nep-age New Economics Papers
on Economics of Ageing
Issue of 2022‒04‒25
thirteen papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. The Distributional Impact of Pension Auto-enrolment By Keane, Claire; O'Malley, Seamus; Tuda, Dora
  2. Working life and human capital investment By Gohl, Niklas; Haan, Peter; Kurz, Elisabeth; Weinhardt, Felix
  3. The dynamic and heterogeneous effects of retirement on cognitive decline By Schmitz, Hendrik; Westphal, Matthias
  4. Discounting Trillions of Dollars in Pension Obligations: A Better Alternative to Using the Expected Return or Risk-Free Rate By Woutersen, Tiemen
  5. Estimation of a Life-Cycle Model with Human Capital, Labor Supply and Retirement By Xiaodong Fan; Ananth Seshadri; Christopher R. Taber
  6. Consumption and Saving after Retirement By Bent Jesper Christensen; Malene Kallestrup-Lamb; John Kennan
  7. Progressing Towards Efficiency: The Role for Labor Tax Progression in Reforming Social Security By Makarski, Krzysztof; Tyrowicz, Joanna; Komada, Oliwia
  8. Rentnerinnen und Rentner am Arbeitsmarkt: Erwerbsarbeit im Ruhestand hat vielfältige Gründe - nicht nur finanzielle (Financial need, enjoyment of work, or the need for social contact – retirees who pursue paid work do so for a variety of reasons) By Romeu Gordo, Laura; Gundert, Stefanie; Engstler, Heribert; Vogel, Claudia; Simonson, Julia
  9. Demographic Changes, Labor Supplies, Labor Complementarities, Calendar Annual Wages of Age Groups, and Cohort Life Wage Incomes By Jensen, Bjarne S.; Pedersen, Peder J.; Guest, Ross
  10. Endogenous childcare costs in R&D based model By Miyake, Yusuke
  11. Demographic transition and economic growth in 6-EU member states By Srdelic, Leonarda; Davila-Fernandez, Marwil J.
  12. Economic Crises and Mental Health: Effects of the Great Recession on Older Americans By David M. Cutler; Noémie Sportiche
  13. Nota sobre el posible impacto presupuestario de la actualización de las pensiones con el IPC en 2023 By Miguel Ángel García Díaz

  1. By: Keane, Claire; O'Malley, Seamus; Tuda, Dora
    Date: 2021
  2. By: Gohl, Niklas; Haan, Peter; Kurz, Elisabeth; Weinhardt, Felix
    Abstract: This paper provides a novel test of a key prediction of human capital theory that educational investment decisions depend on the length of the pay-off period. We obtain causal estimates by leveraging a unique reform of the German public pension system that, across a sharp date-of-birth cutoff, increased the early retirement age by three years. Using RDD, DiD, and IV estimation strategies on census and householdpanel data, we show that this reform causally increased educational investment in the form of on-thejob training. In contrast, non-job related training before retirement was not affected. We explore heterogeneity and additional outcomes.
    Keywords: human capital; retirement policies; RDD
    JEL: J24 J26 H21
    Date: 2021–03–19
  3. By: Schmitz, Hendrik; Westphal, Matthias
    Abstract: We study effects of retirement on cognitive abilities (up to ten years after retirement) using data from 21 countries in Continental Europe, England, and the US, and exploiting early-retirement thresholds for identification. For this purpose, combines event-study estimations with the marginal treatment effect framework to allow for effect heterogeneity. This helps to decompose event-study estimates into true medium-run effects of retirement and effects driven by differential retirement preferences. Our results suggest considerable negative effects of retirement on cognitive abilities. We also detect substantial effect heterogeneity: Those who retire as early as possible are not affected while those who retire later exhibit negative effects.
    Keywords: Cognitive abilities,retirement,event study,marginal treatment effects
    JEL: C31 J14 J24
    Date: 2021
  4. By: Woutersen, Tiemen (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)
    Abstract: This paper proposes a new discount rate that pension funds can use to discount their future obligations. If the payouts of a pension fund depend on the return of the fund's assets, then neither the risk-free rate nor the expected return is an equitable way to discount future liabilities. Using the newly proposed rate, the expected utilities of a particular stream of payments are the same in each period. This proposed rate is higher than the discount rate that is used by some pension funds but lower than the rate that the U.S. States are required to use.
    Keywords: Discount rate; Pension fund obligations; valuation future obligations
    JEL: G20 G28 H50 H55 H60
    Date: 2022–03
  5. By: Xiaodong Fan; Ananth Seshadri; Christopher R. Taber
    Abstract: We develop and estimate a life-cycle model in which individuals make decisions about consumption, human capital investment, and labor supply and use it to analyze changes in Social Security rules. The most important aspect of our paper is human capital towards the end of the life cycle which responds to changes in the rules. Retirement arises endogenously as part of the labor supply decision. The model allows for both an endogenous wage process through human capital investment (which is typically assumed exogenous in the retirement literature), an endogenous retirement decision (which is typically assumed exogenous in the human capital literature), and accounts for the Social Security system. We estimate the model using indirect inference to match the life-cycle profiles of employment and measured wages from the SIPP data. The model replicates the main features of the data—in particular the large increase in measured wages and small increase in labor supply at the beginning of the life cycle as well as the small decrease in measured wages but large decrease in labor supply at the end of the life cycle. We use the model to estimate the effects of various changes to tax and Social Security policies and show that allowing for human capital accumulation is critical.
    JEL: J22 J24 J26
    Date: 2022–04
  6. By: Bent Jesper Christensen; Malene Kallestrup-Lamb; John Kennan
    Abstract: The paper analyzes consumption decisions of retired workers, using Danish register data. A major puzzle, which motivates much of the analysis below, is that wealth actually increases for a large fraction of the people in our data. One would expect that wealth accumulated before retirement would be used to augment consumption in later life, with the implication that wealth should decline over time. The risk of large out-of-pocket medical expenditures is negligible in Denmark, so although explanations associated with such expenditures might explain similar patterns in U.S. data, these explanations are not plausible for Denmark (and therefore also questionable for the U.S.). Our analysis instead attempts to explain wealth paths using a model that emphasizes fluctuations in the marginal utility of consumption. The results show that a latent state variable extension of the standard life-cycle consumption model is quite successful in explaining the curious observed wealth patterns after retirement for singles.
    JEL: E21 J26
    Date: 2022–03
  7. By: Makarski, Krzysztof (Warsaw School of Economics); Tyrowicz, Joanna (University of Warsaw); Komada, Oliwia (GRAPE)
    Abstract: We study interactions between progressive labor taxation and social security reform. Increasing longevity puts fiscal strain that necessitates the social security reform. The current social security is redistributive, thus providing (at least partial) insurance against idiosyncratic income shocks, but at the expense of labor supply distortions. A reform which links pensions to individual incomes reduces distortions associated with social security contributions, but incurs insurance loss. We show that the progressive labor tax can partially substitute for the redistribution in social security, thus reducing the insurance loss.
    Keywords: social security reform, labor income tax, redistribution, insurance, welfare effects
    JEL: C68 D72 E62 H55 J26
    Date: 2022–02
  8. By: Romeu Gordo, Laura (Deutsches Zentrum für Altersfragen (DZA), Berlin); Gundert, Stefanie (Institute for Employment Research (IAB), Nuremberg, Germany); Engstler, Heribert (Deutsches Zentrum für Altersfragen (DZA), Berlin); Vogel, Claudia (Hochschule Neubrandenburg); Simonson, Julia (Deutsches Zentrum für Altersfragen (DZA), Berlin)
    Abstract: "Over the past decades, the share of retirees in paid work, either as employees or as self-employed, has substantially increased. The present study explores the role of monetary and non-monetary motivations for paid work at retirement age. To this end, we compare the financial situation of working and non-working retirees in terms of the available household income and pension benefits. Moreover, we examine the importance of monetary and non-monetary individual motives for pursuing paid work in retirement. Finally, for non-working pensioners who do not intend to take up a job, we analyse the reasons why they are unwilling to do so." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Open-Access-Publikation ; IAB-Haushaltspanel
    Date: 2022–04–07
  9. By: Jensen, Bjarne S. (University of Southern Denmark); Pedersen, Peder J. (Aarhus University); Guest, Ross (Griffith University)
    Abstract: This paper analyzes the impact on age group wage differentials in a setting of imperfect labor substitution at different ages (years) of working life. We examine the wage prospect of assuming medium, high, and low levels of fertility during the population projection period (2020-2090). Main focus is on comparisons of selected Calendar year Age wage profiles and the comparisons of selected Cohort Lifetime wage profiles. The analytical results come from applying a CRESH Labor Aggregator to Age-group Labor supplies with a parametric calibration to register based micro data for Denmark. The results show Calendar year wage effects and Cohort wage effects from ageing that will not exist without non-zero Labor Complementarity elasticities, and are new contributions demonstrating the economic effects of large/small generations and cohort sizes. The impact of cohort size on the lifetime wage profile of its own cohort does depend on sizes of other cohorts, which are affected by the fertility rates underlying many cohorts. Hence, economic advantages of being a small cohort depend on fertilities and the sizes of many other existing cohorts.
    Keywords: labor substitution, CRESH, demographic cohorts, lifetime wage incomes
    JEL: J1 O4 E2
    Date: 2022–03
  10. By: Miyake, Yusuke
    Abstract: In an AI society, ICT is being introduced in all sectors. This trend is expected to significantly impact an aging society with a declining birthrate, which is expected to accelerate in the future. The development of medical care and improvements in diet will promote longer life expectancy, while the spread of online services will promote more efficient labor, and the development of home appliances will greatly reduce the burden of housework and childcare. In this paper, we analyze how the increase in longevity and disposable time of households in an AI society will affect the decline in fertility based on an R&D model.
    Keywords: Endogenous Childcare cost - Endogenous lifetime - Two-sector growth model
    JEL: J11 J22 O41
    Date: 2022–03–22
  11. By: Srdelic, Leonarda; Davila-Fernandez, Marwil J.
    Abstract: Europe is experiencing a dramatic shift in its demographic structure, ending three centuries of unprecedented population growth. However, there are few empirical estimates of the realised effect of such a process on economic performance. The present article attempts to fill this gap in the literature by assessing the impact of demographic transition in six European countries between 1971 and 2019. Unlike most studies in the field that rely on Cobb-Douglas production functions, we adopt an open-economy approach under the premise that, in the long-run, growth is balance-of-payments constrained. Applying time-varying-parameter estimation techniques, we compute the rate of growth compatible with equilibrium in the balance-of-payments (yBP) and show it is a good predictor of output growth trends. We proceed by investigating the importance of population dynamics as one of its determinants. The obtained effects are moderate, and there is significant heterogeneity between countries. In Italy, for instance, a 10-points increase in the old-age dependency ratio is associated with a 3% lower yBP, while in France, we have the opposite effect. Moreover, population decline effects are conditional to controlling for migration, with Germany and Austria differentiating themselves from their Southern Europe counterparts.
    Keywords: Demographic transition; Long-run growth; Thirlwall's law; Europe.
    JEL: J11 O41 O52
    Date: 2022–03
  12. By: David M. Cutler; Noémie Sportiche
    Abstract: We examine the effect of the Great Recession of 2007-2009 on the mental health of older adults, using longitudinal Health and Retirement Study data linked to area-level data on house prices. We use a variety of measures to capture mental health and rely on the very large cross-sectional variation in falling house prices to identify the impact of the Great Recession on those outcomes. We also account for people who moved in response to falling prices by fixing each person’s location immediately prior to the house price collapse. Our central finding is that the Great Recession had heterogeneous effects on health. While mental health was not affected for the average older adult, mental health declined among homeowners with few financial assets, who were therefore more vulnerable to falling house prices. Importantly, health impacts in this group differed by race and ethnicity: depression and functional limitations worsened among Black and other non-white homeowners and medication use increased among white homeowners. There were no measurable impacts for Hispanic homeowners. These results highlight the importance of examining heterogeneity across multiple dimensions when examining the health impacts of economic conditions.
    JEL: I1
    Date: 2022–03
  13. By: Miguel Ángel García Díaz
    Abstract: El pasado 28 de diciembre se publicó la Ley 21/2021 de garantía del poder adquisitivo de las pensiones y de otras medidas de refuerzo de la sostenibilidad financiera del sistema público de pensiones. En esta norma destacan cuatro modificaciones: la actualización de las pensiones con el IPC en sustitución del Índice de Revalorización de las Pensiones (IRP), la incorporación del concepto de gastos impropios en la contabilidad del sistema, modificaciones en los coeficientes de anticipación y diferimiento de la edad ordinaria de jubilación y el Mecanismo de Equidad Intergeneracional (MEI).
    Date: 2022–04

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