nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒07‒19
nine papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Implications of Pension Illiteracy for Labor Supply and Redistribution By Gustafsson, Johan
  2. Retirement, housing mobility, downsizing and neighbourhood quality - A causal investigation By Nguyen, Ha Trong; Mitrou, Francis; Zubrick, Stephen R.
  3. Public Pension Reform and the Equity-Efficiency Trade-off By Gustafsson, Johan
  4. The effect of negative income shocks on pensioners By Johnsen, Julian Vedeler; Willén, Alexander
  5. Studies on labour supply, spending and saving before and after retirement By Bonekamp, Johan
  6. The Silver Economy as a Constructive Response in Public Policy on Aging By Klimczuk, Andrzej
  7. American Delusion: Life Expectancy and Welfare in the US from an International Perspective By Soares, Rodrigo R.; Rocha, Rudi; Szklo, Michel
  8. Coal-Fired Power Plant Retirements in the U.S. By Rebecca J. Davis; J. Scott Holladay; Charles Sims
  9. Older Adult Health Following Greater Access to Secondary Health Care: Evidence from Bus Service Introductions to Arab Towns in Israel By Abu-Qarn, Aamer; Lichtman-Sadot, Shirlee

  1. By: Gustafsson, Johan (Department of Economics, Umeå University)
    Abstract: This paper explores the effects of pension illiteracy on aggregate labor supply and the redistributive performance of public pension systems. I consider an overlapping generations model in continuous time populated with individuals who differ in labor productivity and pension literacy. Agents suffering from pension illiteracy fail to fully account for the structure of the pension system when planning their economic behavior over the life cycle. In particular, I assume that myopic agents treat changes to replacement income as exogenous in the active-retired trade-off and contributions to the pension system as a pure labor income tax. I find that pension illiteracy can negatively impact aggregate labor supply and increase earnings inequality and lifetime income inequality. This suggests that pension illiteracy may limit the efficiency gains of increasing the correlation between individual contributions and benefits, making the equity-efficiency trade-off difficult to characterize in the context of pension reforms.
    Keywords: Labor supply; Myopia; Public pension
    JEL: H55 J22 J26
    Date: 2021–06–29
  2. By: Nguyen, Ha Trong; Mitrou, Francis; Zubrick, Stephen R.
    Abstract: This paper provides the first causal evidence on the impact of retirement on housing choices. Our empirical strategy exploits the discontinuity in the eligibility ages for state pension as an instrument for the endogenous retirement decision and controls for time-invariant individual characteristics. The results show that retirement leads to a statistically significant and sizable increase in the probability of making a residential move or the likelihood of becoming outright homeowners. We also find that individuals downsize both physically and financially and tend to move to better neighbourhoods or closer to the coast upon retirement. We additionally discover that some housing adjustments take place up to 6 years before retirement. Moreover, our results reveal significant heterogeneity in the retirement impact by gender, marital status, education, housing tenue, income and wealth. Within couple households, housing mobility choices are primarily influenced by the wife’s retirement while housing downsizing decisions are only affected by the husband’s retirement. The results suggest that failing to address the endogeneity of retirement often under-states the retirement impact on such housing arrangements.
    Keywords: Retirement,Housing,Migration,Residential Mobility,Quality of Neighbourhood,Downsizing,Instrumental Variable
    JEL: J14 J26 J61 R21 R23
    Date: 2021
  3. By: Gustafsson, Johan (Department of Economics, Umeå University)
    Abstract: Alternative structures of public pension programs have distinct implications for the trade-offs that determine economic behavior over the life cycle. This paper studies these implications in terms of labor supply and economic inequality to characterize the equity–efficiency trade-off between a redistributive (Beveridgean) and an earnings-based (Bismarckian) benefit formula. The economy is modeled as a continuous-time overlapping generations model with endogenous labor supply, savings, and human capital formation. Individuals differ in ability, and they are free to choose how much to work at each period in time and when to enter and exit the labor market. Numerical simulations provide the qualitative insights that a redistributive pension system introduces opposite effects on the incentives to retire for high- and low-skilled individuals, which leads to an increased earnings inequality. This effect can, in turn, dominate the reduced pension inequality such that lifetime and population-wide income inequality increases. Ultimately, it appears that the equity–efficiency trade-off is difficult to characterize when accounting for endogenous labor supply on both the intensive and extensive margins.
    Keywords: Equity-Efficiency; Inequality; Public Pension Policy
    JEL: H55 I24 J22
    Date: 2021–06–29
  4. By: Johnsen, Julian Vedeler (SNF); Willén, Alexander (Norwegian School of Economics)
    Abstract: This paper provides novel evidence on the labor supply response to negative income shocks in retirement, exploiting an institutional feature that caused differential and unexpected income losses among otherwise identical individuals in a sharp regression discontinuity design. We conclude that retired pensioners do not return to work despite income losses of up to seven percent of their annual income. The paper further shows that the negative income shock had no impact on the health of pensioners. At the height of an ongoing global crisis in which public pension funds are rapidly losing value, these results may be particularly important.
    Keywords: Pension Policy; Retirement; Labor Supply; Health
    JEL: I38 J14 J26
    Date: 2021–05–24
  5. By: Bonekamp, Johan (Tilburg University, School of Economics and Management)
    Date: 2021
  6. By: Klimczuk, Andrzej
    Abstract: The paper presents the concept of the "silver economy" as an economic system related to population aging and underlines the features of this policy idea. The study first introduces the discourse and stages of constructing this system by international and national public policy actors in aging. Next, a critical analysis of the dimensions and areas of implementation and development of the silver economy as a policy concept was carried out as well as a review of its external and internal limitations. The conclusion contains proposals for further research directions.
    Keywords: aging policy; longevity economy; policy ideas and concepts; silver economy
    JEL: J14 J18 P49 P59
    Date: 2021
  7. By: Soares, Rodrigo R. (Columbia University); Rocha, Rudi (São Paulo School of Business Administration); Szklo, Michel (São Paulo School of Economics-FGV)
    Abstract: Recent increases in mortality have brought life expectancy back to the forefront of the public health debate in the US. Though unprecedented, this trend comes after an equally striking phenomenon: a decades long deterioration in the relative position of the US in the world's life expectancy distribution, culminating in the late 2010s in a gap of close to 3 years to the OECD average. This paper takes a comparative approach and documents the relative performance of life expectancy in the US from an international perspective. We characterize the changes in this relative performance over time, its age and cause of death profiles, and estimate its welfare implications. We show that this phenomenon is not recent, is not restricted to very particular causes of death, but is mostly driven by adult and old age mortality. We calculate that welfare gains in the US over the last few decades could have been between 19% and 28% higher had the US been able to reproduce the average health performance of OECD countries at their typical health expenditures.
    Keywords: life expectancy, health, welfare, United States
    JEL: I1 I3 O5
    Date: 2021–06
  8. By: Rebecca J. Davis; J. Scott Holladay; Charles Sims
    Abstract: We summarize the history of U.S. coal-fired plant retirements over the last decade, describe planned future retirements, and forecast the remaining operating life for every operating coal-fired generator. We summarize the technology and location trends that are correlated with the observed retirements. We then describe a theoretical model of the retirement decision coal generator owners face. We use retirements from the last decade to quantify the relationships in the model for retired generators. Our model predicts that three-quarters of coal generation capacity will retire in the next twenty years, with most of that retirement concentrated in the next five years. Policy has limited ability to affect retirement times. A $20 per MWh electricity subsidy extends the average life of a generator by six years. A $51 per ton carbon tax brings forward retirement dates by about two years. In all scenarios, a handful of electricity generators remain on the grid beyond our forecast horizon.
    JEL: H40 L10 L50 L94 Q4
    Date: 2021–06
  9. By: Abu-Qarn, Aamer (Ben Gurion University); Lichtman-Sadot, Shirlee (Ben Gurion University)
    Abstract: How much can socioeconomically-based health disparities be attributed to differential access to secondary and specialist health care? We evaluate this question in the context of Arab-Jewish health disparities in Israel while exploiting the introduction of public transportation to Arab communities. Primary care health services are readily available within Arab towns and the introduction of bus services increased residents' access to secondary health services that are almost exclusively available only outside their towns. In the short term older adults reported higher probabilities of being diagnosed with common health conditions, such as heart problems or high cholesterol, and rare health conditions. In the longer term – more than two years following the initial introduction of public transportation to one's town – there were reductions in overweight and mostly null effects on diagnosis-based health conditions. Coupled with an analysis on mortality rates, our results suggest that the higher rates of chronic conditions in the short term are due to higher diagnosis rates rather than health deterioration. However, this effect is weaker in the long run when the benefits of greater access to health care facilities offset the higher diagnosis rates.
    Keywords: public transportation, health disparities, health care access, secondary health care
    JEL: I12 I14 R4
    Date: 2021–06

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