael; Greenstone, Michael; Houser, Trevor; Hsiang, Solomon M.; Hultgren, Andrew; Jina, Amir; Kopp, Robert; McCusker, Kelly; Nath, Ishan; Rising, James; Rode, Ashwin; Seo, Hee Kwon (Samuel); Viaene, Arvid; Yuan, Jiacan; Zhang, Alice
  10. Why Time Cannot Heal All Wounds: Personal Wealth Trajectories of Divorced and Married Men and Women By Nicole Kapelle
  11. Reforming the Individual Direct Taxation System of North Cyprus By Glenn P. Jenkins; Amin Sokhanvar; Hasan Ulaş Altıok
  12. Towards equity and sustainability? China’s pension system reform moves center stage By Li Yang
  13. Asymmetric information, strategic transfers, and the design of long-term care policies By Canta, Chiara; Cremer, Helmuth

  1. By: Park, Cyn-Young (Asian Development Bank); Shin, Kwanho (Korea University); Kikkawa, Aiko (Asian Development Bank)
    Abstract: This paper revisits the impact of population aging on economic growth. In order to understand the impact of population aging on economic growth, it is important to consider the changes in the entire age distribution of demography. Our empirical analysis indicates that a change in age distribution that increases the proportion of older people while reducing the working-age population lowers economic growth. We also investigate the effect of technological advances on the relation between population aging and economic growth, using four plausible proxies of technological advancement: life expectancy, labor productivity, automation, and total factor productivity. We find that increasing life expectancy and labor productivity benefit old age groups as they likely help older age groups contribute more positively to future growth. More automation also helps improve productivity of old age groups but in a different way. When robot density increases, old age groups become less disadvantaged compared to the young. Lastly, technological adoption enhances the growth contribution of productive age groups from the 30s to 60s when one compares low with high total factor productivity scenarios.
    Keywords: demographic change; growth; labor productivity; life expectancy; robotics
    JEL: J11 J24 O33 O47 O57
    Date: 2020–07–10
  2. By: van Ours, Jan C.
    Abstract: This paper studies mental health and loneliness in the Netherlands for individuals beyond age 50. The analysis is based on panel data over the period 2008 to 2018 and focuses on the effects of life events and aging. It appears that mental health gets worse and loneliness increases if individuals lose their partner or become unemployed. On average, mental health of males and high educated females improves at retirement. With respect to aging, the main conclusions are that mental health improves while loneliness goes down at least up to the high 70s. From the perspective of mental health and loneliness it does not seem to be a drag getting old.
    Keywords: age; loneliness; mental health; old people
    JEL: I31 J14
    Date: 2020–11
  3. By: Sanchez-Romero, Miguel; Schuster, Philip; Prskawetz, Alexia
    Abstract: As the heterogeneity in life expectancy by socioeconomic status increases, pension systems become more regressive implying wealth transfers from short to long lived individuals. Various pension reforms aim to reduce these inequalities that are caused by ex-ante differences in life expectancy. However, these pension reforms may themselves induce redistribution effects since a) life expectancy is not perfectly correlated to socioeconomic status and b) pension reforms themselves will have an impact on life cycle decisions (education, consumption, 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 heterogeneities 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
  4. By: Johannes Schünemann (University of Fribourg, Department of Economics); Holger Strulik (University of Goettingen, Department of Economics); Timo Trimborn (Department of Economics and Business Economics, Aarhus University)
    Abstract: For the population over 65, long-term care (LTC) expenditure constitutes a considerable share in health care expenditures. In this paper, we decompose health care into medical care, intended to improve one’s state of health, and personal care required for daily routine. Personal care can be either carried out autonomously or by a third party. In the course of aging, autonomous personal care is gradually substituted by LTC. We set up a life-cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and analyze the interplay between medical care and LTC. In comparative dynamic analyses, our theory-based approach allows us to causally investigate the impact of better health and rising life expectancy, triggered by higher income and better medical technology, on the expected expenditures for LTC in the future. We predict a 1.75-percentage increase in expected LTC expenditure per percentage increase in life expectancy. In terms of present value at age 20, this elasticity declines to around 1 percent. Even when considering different magnitudes of shocks in medical technology and income, we find that these elasticities remain remarkably stable.
    Keywords: Health, Long-Term Care, Health Behavior, Life Expectancy
    JEL: D11 D91 I12 J11
    Date: 2021–05–17
  5. By: Dominic Byrne (School of Economics, University of Queensland); Do Won Kwak (Graduate School of International Studies, Korea University, Seoul, Korea); Kam Ki Tang (School of Economics, University of Queensland, Australia); Myra Yazbeck (Department of Economics, University of Ottawa, Canada; School of Economics, University of Queensland)
    Abstract: The current literature investigating the impact of retirement and the associated spousal spillover effects overlooks the unintended effects of retirement on spouses in vulnerable health, namely spouses with long-term health conditions. In this paper, we fill this gap in the literature and investigate the impact of an individual’s retirement on their partner’s health outcomes when their partner has long-term health conditions. Given the inherent identification challenges associated with entry into retirement, we exploit an exogenous variation of pension-qualifying age in Australia. Using this exogenous variation as an instrument and data from the Household Income and Labour Dynamics in Australia survey, we find that the husband’s retirement has a positive impact on the wife’s quality adjusted life years (QALY) and other physical and mental health outcomes. Drawing upon the literature on QALY and cost-effectiveness thresholds, we estimate that the dollar value of the husband-to-wife spillovers could be worth somewhere between AUD7,000 and AUD21,000. We also identify redistribution of domestic workload as a key transmission mechanism of the spousal spillover effects. Women with LTHCs will see their QALY and health improves only if their husband devotes more time to domestic tasks after retirement.
    Keywords: Spillovers; Retirement; Long-term Health Conditions; QALY
    JEL: I31 I19
    Date: 2021–04–28
  6. By: Hamermesh, Daniel S. (Barnard College); Myck, Michal (Centre for Economic Analysis, CenEA); Oczkowska, Monika (Centre for Economic Analysis, CenEA)
    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.
    Keywords: time use, marital status, time stress, life satisfaction, depression
    JEL: J22 J14 I31
    Date: 2021–04
  7. By: Edouard Ribes (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: On average, O.E.C.D. statistics 2 shows that 4 out of 10 workers in developed geographies occupy a "blue-collar" type of position. Since those professions are physically demanding and come with a toll on one's health (which in turns translate into additional healthcare expenses), the length of an individual's active period must be carefully weighted. This paper therefore offers a financial model (and its subsequent program) to help make such decisions. It notably shows that whilst most developed countries require individuals to work for about 40 years, early retirement is a suitable option when healthcare prices are high. This paper also shows that financial literacy has a significant impact on retirements behaviors. For those with a strong predilection for present consumption and little interest in savings and investments, retirement is not an option. In those cases, the financial pressure associated to the healthcare system translates into either an incentive for them to work until the end of their life or not to enter the labor market at all.
    Keywords: Health,Retirement,Financial planning
    Date: 2021–05–06
  8. By: Adeola Oyenubi; Joseph Ajefu
    Abstract: We study the effect of income receipt in form of Old age pension (OAP) on the prevalence of depressive symptoms using the Centre of Epidemiologic Studies Short Depression Scale (CES-D 10). We exploit the exogeneous age eligibility criteria in a regression discontinuity (RD) design to estimate the impact of OAP on depressive symptoms. Using the randomized inference approach, we find a statistically significant evidence that the OAP reduces depressive symptoms among the beneficiaries. We find this effect vary by gender and employment status. Our result also suggests that the impact of OAP tends to increase with depression scores, that is, those with high depression score tend to benefit more. We note that since the CES-D 10 is a screening tool, this result only provides an indication that the expected positive relationship between income and health holds in this context.
    Keywords: Mental health, causal inference, old age pension, South Africa
    JEL: I14 I15 I18
    Date: 2020–10
  9. By: Carleton, Tamma; Delgado, Michael; Greenstone, Michael; Houser, Trevor; Hsiang, Solomon M.; Hultgren, Andrew; Jina, Amir; Kopp, Robert; McCusker, Kelly; Nath, Ishan; Rising, James; Rode, Ashwin; Seo, Hee Kwon (Samuel); Viaene, Arvid; Yuan, Jiacan; Zhang, Alice
    Abstract: This paper develops the first globally comprehensive and empirically grounded estimates of mortality risk due to future temperature increases caused by climate change. Using 40 countries' subnational data, we estimate age-specific mortality-temperature relationships that enable both extrapolation to countries without data and projection into future years while accounting for adaptation. We uncover a U-shaped relationship where extreme cold and hot temperatures increase mortality rates, especially for the elderly, that is flattened by both higher incomes and adaptation to local climate (e.g., robust heating systems in cold climates and cooling systems in hot climates). Further, we develop a revealed preference approach to recover unobserved adaptation costs. We combine these components with 33 high-resolution climate simulations that together capture scientific uncertainty about the degree of future temperature change. Under a high emissions scenario, we estimate the mean increase in mortality risk is valued at roughly 3.2% of global GDP in 2100, with today's cold locations benefiting and damages being especially large in today's poor and/or hot locations. Finally, we estimate that the release of an additional ton of CO2 today will cause mean [interquartile range] damages of $36.6 [-$7.8, $73.0] under a high emissions scenario and $17.1 [-$24.7, $53.6] under a moderate scenario, using a 2% discount rate that is justified by US Treasury rates over the last two decades. Globally, these empirically grounded estimates substantially exceed the previous literature's estimates that lacked similar empirical grounding, suggesting that revision of the estimated economic damage from climate change is warranted.
    JEL: Q5 Q51
    Date: 2020–08
  10. By: Nicole Kapelle
    Abstract: Amid concerns of long-term economic consequences of divorce, cross-sectional research illustrated that ever-divorce men but particularly women hold less per capita wealth than continuously married spouses in older age. Using a longitudinal approach and unique personal-level wealth data from the German Socio-Economic Panel Study, the present study aims to understand how divorce stratifies men’s and women’s wealth trajectories. To this end, I apply a novel doubly robust estimation approach that combines propensity score and coarsened exact matching with random-effects growth models to provide causal comparisons of wealth trajectories. Results show that wealth differences between ever-divorce and continuously married individuals predominantly stem from persistent disadvantage generated immediately around divorce rather than a scarring of divorcees’ wealth accumulation over time, although remarriage is a relevant moderator of post-divorce wealth accumulation. Divorced women’s wealth disadvantage compared to men’s likely stems from a range of sources including the maintenance of within-couple wealth inequalities, biased property division processes, and lower wealth accumulation potentials after divorce. Comparatively, married women benefit from marital protection to compensate their lower wealth accumulation potential. Finally, selection into divorce is a relevant although secondary factor that needs to be considered in the explanation of divorce-related wealth stratification.
    Keywords: Divorce, Wealth stratification, Gender, Life course, Matching
    Date: 2021
  11. By: Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus); Amin Sokhanvar (Graduate School of Economics and Management, Ural Federal University, Yekaterinburg, Russia); Hasan Ulaş Altıok (Department of Banking and Finance Eastern Mediterranean University, North Cyprus)
    Abstract: The need to restructure the taxation system of the TRNC arise from the unsustainable public sector deficit, inequalities in the tax incidence, and the dependency of fiscal support from Turkey. This paper investigates the changes that need to be made to its individual directs tax in order to have a more sustainable structure of government finances. The tax reform measures proposed, developed, and analysed in this paper indicates that it is possible to create a simpler, more equitable, revenue-productivity direct tax system while improving the incentives for enhanced taxpayer compliance.
    Keywords: pension funds; personal income tax; tax incidence; tax compliance; fiscal equity
    JEL: H24 H26
    Date: 2021–05–11
  12. By: Li Yang (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INSEAD - Institut Européen d'administration des Affaires)
    Abstract: In this paper I review the latest development of China's public pension system. Last several decades saw China's tremendous achievement in various public pension reforms. Especially since the 11th Five-Year Plan (2006-2010), reform has accelerated. By 2019, the public pension system in China has covered almost one billion adults, which makes it the biggest pension system in the world. Together with the expansion of Dibao (Basic living allowance) and the eradication of poverty, the development of pension system has become the top agenda in current policy making of the Chinese government. Yet, challenges exist: unequal distribution of pension resource and the long-run unsustainability of the pension system are waiting to be addressed with increasing urgence. Although potential countermeasures, both based on international experience and with Chinese feature, has been proposed and piloted in both regional and national level, there are incremental pressure for further reforming the system. In the latest Five-Year Plan (2021-2015), the government has vowed to construct a unified, equitable, and sustainable pension system with full coverage. This is a very challenging yet exciting goal to achieve not only for the policy makers, but also for academic researchers and general public.
    Date: 2021–04
  13. By: Canta, Chiara; Cremer, Helmuth
    Abstract: We study the design of social long-term care (LTC) insurance when informal care is exchange-based. Parents do not observe their children's cost of providing care, which is continuously distributed over some interval. They choose a rule specifying transfers that are conditional on the level of informal care. Social LTC insurance is designed to maximize a weighted sum of parents' and children's utility. The optimal uniform public LTC insurance can fully cover the risk of dependence but parents continue to bear the risk of having children with a high cost of providing care. A nonlinear policy conditioning LTC benefits on transfers provides full insurance even for this risk. Informal care increases with the children's welfare weight. Our theoretical analysis is completed by numerical solutions based on a calibrated example. In the uniform case, public care should represent up to 40% of total care but its share decreases to about 30% as the weight of children increases. In the nonlinear case, public care increases with the children's cost of providing care at a faster rate when children's weight in social welfare is higher. It represents 100% of total care for the families with high-cost children.
    Keywords: asymmetric information; informal care; Long-term care; Strategic bequests
    JEL: H2 H5
    Date: 2020–11

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