nep-age New Economics Papers
on Economics of Ageing
Issue of 2021‒08‒16
fourteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Trends in Labor Supply of Older Men and the Role of Social Security By Zhixiu Yu
  2. Why mandate young borrowers to contribute to their retirement accounts? By Andersen, Torben M.; Bhattacharya, Joydeep
  3. Do Firms Hire More Older Workers? Evidence from Germany By Fabian Busch; Robert Fenge; Carsten Ochsen
  4. Reference-dependent preferences, time inconsistency, and pay-as-you-go pensions By Andersen, Torben M.; Bhattacharya, Joydeep; Liu, Qing
  5. Pareto-improving transition to fully funded pensions under myopia By Andersen, Torben M.; Bhattacharya, Joydeep; Gestsson, Marias H.
  6. Subjective Life Expectancies, Time Preference Heterogeneity, and Wealth Inequality By Richard Foltyn; Jonna Olsson
  7. Health, Retirement and Economic Shocks By Martinez-Jimenez, Mario; Hollingsworth, Bruce; Zucchelli, Eugenio
  8. Pension Wealth and the Gender Wealth Gap By Karla Cordova; Markus M. Grabka; Eva Sierminska
  9. Retirement and health outcomes in a meta-analytical framework By Filomena, Mattia; Picchio, Matteo
  10. The effect of Long-Term Care (LTC) benefits on healthcare use By Manuel Serrano-Alarcón; Helena Hernández-Pizarro; Guillem López i Casasnovas; Catia Nicodemo
  11. Do State Snap Policies Influence Program Participation among Seniors? By Jones, Jordan; Courtemanche, Charles; Denteh, Augustine; Marton, James; Tchernis, Rusty
  12. A generative model for age and income distribution By Fatih Ozhamaratli; Oleg Kitov; Paolo Barucca
  14. The Liability of Aging in Internal Capital Markets By USHIJIMA Tatsuo

  1. By: Zhixiu Yu (University of Minnesota)
    Abstract: The labor supply of older men increased from the 1930s to the 1950s cohort. I estimate a structural model that fits the participation and hours worked by the 1930s cohort well. The observed policy changes in normal retirement age, the earnings test, and delayed retirement credits explain 73.4% and 88.7% of the observed rises in labor force participation and hours worked by the 1950s cohort. Additional policy experiments suggest that postponing retirement age have little effect on older workers, while eliminating the earnings test and reducing retirement benefits would further increase older age participation by 3.37 and 5.10 percent, respectively.
    Keywords: Social Security reform, retirement, labor force participation, health, older workers
    JEL: D15 H55 I12 J14 J22
    Date: 2021–08
  2. By: Andersen, Torben M.; Bhattacharya, Joydeep
    Abstract: Many countries, in an effort to address the problem that too many retirees have too little saved up, impose mandatory contributions into retirement accounts, that too, in an age-independent manner. This is puzzling because such funded pension schemes effectively mandate the young, who wish to borrow, to save for retirement. Further, if agents are present-biased, they disagree with the intent of such schemes and attempt to undo them by reducing their own saving or even borrowing against retirement wealth. We establish a welfare case for mandating the middle-aged and the young to contribute to their retirement accounts, even with age-independent contribution rates. We find, somewhat counter-intuitively, that pitted against laissez faire, mandatory pensions succeed by incentivizing the young to borrow more and the middle-aged to save nothing on their own, in effect, rendering the latter's present-biasedness inconsequential.
    Date: 2021–02–01
  3. By: Fabian Busch; Robert Fenge; Carsten Ochsen
    Abstract: This paper analyses how demographic changes of the labour force affect labour demand. Do firms adjust their hiring behaviour to an ageing society? Combining data at the firm level and the administrative district level, we analyse the hiring behaviour of firms. Our findings suggest that firms with an ageing workforce hire relatively more older workers. Since the willingness to hire older workers also increases with the share of older unemployed, the propensity to employ older people does generally rise with an ageing labour force. Also, part-time employment induces firms to engage more older workers but this effect disappears for large firms. In contrast, partial retirement regulations have a negative effect on hiring older workers which reveals unintended incentives of the German law on this matter. Finally, firms with a higher share of educated personnel demand more older workers.
    Keywords: ageing labour force, hiring of older workers, panel data models
    JEL: J11 J23 C33
    Date: 2021
  4. By: Andersen, Torben M.; Bhattacharya, Joydeep; Liu, Qing
    Abstract: The classic Aaron–Samuelson result argues that pay-as-you-go (PAYG) pension schemes cannot coexist with higher-return, private, retirement-saving schemes. The ensuing literature shows if agents voluntarily undersave for retirement due to myopia or time-inconsistency, then a paternalistic, rationale for PAYG pensions arises only if voluntary retirement saving is fully crowded out because of a binding borrowing constraint. This paper generalizes the discussion to the reference-dependent utility setup of Kőszegi and Rabin (2009) where undersaving happens naturally. No borrowing constraint is imposed. We show it is possible to offer a non-paternalistic, welfare rationale for return-dominated, PAYG pensions to coexist with private, retirement saving.
    Date: 2021–07–01
  5. By: Andersen, Torben M.; Bhattacharya, Joydeep; Gestsson, Marias H.
    Abstract: Under dynamic efficiency, a pay-as-you-go (PAYG) pension scheme helps the current generation of retirees but hurts future generations because they are forced to save via a return-dominated scheme. Abandoning it is deemed welfare-improving but typically not for all generations. But what if agents are present-biased (hence, undersave for retirement) and the “paternalistically motivated forced savings†component of a PAYG scheme motivated its existence in the first place? This paper shows it is possible to transition from such a PAYG scheme on to a higher return, mandated fully-funded scheme; yet, no generation is hurt in the process. The results inform the debate on policy design of pension systems as more and more policy makers push for the transition to take place but are forced to recognize that current retirees may get hurt along the way.
    Date: 2021–06–01
  6. By: Richard Foltyn; Jonna Olsson
    Abstract: This paper explores how heterogeneity in life expectancy, objective (statistical) as well as subjective, affects savings behavior between healthy and unhealthy people. Using data from the Health and Retirement Study, we show that people in poor health not only have shorter actual lifespan, but are also more pessimistic about their remaining time of life. Using a standard overlapping-generations model, we show that differences in life expectancy can explain one third of the differences in accumulated wealth with an important part driven by pessimism among unhealthy people.
    Keywords: Life expectancy, preference heterogeneity, subjective beliefs, life cycle
    JEL: D15 E21 G41 I14
    Date: 2021–07
  7. By: Martinez-Jimenez, Mario (Lancaster University); Hollingsworth, Bruce (Lancaster University); Zucchelli, Eugenio (Universidad Autónoma de Madrid)
    Abstract: We explore the effects of retirement on both physical and mental ill-health and whether these change in the presence of economic shocks. We employ inverse probability weighting regression adjustment to examine the mechanisms influencing the relationship between retirement and health and a difference-in-differences approach combined with matching to investigate whether the health effects of retirement are affected by the Great Recession. We estimate these models on data drawn from the English Longitudinal Study of Ageing (ELSA) and find that retirement leads to a deterioration in both mental and physical health, however there seems to be considerable effect heterogeneity by gender and occupational status. Our findings also suggest that retiring shortly after the Great Recession appears to improve mental and physical health, although only among individuals working in the most affected regions. Overall, our results indicate that the health effects of retirement might be influenced by the presence of economic shocks.
    Keywords: retirement, health, Great Recession, ELSA
    JEL: J14 J26 I10
    Date: 2021–07
  8. By: Karla Cordova; Markus M. Grabka; Eva Sierminska
    Abstract: We examine the gender wealth gap with a focus on pension wealth and statutory pension rights. By taking into account employment characteristics of women and men, we are able and identify the extent to which the redistributive effect of pension rights reduces the gap. The empirical basis of this examination is the Socio-Economic Panel (SOEP), which is one of the few datasets where information on wealth as well as on pension entitlements is collected at the individual level. Pension wealth data is available for 2012 only. Individual level wealth data allows to analyze the gender wealth gap between women and men across all households. Due to the longitudinal character of the underlying data, detailed information on employment trajectories and family related events (such as childbirth, marriage, divorce, widowhood, etc.), which can have an effect on (public) pension entitlements are considered.
    Keywords: Gender Wealth Gap, pension entitlements, Germany, redistribution, SOEP
    JEL: H55 D31 J16
    Date: 2021
  9. By: Filomena, Mattia; Picchio, Matteo
    Abstract: This paper presents a meta-analysis on the effects of retirement on health. We select academic papers published between 2000 and 2021 studying the impact of retirement on physical and mental health, self-assessed general health, healthcare utilization and mortality. Among 275 observations from 85 articles, 28% (13%) find positive (negative) effects of retirement on health outcomes. Almost 60% of the observations do not provide statistically significant findings. Using meta-regression analysis, we checked for the presence of publication bias after distinguishing among different journal subject areas and, once correcting for it, we find that the average effect of retirement on health outcomes is small and barely significant. We apply model averaging techniques to explore possible sources of heterogeneity and our results suggest that the different estimated effects can be explained by the differences in both health measurements and retirement schemes.
    Keywords: Retirement,health,meta-analysis,meta-regression,publication bias
    JEL: I10 J14 J26
    Date: 2021
  10. By: Manuel Serrano-Alarcón; Helena Hernández-Pizarro; Guillem López i Casasnovas; Catia Nicodemo
    Abstract: The healthcare systems of most European countries are currently operating under extreme levels of pressure. Part of this pressure is due to a rising demand for healthcare caused by an increase in comorbidities and life expectancies amongst the populations they serve. The implementation of a good system of Long-Term Care (LTC) could reduce this pressure if it promotes preventative habits and treatment adherence, or reduces age-related risks. In this study we aim to understand the role of LTC benefits in reducing healthcare use in primary and secondary care by exploring a detailed administrative database. Results show that a monthly LTC benefit of around 412 euros could reduce avoidable hospitalizations by 60% and also unscheduled "walk-in" patient visits by a half, with the majority relating to social exclusion cases. Furthermore, LTC benefits could promote preventive healthcare, improving access to healthcare services such as cataract surgery. These findings have important policy implications for the organization of the LTC and healthcare systems, suggesting that allocating resources to LTC might not only increase the welfare of LTC beneficiaries, but also help to contain the increasing costs of healthcare.
    Date: 2021–08
  11. By: Jones, Jordan (Economic Research Service, USDA); Courtemanche, Charles (Georgia State University); Denteh, Augustine (Georgia State University); Marton, James (Georgia State University); Tchernis, Rusty (Georgia State University)
    Abstract: Senior participation in the Supplemental Nutrition Assistance Program (SNAP) has traditionally been lower than other groups among those eligible, with historical estimates below 50 percent. We examine the impacts of state SNAP policies on program participation among low-income senior (age 60 and older) and non-senior households using data from the 2001-2014 December Current Population Survey Food Security Supplement. Our results suggest that policies designed to expand SNAP eligibility modestly increased participation among seniors but led to larger increases among non-seniors. In contrast, we find little evidence of effects of policies related to transaction costs, stigma, or outreach on either group.
    Keywords: SNAP, seniors, participation, eligibility
    JEL: I32 I38 J14 Q18
    Date: 2021–07
  12. By: Fatih Ozhamaratli (University College London); Oleg Kitov (University of Cambridge); Paolo Barucca (University College London)
    Abstract: Each individual in society experiences an evolution of their income during their lifetime. Macroscopically, this dynamics creates a statistical relationship between age and income for each society. In this study, we investigate income distribution and its relationship with age and identify a stable joint distribution function for age and income within the United Kingdom and the United States. We demonstrate a flexible calibration methodology using panel and population surveys and capture the characteristic differences between the UK and the US populations. The model here presented can be utilised for forecasting income and planning pensions.
    Date: 2021–07
  13. By: José Antonio Hernández Rodríguez
    Abstract: Varias reformas se han hecho en Colombia para intentar aumentar la cobertura, mejorar la focalización y hacer económicamente sostenible el sistema pensional. Sin embargo, diferentes componentes como la indexación al salario mínimo (dada su cercanía al salario medio), las bajas tasas de fidelidad y de reemplazo, especialmente en el Régimen de Ahorro Individual con Solidaridad (RAIS), hacen que estos objetivos no se cumplan. Este documento intenta demostrar que lograr pensionarse es un objetivo que generalmente no se cumple para las personas más vulnerables. Esto se hace mediante la replicación de los resultados de Schutt (2011) y se encuentra que, en efecto, el panorama actual es más desfavorable que el de hace 10 años: cada vez es más difícil acumular el capital suficiente para tener una pensión según los términos de ley, especialmente para los sectores de menores ingresos y para las mujeres. El gran culpable de esto es el incremento sustancial del salario mínimo (SM) en ese período. Como propuesta para mejorar ese panorama, el presente trabajo expone la implementación de Transferencias no condicionadas a la vejez (TNC), como un eventual complemento el SGP. Las cuales cubrirán a las personas mayores vulnerables en edad de pensión buscando que, al coexistir el RAIS y las TNC se logre aumentar la cobertura, focalización y sostenibilidad del sistema pensional como generador de bienestar para las personas de la tercera edad en condición de vulnerabilidad.
    Keywords: pensiones, transferencias no condicionadas, subsidios, ahorro.
    JEL: G23 H55 J32 J38
    Date: 2021–07–22
  14. By: USHIJIMA Tatsuo
    Abstract: Diversified firms differ considerably in the efficiency of their internal capital markets (ICMs), through which scarce capital is allocated across alternative growth opportunities. This study highlights the role of firm age in generating this heterogeneity. Consistent with the hypothesis that organizational aging increases the rigidity of capital allocation, our analysis of Japanese firms identifies a strong inverse association between ICM efficiency and firm age. This correlation is robust to controlling for covariates suggested by alternative explanations such as agency problems and the individual aging of managers. Moreover, the correlation is substantially weakened when a firm is drastically reorganized. These results suggest that the liability of aging (age-based organizational rigidity) significantly affects intrafirm resource mobility, which is crucial for a firm's ability to respond to external changes.
    Date: 2021–08

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