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on Economics of Ageing |
| By: | Danielyan, Vladimir; Polterovich, Victor |
| Abstract: | We improve and investigate a dynamic model of the behavior of the population of agents belonging to different income groups during the transition from a pay-as-you-go to a mixed pension system. The model is based on the assumption that wealthier participants are characterized by a lower rate of income discount, which actually means an orientation toward a longer planning horizon. It provides a satisfactory approximation of the trajectories observed in Argentina after the pension reform of 1993, which is largely similar to the Russian reform of 2002. The model shows that as income increases, the proportion of representatives of the corresponding income group who prefer to "keep in the shadow" should decrease. This pattern is consistent with observations. The model explains why pension reforms in many countries have resulted in an expansion of the shadow sector. The impact of the minimum pension, the rate of return on pension savings and the retirement age on the levels of participation of different income groups in the pension system is studied. |
| Keywords: | pension reform, pay-as-you-go system, fully-funded system, retirement age, minimum seniority, informal sector, participation level |
| JEL: | D02 E02 H55 O43 |
| Date: | 2021–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110676&r= |
| By: | Jorge Miguel Bravo; Mercedes Ayuso; Robert Holzmann; Edward Palmer |
| Abstract: | Continuous longevity improvements and population ageing have led countries to modify national public pension schemes by increasing the standard and early retirement ages in a discretionary, scheduled, or automatic way, and by making it harder for people to retire prematurely. To this end, countries have adopted alternative retirement age strategies, but our analyses show that the measures taken are often poorly designed and consequently misaligned with the pension scheme’s ultimate goals. In addition, our analyses demonstrate that countries risk falling short of their goals given their use of projection methods that underestimate life expectancy. This paper discusses how to implement automatic indexation of the retirement age to life expectancy developments while respecting the principles of intergenerational actuarial fairness and neutrality among generations. We show that in policy designs in which extended working lives translate into additional pension entitlements, the pension age must be automatically updated to keep the period in retirement constant. Alternatively, policy designs that pursue a fixed replacement rate are consistent with retirement age policies targeting a constant balance between active years in the workforce and years in retirement. The empirical strategy employed to project the relevant cohort life expectancy uses a Bayesian Model Ensemble approach to stochastic mortality modelling to generate forecasts of intergenerationally and actuarially fair pension ages for 23 countries and regions from 2000 to 2050. The empirical results show that the pension age increases needed to accommodate the effect of longevity developments on pay-as-you-go equilibrium and to reinstate equity between generations are sizeable and well beyond those employed and/or legislated in most countries. A new wave of pension reforms may be at the doorsteps. |
| Keywords: | retirement age, actuarial fairness, intergenerational neutrality, pensions, Bayesian Model Ensemble, population ageing |
| JEL: | H55 G22 C63 C53 H23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9408&r= |
| By: | Giles, John T. (World Bank); Lei, Xiaoyan (Peking University); Wang, Gewei (Peking University); Wang, Yafeng (Peking University); Zhao, Yaohui (Peking University) |
| Abstract: | This paper documents the patterns and correlates of retirement in China using a nationally representative survey, the China Health and Retirement Longitudinal Study (CHARLS). After documenting stark differences in retirement ages between urban and rural residents, the paper shows that China's urban residents retire earlier than workers in many OECD countries and that rural residents continue to work until advanced ages. Differences in access to generous pensions and economic resources explain much of the urban-rural difference in retirement rates. The paper suggests that reducing disincentives created by China's Urban Employee Pension system, improving health status, providing childcare and elder care support may all facilitate longer working lives. Given spouse preferences for joint retirement, creating incentives for women to retire later may facilitate longer working lives for both men and women. |
| Keywords: | retirement, aging, pensions, urban-rural gap, China, CHARLS |
| JEL: | J26 O15 O17 O53 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14725&r= |
| By: | Andrew G. Biggs (American Enterprise Institute) |
| Abstract: | Children consume a substantial portion of a household's income while living at home, but are usually financially independent by the time the parents reach retirement age. |
| Keywords: | household income, Retirement, savings |
| JEL: | A |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:aei:rpaper:1008549131&r= |
| By: | Yoko Niimi; Charles Yuji Horioka |
| Abstract: | This paper examines various aspects of elderly poverty and its measurement. It first discusses some of the most important issues relating to measuring elderly poverty. It then reviews recent trends in elderly poverty, which show considerable heterogeneity in the extent of elderly poverty even among developed countries. Such cross-country differences are due at least partly to differences in the generosity of public old-age pensions and other social safety nets for the elderly. Empirical evidence also corroborates that the expansion of public pension programs has often played a key role in reducing elderly poverty. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1149&r= |
| By: | Chen, Hung-Ju; Miyazaki, Koichi |
| Abstract: | This study analytically investigates the effects of pay-as-you-go social security and educational subsidies on the fertility rate, retirement age, and GDP per capita growth rate in an overlapping generations model, where parents invest resources toward their children's human capital. We find that an old agent retires fully when his or her labor productivity is low and retires later when the labor productivity is high. Under the unique balanced-growth-path (BGP) equilibrium, when an old agent is still engaged in work, tax rates are neutral to the fertility rate, higher tax rates encourage him or her to retire earlier, a higher social security tax rate depresses the GDP per capita growth rate, and a higher tax rate for educational subsidies can accelerate growth. However, when an old agent fully retires, higher tax rates increase the fertility rate, a higher social security tax rate lowers the GDP per capita growth rate, and a higher tax rate for educational subsidies boosts growth. Additionally, if an old agent's labor productivity increases, the fertility rate also increases. We also conduct numerical simulations and analyze how an old agent's labor productivity affects the retirement age, fertility rate, and GDP per capita growth rate under the BGP equilibrium. |
| Keywords: | Pay-as-you-go social security; educational subsidy; fertility; endogenous retirement; GDP per capita growth rate |
| JEL: | H55 I25 J13 J26 |
| Date: | 2021–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110626&r= |
| By: | Uchida, Yuki; Ono, Tetsuo |
| Abstract: | This study presents a political economy model with overlapping generations to analyze the effects of population aging on fiscal policy formation and the resulting distribution of the fiscal burden across generations. The analysis shows that both an increased life expectancy and a decreased population growth rate increase the ratios of government debt and labor income tax revenue to GDP. However, they decrease the ratio of capital income tax revenue to GDP. Furthermore, it also shows that the increased political weight of the elderly creates an increase in the ratios of public debt and labor income tax revenue to GDP, as well as an initial decrease followed by an increase in the ratio of capital income tax revenue to GDP. |
| Keywords: | Generational burden, Overlapping generations, Political economy, Population aging, Public debt |
| JEL: | D70 E24 E62 H60 |
| Date: | 2021–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110634&r= |
| By: | Walwei, Ulrich (Institute for Employment Research (IAB), Nuremberg, Germany ; Univ. Regensburg); Deller, Jürgen (Leuphana University of Lüneburg) |
| Abstract: | "Taking an international comparative perspective, this paper deals with driving forces of and potential obstacles to the labor market participation of older workers. It focuses in depth on four case studies that appear to be prototypical for different contexts. Given the high variance of cultures of work and welfare state systems in Europe and its neighbouring countries, Germany, Israel, Italy and Sweden were selected with the aim of examining the development and situation of older workers in great detail. Each country stands for a specific configuration, e.g. because it may represent a trend reversal, a continuously outstanding performance or lasting problems. The cases also include information on pension reforms and approaches to better manage aging workforces. In face of the different country situations, it becomes obvious that one size of policies does not fit all. Independent of national policies, employability over the life cycle requires more attention. Regarding future developments, several domains of organizational practices are indispensable for appropriately managing an aging workforce, including skill improvement and a healthy work environment." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | Bundesrepublik Deutschland ; Israel ; Italien ; Schweden ; Pandemie ; Auswirkungen ; Beschäftigungsfähigkeit ; Determinanten ; Diversity Management ; Erwerbsbeteiligung ; human resource management ; institutionelle Faktoren ; internationaler Vergleich ; lebenslanges Lernen ; ältere Arbeitnehmer ; Reformpolitik ; Rentenpolitik ; Arbeitsmarktpolitik ; Wohlfahrtsstaat ; 1993-2018 |
| JEL: | J14 J26 M54 |
| Date: | 2021–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:202116&r= |
| By: | Alexander F. Tieman; Jason Harris; Yugo Koshima; Alessandro De Sanctis |
| Abstract: | This paper compiles the Intertemporal Public Sector Balance Sheets for all G7 countries and examines their relationship with government borrowing costs. In 2018, all G7 countries have negative Intertemporal Net Financial Worth (INFW), falling short of their intertemporal budget constraint. A decomposition of the evolution of INFW shows that short-term fluctuations are mainly driven by fiscal policy changes, while in the long run demographic changes and health and pension obligations play a larger role. We find that on average a 10 percentage point of GDP increase in INFW reduces the (future) 10-1 year sovereign yield curve spread by 2.8 basis points. This results suggest that financial markets pay attention to governments’ future policy obligations, in addition to its current assets and liabilities. |
| Keywords: | balance sheet framework; negative Intertemporal Net Financial Worth; INFW 0; evolution of INFW; INTERTEMPORAL NET; Financial statements; Health care spending; Fiscal stance; Pension spending; Global |
| Date: | 2021–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/128&r= |
| By: | Hammer, Bernhard; Christl, Michael; De Poli, Silvia |
| Abstract: | Governments face a potential trade-off between provision for the growing population in retirement and the support of working-age households with low income. Using EUROMOD-based microdata from 28 countries, we (a) quantify the redistribution to the pensioner and non-pensioner populations, (b) study the position of net beneficiaries in the overall income distribution and (c) analyse how taxes and benefits affect the working-age population with low income. Our results provide novel insights into the distributive role of tax-benefit systems across Europe. Interestingly, a strong overall redistribution between households is associated with generous pensions for a portion of the retirees but negatively related to support for low-income households. |
| Keywords: | Redistribution,Welfare state,Inequality,Microsimulation,EUROMOD |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:988&r= |
| By: | Rik Dillingh (CPB Netherlands Bureau for Economic Policy Analysis); Maria Zumbuehl (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | Dutch retirees – and individuals who are close to retirement – show a clear interest in two alternatives for the default lifelong flat rate annuity. The first alternative is the currently already available option of a high/low annuity based profile, with a higher annuity in the first years of retirement and a lower annuity after that. The second alternative is the announced new option of a partial lump sum at retirement, combined with a lower monthly annuity. In a survey experiment with over a thousand participants we investigated how appealing these different payout options are to retirees, and what influences their preferences. There is significant interest in all three payout options. While the default option of a constant annuity is most popular, there is also substantial interest in the alternative options, with both the high/low and the lump sum option being chosen in almost 30% of cases. The preference for a specific option depends on the choice parameters and the economic setting. Interest in a lump sum is higher if the size of the lump sum increases and interest in a high/low annuity-based profile is higher when the high annuity is valid for a shorter period. Higher replacement rates and a higher interest rate both increase the preference for the constant payout pattern. Individual characteristics also play a role in the choice of the preferred option. |
| JEL: | D14 G41 H31 J32 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:431&r= |
| By: | Pagan, Ricardo; Malo, Miguel |
| Abstract: | In this article, we analyse loneliness trajectories for older people aged 50 or more in selected European countries by gender. We focus on the relationship between disability and disability trajectories and loneliness trajectories. We use three waves of the longitudinal SHARE database. We find that permanent loneliness is not generalised, but 31 per cent of older males and 44 per cent of females suffer from loneliness in at least one of the three waves. Disability increases loneliness persistence, especially for women. Improvements in disability decrease the risk of loneliness persistence, but this effect is smaller than for disability status and there are no clear differences by gender. The rankings of the country effects on loneliness persistence by gender provide only partial support, with Mediterranean and Eastern European countries having the highest persistence, while the lowest rates are found in Northern countries, as in the previous comparative literature on loneliness. |
| Keywords: | Loneliness persistence; disability persistence; disability dynamics; aging; cross-national comparison |
| JEL: | J10 J14 J18 |
| Date: | 2021–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110616&r= |
| By: | Schwandt, Hannes (Northwestern University); Currie, Janet (Princeton University); Bär, Marlies (Erasmus School of Health Policy and Management); Banks, James (Institute for Fiscal Studies, London); Bertoli, Paola (University of Verona); Bütikofer, Aline (Norwegian School of Economics); Cattan, Sarah (Institute for Fiscal Studies, London); Chao, Beatrice Zong-Ying (Northwestern University); Costa, Claudia (University of Coimbra); Gonzalez, Libertad (Universitat Pompeu Fabra); Grembi, Veronica (University of Milan); Huttunen, Kristiina (Aalto University); Karadakic, René (Norwegian School of Economics); Kraftman, Lucy (Institute for Fiscal Studies, London); Krutikova, Sonya (Institute for Fiscal Studies, London); Lombardi, Stefano (VATT, Helsinki); Redler, Peter (University of Munich); Riumallo Herl, Carlos (affiliation not available); Rodríguez-González, Ana (Lund University); Salvanes, Kjell G. (Norwegian School of Economics); Santana, Paula (University of Coimbra); Thuilliez, Josselin (University Paris 1); van Doorslaer, Eddy (Erasmus University Rotterdam); Van Ourti, Tom (Erasmus School of Economics); Winter, Joachim (University of Munich); Wouterse, Bram (Erasmus University Rotterdam); Wuppermann, Amelie (Martin-Luther University, Halle-Wittenberg) |
| Abstract: | Although there is a large gap between Black and White American life expectancies, the gap fell 48.9% between 1990-2018, mainly due to mortality declines among Black Americans. We examine age-specific mortality trends and racial gaps in life expectancy in rich and poor U.S. areas and with reference to six European countries. Inequalities in life expectancy are starker in the U.S. than in Europe. In 1990 White Americans and Europeans in rich areas had similar overall life expectancy, while life expectancy for White Americans in poor areas was lower. But since then even rich White Americans have lost ground relative to Europeans. Meanwhile, the gap in life expectancy between Black Americans and Europeans decreased by 8.3%. Black life expectancy increased more than White life expectancy in all U.S. areas, but improvements in poorer areas had the greatest impact on the racial life expectancy gap. The causes that contributed the most to Black mortality reductions included: Cancer, homicide, HIV, and causes originating in the fetal or infant period. Life expectancy for both Black and White Americans plateaued or slightly declined after 2012, but this stalling was most evident among Black Americans even prior to the COVID-19 pandemic. If improvements had continued at the 1990-2012 rate, the racial gap in life expectancy would have closed by 2036. European life expectancy also stalled after 2014. Still, the comparison with Europe suggests that mortality rates of both Black and White Americans could fall much further across all ages and in both rich and poor areas. Significance Statement From 1990-2018, the Black-White life expectancy gap fell 48.9% though progress stalled after 2012 as life expectancy plateaued or declined. If improvements had continued at the 1990-2012 rate, the racial gap in life expectancy would have closed by 2036. Black life expectancy in 1990 started below European or White American levels but grew at a faster rate: the gap between Europeans and Black Americans decreased by 8.3% between 1990-2018. In 1990 White Americans and Europeans in rich areas had similar life expectancy, while White Americans in poor areas had lower life expectancy than poor Europeans. But all White Americans have lost ground relative to Europeans. Current incomebased life expectancy gaps are starker in the U.S. than in comparable European countries. |
| Keywords: | life expectancy, racial disparity, area-level socioeconomic status, international comparison |
| JEL: | I14 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14745&r= |