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on Economics of Ageing |
| By: | Jiaxin Shi (Max Planck Institute for Demographic Research, Rostock, Germany); Christian Dudel (Max Planck Institute for Demographic Research, Rostock, Germany); Christiaan Monden; Alyson A. van Raalte (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | Objectives Persistent and substantial disparities in old-age mortality suggest that there may be great inequalities in the length of retirement life. This study aims to assess gender and educational differences in the average retirement lifespan and the variation in retirement lifespan, taking into account individual labor-force exit and re-entry dynamics. Methods We used longitudinal data from the Health and Retirement Study in 1996–2016, focusing on respondents aged 50 and above (N = 32,228). Multistate life tables were estimated using discrete-time event history models. The average retirement lifespan, as well as absolute and relative inequalities in retirement lifespan, were calculated analytically. Results We found that among women there was a persistent educational gradient in average retirement lifespan over the whole period studied; among men, the relationship between education and retirement expectancy was different across periods. Women and the lower-educated had higher absolute inequality in retirement lifespan than men and the higher-educated—yet these relationships were reversed when examined by relative inequality. Discussion Our multistate approach provides an accurate and comprehensive picture of the retirement lifespan of older Americans in the past two decades. Such findings should be considered in high-level discussions on Social Security. Potential reforms such as raising the eligibility age or cutting benefits may have unexpected implications for different social groups due to their differential impacts on retirement initiation and re-entry dynamics. |
| Keywords: | USA, age at retirement, inequality, life expectancy, mortality, multi-state life tables, retirement |
| JEL: | J1 Z0 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2022-015&r= |
| By: | Andersen, Torben M. (University of Aarhus); Bhattacharya, Joydeep (Iowa State University); Grodecka-Messi, Anna (Research Department, Central Bank of Sweden); Mann, Katja (Copenhagen Business School) |
| Abstract: | A growing literature explores reasons for rising wealth inequality, but disregards the role of pension systems despite their well-understood influence on life-cycle saving. In theory and according to available evidence, both pay-as-you-go (PAYG) and fully-funded (FF) pension schemes crowd out voluntary retirement saving. They differ because aggregate savings decrease in the former but increase under the latter system. Unlike most nations, Denmark has seen a decline in wealth inequality in recent decades. This paper studies a calibrated life-cycle model of Denmark and employs unique registry data to argue that a Danish pension system transition, from a mostly PAYG to a dominant, mandated FF scheme, explains much of this decline. |
| Keywords: | Wealth inequality; pension systems; crowding out; life-cycle savings |
| JEL: | D31 E01 E21 G51 H55 J32 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0411&r= |
| By: | Jody Schimmel Hyde; April Yanyuan Wu; Gina Livermore |
| Abstract: | This study uses occupational data from the Health and Retirement Study to document the link between disability onset and occupational transitions among older adults who are working and do not report a disabling condition at age 55. |
| Keywords: | older workers, occupations, transitions, disability, work limitations |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:4020ae559cbb440bb68bd80fc8e0f6d1&r= |
| By: | Baurin, Arno (Université catholique de Louvain, LIDAM/IRES, Belgium); Hindriks, Jean (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | Pension reforms, required to address the financial challenge of an ageing population, involve changing the accrual rate or the indexation rates. The accrual rate is the rate at which pension benefit is built up for each year of work. The indexation rate is the rate at which pension benefit is tied to the nominal wage growth. In this paper, we study the prospective consequences of indexation and accrual reforms and show the existence of a tension between democracy and equality. Simulating the effects of long-term budget balancing reforms, we show that 80% of the population prefers accrual over indexation reforms, with the implication that the youngest half of the population would bear 85% of the total adjustment cost. Then, we consider alternative pension reforms improving the generational balance (including policy mix and contribution reforms), and we show that all those reforms fail to get majority support. Finally we show that even though indexation reform is preferable in terms of work incentives, that does not change vote incentives. So, the tension is also between democracy and efficiency. |
| Keywords: | Pension reform ; Ageing ; Generational balance ; Prospective incidence ; Indexation ; Fiscal balance |
| JEL: | D63 D64 H55 I38 |
| Date: | 2022–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022008&r= |
| By: | Klimaviciute, Justina (Vilnius University); Pestieau, Pierre (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | With the rapid increase in long-term care (LTC) needs, it is important to assess the expected contributions of the traditional providers of LTC: the state, the market and the family. We first survey the literature devoted to the family and the market. Then, given the declining role of family caregiving and the negligible role of the market, we look at a number of studies exploring the design of public policies in support of the dependent elderly, particularly those who cannot count on the assistance from their family and those who lack basic means. Those public policies are conceived in such a way that they also rely on both the market and the family. |
| Keywords: | Long-term care ; dependence ; social insurance ; family solidarity ; social norm |
| JEL: | I11 I12 I18 J14 |
| Date: | 2022–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022004&r= |
| By: | Norihiro Komura (Institute of Economic Research, Kyoto University); Shun-ichiro Bessho (Faculty of Economics, University of Tokyo) |
| Abstract: | We estimate the longer-term impact of coinsurance for the elderly by RDD using administrative data, focusing on the increase in coinsurance in Japan, from 10% to 20%, for those aged 70-74, born after April 1944. The reduction of utilization in the longer term is similar to, or slightly larger than, in the short term. Patients reduce potentially wasteful care more; we do not find discernible impacts on health outcome and health-related behaviors. For the moderate change of prices for the elderly, distinctive characteristics associated with medical services, like behavioral hazard and ex-ante moral hazard, seem not largely affect consumer responsiveness. |
| Keywords: | Fiscal |
| JEL: | I11 I12 I13 I18 J14 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:1074&r= |
| By: | Andrew G. Biggs; Anqi Chen; Alicia H. Munnell |
| Abstract: | Much of the disagreement over whether the United States faces a retirement savings crisis hinges on different assumptions on how household consumption changes once the kids leave home. “Optimal savings†studies, which assume that household consumption declines and savings increase when the kids leave, suggest that most people are saving optimally. On the other hand, studies based on the assumption of steady consumption over the working years conclude that many households will end up underprepared for retirement. Researchers have tried to determine empirically which of these two theories better describes actual household behavior. Some have found that parents reduce consumption after their kids become independent, allowing them to save more for retirement. Others, however, have found that 401(k) savings do not increase. If households are both consuming less but not saving more after the kids leave, where are the resources going? This brief, which is based on a recent study, examines three ways to reconcile these seemingly inconsistent results: 1) define savings more broadly: beyond 401(k)s, parents may be saving by paying down debt faster; 2) define consumption more broadly: beyond survey definitions of consumption, parents may still be providing financial support to their grown children; and 3) define income more carefully: parents may be adjusting their labor supply and earnings.1 The analysis explores each of these avenues using data from the Health and Retirement Study and the Panel Study of Income Dynamics. The discussion proceeds as follows. The first section briefly summarizes the evidence to date. The second section describes the methodology and data for the current analysis. The third section presents the results. The final section concludes that parents do not increase savings after children leave but do reduce consumption and income. While the analysis does not completely resolve the apparent conflicting behaviors, understanding that a third dimension – changes in income – is at play can help inform future research on the topic. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2022-5&r= |
| By: | Merz, Joachim (Leuphana University Lüneburg) |
| Abstract: | This study contributes to the subjective well-being and retirement literature by quantifying life satisfaction before (4) and after retirement (9+) periods asking: Are retirees more satisfied? Fixed-effects and causal instrumental variables (IV) estimates with individual longitudinal data of the Socio-Economic Panel (SOEP, 33 waves) analyze anticipation and adaptation retirement effects of statutory insured and civil service pensioners in Germany. Main findings: The occupational situation absorbs a positive personal and family influence. There are positive anticipation effects before retirement followed by adaptation instantly when retired both for statutory insured and civil service pensioners. With neutral respectively negative post-retirement adaptation there is no positive retirement effect for both pensioner groups. In short: retirees are not more satisfied, a remarkable result both for statutory insured and civil service pensioners. |
| Keywords: | retirement, statutory insured and civil service pensioners, life satisfaction/subjective well-being, anticipation and adaptation effects, robust fixed-effect regression, causality IV estimates, Socio-Economic Panel (SOEP), Germany |
| JEL: | I31 J26 C21 C23 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15140&r= |
| By: | Flawinne, Xavier; Lefebvre, Mathieu; Perelman, Sergio; Pestieau, Pierre (Université catholique de Louvain, LIDAM/CORE, Belgium); Schoenmaeckers, Jerome |
| Abstract: | The current health crisis has particularly affected the elderly population. Nursing homes have unfortunately experienced a relatively large number of deaths. On the basis of this observation and working with European data (from SHARE), we want to check whether nursing homes were lending themselves to excess mortality even before the pandemic. Controlling for a number of important characteristics of the elderly population in and outside nursing homes, we conjecture that the difference in mortality between those two samples is to be attributed to the way nursing homes are designed and organised. Using matching methods, we observeexcess mortality in Belgium, France, Germany Luxembourg, Switzerland, Estonia and Czech Republic but no statistically significant excess mortality in Sweden, the Netherlands, Denmark, Austria, Italy or Spain. This raises the question of the organisation and management of these nursing homes, but also of their design and financing. |
| Keywords: | Nursing homes ; mortality ; propensity score matching ; SHARE |
| JEL: | C21 I10 J14 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022006&r= |
| By: | Geoffery T. Sazenbacher; Matthew S. Rutledge |
| Abstract: | At any given time, a large pool of people ages 55-70 – over 15 million today – indicate they are retired. With the U.S. economy currently facing a labor shortage, the potential return of these retirees to the workforce is an important question. On the one hand, it seems likely that many retired workers could be enticed to return given that the job opening rate is at an all-time high. On the other hand, it is possible that retirement is not a choice easily undone. To evaluate which scenario is likely to play out, this brief uses the Current Population Survey (CPS) to investigate the extent to which retired individuals reentered the labor force (“unretired†) over the last several decades, and how their response varied by labor market conditions. The discussion proceeds as follows. The first section provides background on what we know about unretirement. The second section discusses the data and methodology. The third section offers evidence that the rate of unretirement is generally low but is somewhat responsive to a tight labor market, as indicated by high rates of job openings. The final section concludes that the number of retired workers reentering the labor force as the economy continues to recover is likely to be non-trivial, but small relative to the size of the labor shortage. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2022-4&r= |
| By: | Alexander Krenek (WIFO); Margit Schratzenstaller; Klaus Grünberger (Austrian Institute of Economic Research); Andreas Thiemann |
| Abstract: | Based on the most recent data from the ECB's Household Finance and Consumption Survey, the project models the future household-level wealth distribution in five selected EU member countries (Finland, France, Germany, Ireland, and Italy) to derive inheritances based on different demographic and wealth projection scenarios. On this basis, various inheritance tax scenarios are simulated to estimate potential inheritance tax revenues for a projection period of 30 years. Our results indicate that multiple factors coincide in favouring a growing revenue potential for inheritance taxation in the medium-term. Wealth accumulation and appreciation lead to higher average wealth levels. The shift of the baby boomer generation out of the labour force results in an increase of the older population both in absolute and relative terms. Eventually, this will lead to a rise in the number of deaths and the number of inheritances. Additionally, low fertility rates lead to a reduction of the average number of successors and thereby decrease the importance of exemption thresholds, as individual inheritances become larger. Overall, our simulations show that the future revenue potential of inheritance taxes may be substantial. In practice, it can be expected that the theoretical revenue potential demonstrated by our simulations will be reduced by tax avoidance, real responses, and general equilibrium effects on other taxes. A review of the empirical evidence shows that behavioural responses to inheritance taxes are less pronounced compared to a net wealth tax. |
| Keywords: | TP_Europa, inheritance taxation, wealth taxation, ageing, HFCS, behavioural effects |
| Date: | 2022–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2022:i:645&r= |
| By: | Titus Galama (University of Southern California); Hans van Kippersluis (Erasmus University) |
| Abstract: | We present a theory of human capital, with its two most essential components, health capital and, what we term, skill capital, endogenously determined within the model. Using the theory, and a calibrated version of it, we uncover and highlight an important economic mechanism driving human-capital formation, socio-economic and health disparities, human-capital based economic growth, and causal relations among the stocks of wealth, skill and health, namely whether individuals can influence their own length of life (endogenous longevity). Without the ability of individuals to influence their longevity, the effects of health, skill and wealth on later-life skill and health are muted. Any additional health, skill or wealth is not used for additional investment, but essentially consumed. These findings have important implications for the modeling of, and our understanding of, human-capital formation, disparities in human capital and health, and human-capital based economic growth. |
| Keywords: | health investment, education, human capital, health capital, dynamic optimal control, longevity |
| JEL: | D91 I10 I12 J00 J24 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2022-009&r= |