nep-age New Economics Papers
on Economics of Ageing
Issue of 2022‒02‒14
sixteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The old-age pension household replacement rate in Belgium By Brown, Alessio J.G.; Fraikin, Anne-Lore
  2. Early Retirement of Employees in Demanding Jobs: Evidence from a German Pension Reform By Johannes Geyer; Svenja Lorenz; Thomas Zwick; Mona Bruns
  3. Teachers’ Knowledge and Preparedness for Retirement: Results from a Nationally Representative Teacher Survey By Fuchsman, Dillon; McGee, Josh; Zamarro, Gema
  4. How does pension saving change when individuals complete repayment of their mortgage? By Rowena Crawford
  5. The Effects of an Increase in the Retirement Age on Health: Evidence from Administrative Data By Mara Barschkett; Johannes Geyer; Peter Haan; Anna Hammerschmid
  6. Why do couples and singles save during retirement? By Mariacristina De Nardi; Eric French; John Bailey Jones; Rory McGee
  7. Long-term care spending and hospital use among the older population in England By Rowena Crawford; George Stoye; Ben Zaranko
  8. How does education influence individuals' use of bequests as a long-term care insurance? By Edouard Ribes
  9. Does Grandparenting Pay off for the Next Generations? Intergenerational Effects of Grandparental Care By Mara Barschkett; C. Katharina Spieß; Elena Ziege
  10. Assessing heterogeneity in the health effects of social pensions among the poor elderly: evidence from Peru By Noelia Bernal; Javier Olivera; Marc Suhrcke
  11. Exposure in utero to Adverse Events and Health Late-in-life:Evidence from China By Wang, J.; Alessi, R.; Angelini, V.
  12. Bringing back the state: understanding varieties of re-reforms in Latin America By Carrera, Leandro; Angelaki, Marina
  13. Effectiveness of Covid-19 vaccination in Poland By Karol Madoñ; Piotr Lewandowski
  14. The impact of house prices on pension saving in early adulthood By Rowena Crawford; Polly Simpson
  15. Valoración del nuevo modelo del Régimen Especial de Trabajadores Autónomos By Jose Enrique Devesa Carpio; Maria del Mar Devesa Carpio; Francisco Borja Encinas Goenechea; Inmaculada Domínguez Fabián; Miguel Ángel García Díaz; Robert Meneu Gaya
  16. RETIRO DE FONDOS DE PENSIONES: RESULTADOS Y EFECTOS By Olga Fuentes Contreras; Ximena Quintanilla Domínguez; Alexandra Rueda Restrepo; Eugenio Salvo Cifuentes; Diego Herrera Astorga; Maria Fernanda Toledo Badilla

  1. By: Brown, Alessio J.G. (UNU-MERIT, Maastricht University, Global Labor Organization (GLO)); Fraikin, Anne-Lore (UNU-MERIT, Maastricht University, Global Labor Organization (GLO), and Liege University)
    Abstract: The objective of the paper is to examine the retirement behaviour of Belgian workers in one-earner households who are automatically granted a more generous old-age pension benefits replacement rate, called the household replacement rate. Following a recommendation of the Belgian Pension Reform Committee, this policy is to be suppressed for new pensioners, except for those receiving the minimum pension. We provide an ex-ante impact evaluation of such reform on both pension sustainability and adequacy measures. Specifically, we test whether the household replacement rate entails a work (dis)incentive mechanism promoting (harming) pension sustainability and furthermore, we analyse the role of the household replacement rate in old-age poverty and inequality measures. To do so, we use the survey dataset SHARE and a discrete time logistic duration model to study the link between retirement and financial retirement incentives created by the social security system. We find that the household replacement rate generates slightly higher retirement incentives through an income effect and we find that the household replacement rate plays an important role in decreasing the elderly poverty rate. Since households with asymmetrical working arrangements are often at the lowest part of the equivalized income distribution, the substantial effect of the household replacement rate on poverty measures is a motive to use such mechanism as a poverty alleviation tool. Nevertheless, we advocate that income redistribution measures should not be tied to a specific household composition and policies such as pensionable earning minima, minimum pension benefits and the inclusion of replacement income periods in the pension benefits calculation effectively serve the income redistribution goal without favouring a certain type of household over another. Overall, despite the positive poverty and distributional aspects of this policy, our analysis supports the reform proposal of removing the household replacement rate.
    Keywords: retirement, pension policy, Belgium, impact assessment
    JEL: H31 H55 J22 J26 O15
    Date: 2022–01–19
  2. By: Johannes Geyer; Svenja Lorenz; Thomas Zwick; Mona Bruns
    Abstract: Early retirement options are usually targeted at employees at risk of not reaching their regular retirement age in employment. An important at-risk group comprises employees who have worked in demanding jobs for many years. This group may be particularly negatively affected by the abolition of early retirement options. To measure differences in labor market reactions of employees in low- and high-demand jobs, we exploit the quasi-natural experiment of a cohort-specific pension reform that increased the early retirement age for women from 60 to 63 years. Based on a large administrative dataset, we use a regression-discontinuity approach to estimate the labor market reactions. Surprisingly, we find the same relative employment increase of about 25% for treated women who were exposed to low and to high job demand. For older women in demanding jobs, we do not find substitution effects into unemployment, partial retirement, disability pension, or inactivity. Eligibility for the pension for women required high labor market attachment; thus, we argue that this eligibility rule induced the positive selection of healthy workers into early retirement. We propose alternative policies that protect workers exposed to high job demand better against the negative consequences of being unable to reach their statutory retirement age in employment.
    Keywords: Pension reform, job demand, early retirement, quasi-experimental variation
    JEL: J14 J18 J22 J26 H31
    Date: 2021
  3. By: Fuchsman, Dillon (Sinquefield Center for Applied Economic Research, Saint Louis University); McGee, Josh (University of Arkansas); Zamarro, Gema (University of Arkansas)
    Abstract: Adequately saving for retirement requires both planning and knowledge about available retirement savings options. Teachers participate in a complex set of different plan designs and benefit tiers, and many do not participate in Social Security. While teachers represent a large part of the public workforce, relatively little is known regarding their knowledge about and preparation for retirement. We administered a survey to a nationally representative sample of teachers through RAND’s American Teacher Panel and asked teachers about their retirement planning and their employer sponsored retirement plans. We find that while most teachers are taking steps to prepare for retirement, many teachers lack the basic retirement knowledge necessary to plan effectively. Teachers struggled to identify their plan type, how much they are contributing to their plans, retirement eligibility ages, and who contributes to Social Security. These results suggest that teacher retirement reform may not be disruptive for teachers and that better, simpler, and clearer information about teacher retirement plans would be beneficial.
    Keywords: teacher pensions; retirement knowledge; retirement planning
    JEL: I20 J33
    Date: 2022–01–17
  4. By: Rowena Crawford (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: We examine the extent to which owner-occupiers in their 50s and 60s change their private pension saving when they complete repayment of the mortgage on their primary residence. Using panel data from a household survey, the English Longitudinal Study of Ageing, we identify those who completed repayment of their mortgage as anticipated two years prior. Despite mortgage expenditures falling by over £200 per person on average, there is little resulting change in average pension saving. This is because only a small minority of individuals react – the probability of an individual increasing their monthly pension saving by more than £150 increases by only 5 percentage points on completing repayment of a mortgage. This suggests that if policymakers wish to influence behaviour in order to increase private pension saving, interventions targeted at those completing their mortgage repayment could be a tractable approach. Such individuals would be able to increase pension saving while maintaining spending at recent levels.
    Date: 2020–12–01
  5. By: Mara Barschkett; Johannes Geyer; Peter Haan; Anna Hammerschmid
    Abstract: This study analyzes the causal effect of an increase in the retirement age on health. We exploit a sizable cohort-specific pension reform for women using two complementary empirical approaches - a Regression Discontinuity Design and a Difference-in- Differences approach. The analysis is based on official records covering all individuals insured by the public health system in Germany and including all certified diagnoses by practitioners. This enables us to gain a detailed understanding of the multi-dimensionality in these health effects. The empirical findings reflect the multidimensionality but allow for deriving two broader conclusions. We provide evidence that the increase in the retirement age negatively affects health outcomes as the prevalence of several diagnoses, e.g., mental health, musculoskeletal diseases, and obesity, increases. In contrast, we do not find support for an improvement in health related to a prolonged working life since there is no significant evidence for a reduction in the prevalence of any health outcome we consider. These findings hold for both identification strategies, are robust to sensitivity checks, and do not change when correcting for multiple hypothesis testing.
    Keywords: Germany, Retirement, Pension reform, Health, ICD-10, Regression Discontinuity Design, Difference-in-Differences
    JEL: I10 I12 I18 J14 J18 J26
    Date: 2021
  6. By: Mariacristina De Nardi (Institute for Fiscal Studies and University of Minnesota and Federal Reserve Bank of Minneapolis); Eric French (Institute for Fiscal Studies and University College London and University of Cambridge); John Bailey Jones (Institute for Fiscal Studies); Rory McGee (Institute for Fiscal Studies and University of Western Ontario)
    Abstract: While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household mem-ber dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.
    Date: 2021–05–28
  7. By: Rowena Crawford (Institute for Fiscal Studies and Institute for Fiscal Studies); George Stoye (Institute for Fiscal Studies and Institute for Fiscal Studies); Ben Zaranko (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: This paper examines the impact of changes in public long-term care spending on the use of public hospitals among the older population in England, and the cost and quality of this care. Mean per-person long-term care spending fell by 31% between 2009/10 and 2017/18 as part of a large austerity programme, but cuts varied considerably geographically. We instrument public long-term care spending with predicted spending based on historical national funding shares and national spending trends. We ?nd public long-term care spending cuts led to substantial increases in the number of emergency department (ED) visits made by patients aged 65 and above, explaining between a quarter and a half of the growth in ED use among this population over this period. The e?ects are most pronounced among older people and those living in more deprived areas. This also resulted in an increase in 7-day ED revisits and emergency readmissions. However, there was no wider impact on inpatient or outpatient hospital use, and consequently little impact on overall public hospital costs. These results suggest that the austerity programme successfully reduced combined public spending on health and long-term care, but had adverse e?ects on the health of vulnerable users.
    Date: 2020–12–07
  8. 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: This paper proposes a simple economic model describing retirees' use of bequests. The model assumes that retirees need long term care and have preferences regarding the source of this support. Support can either be bought from the market (at a fixed rate) or sourced from within their family and compensated through bequests. When calibrated, the model shows that for individuals to get at least 1h of daily care, they must, independently of their education level, save about 20% of their pension in the early years of their retirement. However, differences in the source of support appear between non educated and educated households. It is indeed much easier to get support from family members in non-educated households compared to educated ones. Those results suggest that non educated households are also less likely to contract financial insurance products for long term care as they can easily leverage informal arrangements (i.e. their family).
    Keywords: Bequests,Inheritances,Intergenerational transfers,Wealth inequalities,Wealth management
    Date: 2021–12–21
  9. By: Mara Barschkett; C. Katharina Spieß; Elena Ziege
    Abstract: Grandparents act as the third largest caregiver after parental care and daycare in Germany, as in many Western societies. Adopting a double-generation perspective, we investigate the causal impact of this care mode on children's health, socio-emotional behavior, and school outcomes, as well as parental well-being. Based on representative German panel data sets, and exploiting arguably exogenous variations in geographical distance to grandparents, we analyze age-specific effects, taking into account counterfactual care modes. Our results suggest null or negative effects on children's outcomes: If children three years and older are in full-time daycare or school and, in addition, cared for by grandparents, they have more health and socio-emotional problems, in particular conduct problems. In contrast, our results point to positive effects on parental satisfaction with the childcare situation and leisure. The effects for mothers correspond to an increase of 11 percent in satisfaction with the childcare situation and 14 percent in satisfaction with leisure, compared to the mean, although the results differ by child age. While the increase in paternal satisfaction with the childcare situation is, at 21 percent, even higher, we do not find an effect on paternal satisfaction with leisure.
    Keywords: grandparental childcare, socio-emotional outcomes, cognitive outcomes, parental well-being, instrumental variable
    JEL: D1 I21 I31 J13 J14
    Date: 2021
  10. By: Noelia Bernal; Javier Olivera; Marc Suhrcke
    Abstract: This paper exploits the discontinuity around a welfare index of eligibility to assess the heterogeneous health impacts of Peru’s social pension program Pension 65, which focuses on elderly poor individuals. The heterogeneity is analysed with regards to the treatment exposure (short vs long run), the accessibility to health care infrastructure (near vs distant facilities), and gender. Overall, we find improvements in anaemia, mortality risk markers, cognitive functioning, mental health, and self-reported health among eligible individuals; yet there is an increase in the risk of obesity among women, as well as an increase in reported chronic diseases. The program improves the quality of nutrition and health care access, but reduces the frequency or intensity of physical activities. About half of the effects on the analysed outcomes persist in the longer run and living in a district with good access to facilities stands out as the most relevant characteristic enhancing the beneficial program effects. Overall thus, the resulting health benefits in areas of under-nutrition are at most modestly compensated by deterioration in over-nutrition related conditions. As the program evolves further, policymakers need to confront the challenge of continuing to ensure the health benefits in terms of reducing nutritional deficits and the lack of health infrastructure while avoiding potential undesirable side effects in terms of over-nutrition in a geographically diverse country like Peru.
    Keywords: social pensions; Peru; nutrition; health; poverty; ageing
    JEL: H55 I12 I31
    Date: 2022–01
  11. By: Wang, J.; Alessi, R.; Angelini, V.
    Abstract: This paper estimates the effect of in utero exposure to adverse events on late life diabetes, cardiovascular disease risks and cognition deficiency. We merge data on the regional violence during the Cultural Revolution and the excessive death rates during the Chinese Great Famine with data from the China Health and Retirement Longitudinal Study (CHARLS)survey. Results show that female babies who were exposed in utero to the famine have higher diabetes risks, while male babies who were exposed to the Cultural Revolution are shown to have lower cognitive abilities.
    Keywords: early life conditions; chinese great famine; cultural revolution; diabetes; cardiovascular disease; cognition;
    JEL: I10 J11 J14
    Date: 2022–01
  12. By: Carrera, Leandro; Angelaki, Marina
    Abstract: Pension policy is a highly political issue across Latin America. Since the mid-2000s, several countries have re-reformed their pension systems with a general trend toward more state involvement, yet with significant variation. This article contends that policy legacies and the institutional political setting are key to understanding such variation. Analyzing the cases of Argentina, Bolivia, and Chile, this article shows that where a weak legacy, characterized by low coverage and savings rates, a weakly organized pension industry, and strong societal groups that oppose the private system, combines with a strong institutional setting, characterized by a government with large support in Congress and where the president concentrates decisionmaking, re-reform outcomes may lead to the outright elimination of the private pillar. Conversely, where a strong legacy combines with a weak institutional setting, re-reform outcomes will tend to maintain the private pillar and expand only the role of the public one.
    Keywords: Pension reform; policy change; Latin America; institutions; policy legacy; CUP
    JEL: R14 J01
    Date: 2021–12–21
  13. By: Karol Madoñ; Piotr Lewandowski
    Abstract: COVID-19 vaccines have proven highly effective in protecting against serious disease and death. Yet despite their introduction, Poland’s COVID-19 mortality rate remains high. This results from Poland’s lower vaccination rate compared to other EU countries – especially among people aged 70 or more who are at the highest risk from COVID-19.Vaccinating people aged 70+ is a much more effective method of lowering COVID-19 mortality rates than vaccinating people of working age. Increasing vaccination rates in the former age group would noticeably lower COVID-19 mortality in Poland. However, this would require an intensification of support efforts on a local level, including providing the elderly with comprehensive assistance in the vaccination process.
    Keywords: covid-19, pandemic, vaccination
    Date: 2022–01
  14. By: Rowena Crawford (Institute for Fiscal Studies and Institute for Fiscal Studies); Polly Simpson (Institute for Fiscal Studies and Institute for Fiscal Studies)
    Abstract: In this paper, we estimate the effect of house prices on whether or not young adults actively save in a private pension. We use job-level data from a survey of employers, matched to average house prices at the level of an individuals’ location of employment, exploiting geographical variation in local house price movements in England over the decade 1997 to 2007. We find that after controlling for individual and job characteristics there is no statistically significant effect, on average, across all employees. There is a negative effect for public-sector workers and those in the middle of the earnings distribution. However, the effects are small – for example, among public-sector workers, if house prices are £100,000 higher, then this is associated with a 3 percentage point lower probability of contributing to a pension. The effect is larger among employees in the NHS, education and non-uniformed services, who face a higher employee contribution than employees in the civil service.
    Date: 2020–12–01
  15. By: Jose Enrique Devesa Carpio (Universitat de València); Maria del Mar Devesa Carpio (Universitat de València); Francisco Borja Encinas Goenechea (Universidad de Extremadura); Inmaculada Domínguez Fabián (Universidad de Extremadura); Miguel Ángel García Díaz (Universidad Rey Juan Carlos); Robert Meneu Gaya (Universitat de València)
    Abstract: One of the aspects of the pension reform that has been under negotiation since mid-2021 is the modification of the Special Scheme for Self-Employed Workers (Régimen Especial de Trabajadores Autónomos RETA). According to the news that has spread, the new RETA may entail important changes with respect to the previous system, such as: a) The real returns declared for tax purposes will be taken into account, not being able to choose the contribution bases as was the case until now; b) the contribution payment will be set based on a series of return intervals (steps), which implies the disappearance of a single rate of contribution, as was the case up to now; c) a long transitory period is established (from 2023 to 2031) for its final implementation.Using a quota system and a function by steps means that not all affiliates are going to be subject to the same contribution rate, which implies a change with respect to what happened until now in the RETA and in the General Scheme (Régimen General).Although the application of the new quota table that appeared in January 2022 represents a slight improvement of the RETA, it continues to present important deficiencies in terms of the fairness of the system in several areas: a) within the RETA itself; b) regarding the General Scheme; c) during the transitional period, prominently.We propose a simple and transparent solution of using tax returns as a contribution base and continuing to apply a single contribution rate for all self-employed workers. In addition, this rate should be similar to that of the General Scheme. This would avoid most of the problems that we have detected and would make it possible to maintain tax returns as a reference, which we consider to be an important advance for the equalization with the General Scheme. Uno de los aspectos de la reforma de las pensiones que se está negociando desde mediados de 2021 es la modificación del Régimen Especial de Trabajadores Autónomos (RETA). Según las noticias que han trascendido, el nuevo RETA puede suponer importantes cambios respecto al sistema anterior, pudiendo destacarse: a) Se tendrán en cuenta los rendimientos reales declarados fiscalmente, no pudiendo elegir las bases de cotización como ocurría hasta ahora; b) la cuota a pagar se fijará en función de una serie de intervalos (escalones) de rendimientos, lo que implica la desaparición de un tipo de cotización único, como ocurría hasta ahora; c) se establece un periodo transitorio largo (desde 2023 a 2031) para su implantación definitiva.Utilizar un sistema de cuotas y una función por escalones supone que no todos los afiliados van a estar sujetos al mismo tipo de cotización, lo que implica una quiebra respecto a lo que ocurría hasta ahora en el RETA y en el Régimen General.Aunque la aplicación de nueva tabla de cuotas aparecida en enero de 2022 supone una ligera mejora del RETA, éste sigue presentando importantes deficiencias en cuanto a la equidad del sistema en varios ámbitos: a) dentro del propio RETA; b) respecto al Régimen General; c) durante el periodo transitorio, de manera destacada.Proponemos como solución sencilla y transparente la de utilizar los rendimientos fiscales como base de cotización y seguir aplicando un tipo de cotización único para todos los autónomos y que, además, sea similar al del Régimen General. Esto evitaría la mayor parte de problemas que hemos detectado y permitiría mantener como referencia los rendimientos fiscales, que consideramos que es un avance importante en la equiparación con el Régimen General.
    Keywords: Sistema de pensiones; Equidad; Régimen General; Tipo de cotización Pension system; Equity; General Scheme; Contribution rate
    JEL: H55
    Date: 2022–02
  16. By: Olga Fuentes Contreras; Ximena Quintanilla Domínguez; Alexandra Rueda Restrepo; Eugenio Salvo Cifuentes; Diego Herrera Astorga; Maria Fernanda Toledo Badilla (Studies Division, Chilean Pension Supervisor)
    Abstract: En el contexto de la pandemia por COVID-19 y de las crisis sanitaria y económica derivadas de esta, como una medida sin precedentes para el sistema de pensiones chileno se permitieron tres retiros anticipados de ahorros previsionales. A junio de 2021, estas tres leyes han resultado en un total de US$ 50.000 millones retirados.
    Keywords: Sistema de Pensiones de contribución definida
    Date: 2021–12

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