nep-age New Economics Papers
on Economics of Ageing
Issue of 2023‒08‒21
eleven papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Relationship between Social Security Programs and Elderly Employment in Japan By Takashi Oshio; Satoshi Shimizutani; Akiko S. Oishi
  2. Do individuals accept fluctuations in pension income? By Bucher-Koenen, Tabea; Knebel, Caroline; Weber, Martin
  3. Health accidents and wealth decline in old age By Hippolyte d'Albis; Najat El Mekkaoui; Bérangère Legendre
  4. Joining late, leaving early? Immigrant-native disparities in labor market exit By Åslund, Olof; Larsson, Fredrik; Laun, Lisa
  5. Using Monte Carlo Methods for Retirement Simulations By Aditya Gupta; Vijay K. Tayal
  6. Policy Expectation Counts? The Impact of China's Delayed Retirement Announcement on Urban Households Savings Rates By Shun Zhang
  7. Private Wealth over the Life-Cycle: A Meeting between Microsimulation and Structural Approaches By L. GALIANA; L. WILNER
  8. Aging, Health Risk, and Interest Rates By Reona Hagiwara
  9. Cambio demográfico y brechas de protección social en el Caribe hispanohablante, Centroamérica y México By Huenchuan, Sandra
  10. Health Externalities to Productivity and Efficient Health Subsidies By Siew Ling Yew; Jie Zhang
  11. Caregiving and Labor Supply: New Evidence from Administrative Data By Nicole Maestas; Matt Messel; Yulya Truskinovsky

  1. By: Takashi Oshio; Satoshi Shimizutani; Akiko S. Oishi
    Abstract: This study examines how elderly employment is associated with social security programs and how it responds to recent reforms in Japan. To this end, we employed a rich and longitudinal dataset of middle-aged and older individuals collected between 2005 and 2018. By incorporating various factors related to social security incentives into a single index of implicit tax (ITAX), we confirmed that the index successfully captured the incentives and their changes incorporated in recent social security reforms. We further estimated the association of ITAX with an individual’s decisions concerning retirement and pension benefit claims. Lastly, we conducted counterfactual simulations to assess the effect of recent social security forms on retirement based on the estimated regression parameters. The results showed that a higher ITAX drove individuals, especially men, to retire and claim benefits earlier.
    JEL: H55 J14 J26
    Date: 2023–07
  2. By: Bucher-Koenen, Tabea; Knebel, Caroline; Weber, Martin
    Abstract: How to invest and decumulate wealth during retirement has far-reaching consequences for consumption during retirement. We conduct an online experiment among 2, 500 individuals representative of the adult German population. First, we investigate the choice between phased withdrawal plans with varying riskiness resulting in volatile retirement income. We find that 40% of the participants choose some risk and thus, accept fluctuations in retirement income. Second, we analyze the choice between the selected withdrawal plan and a lifelong annuity. Overall 56% of the respondents switch to the annuity. Switching behavior is more prevalent among individuals who chose the risk-free and medium-risk withdrawal plans as compared to the risky plan. Anchoring and fluctuation frames have small and significant effects on plan choice.
    Keywords: Retirement planning, phased withdrawal plans, annuities, framing
    JEL: D14 E21 G5 H55 J14 J26
    Date: 2023
  3. By: Hippolyte d'Albis (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Najat El Mekkaoui (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); Bérangère Legendre (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc)
    Abstract: This paper explores the impact of a health shock and changes in survival probability on the savings and portfolio choices of older individuals. Using a theoretical framework featuring a portfolio choice that incorporates imperfect annuity markets, we analyze how elderly individuals, whose survival probability has been altered by a health shock, allocate their resources. A difference-indifferences approach complements the theoretical approach by taking into account the effect of age and cohort, and controlling for selection bias related to health events at older ages. Our analysis utilizes a panel of 5570 observations from the Survey of Health, Aging, and Retirement in Europe (SHARE, 2011 and 2017). Both theoretical and empirical findings converge, indicating that experiencing a health accident such as a stroke or heart attack leads to a decrease in safe savings. Consequently, investing in annuities becomes crucial in enabling individuals to mitigate the consequences of poor health in aging economies.
    Keywords: Life cycle model, saving behavior, health shock, difference-indifferences Life cycle model, difference-in-differences
    Date: 2023–07
  4. By: Åslund, Olof (Uppsala University, Department of Economics); Larsson, Fredrik (Swedish Public Employment Agency); Laun, Lisa (Uppsala Center for Labor Studies (UCLS))
    Abstract: Theory and empirical findings on retirement determinants suggest that we may expect differences in labor market exit between native and foreign-born workers. Despite many countries seeing rising immigrant shares in their aging populations, alongside significant labor market disparities, the issue has so far received limited attention. Population-wide administrative data for Sweden show that the hazard rate to retirement is greater among immigrants already from age 50. But approaching age 65, especially marginal migrant groups have a stronger tendency to remain in the labor force and thus not adhering to the norm of retiring at a specific age. Education and family situation explain little of the retirement gaps, whereas labor market history, health, and occupational allocations are important determinants. Immigrant-native retirement differences are greater among men than among women. Overall findings suggest economic necessity and/or opportunity rather than varying preferences as drivers of differentials.
    Keywords: labor market exit; immigrants; retirement hazard
    JEL: C93 J64 J68
    Date: 2023–06–12
  5. By: Aditya Gupta; Vijay K. Tayal
    Abstract: Retirement prediction helps individuals and institutions make informed finan-cial, lifestyle, and workforce decisions based on estimated retirement portfolios. This paper attempts to predict retirement using Monte Carlo simulations, allow-ing one to probabilistically account for a range of possibilities. The authors propose a model to predict the values of the investment accounts IRA and 401(k) through the simulation of inflation rates, interest rates, and other perti-nent factors. They provide a user case study to discuss the implications of the proposed model.
    Date: 2023–06
  6. By: Shun Zhang
    Abstract: This article examines the impact of China's delayed retirement announcement on households' savings behavior using data from China Family Panel Studies (CFPS). The article finds that treated households, on average, experience an 8% increase in savings rates as a result of the policy announcement. This estimation is both significant and robust. Different types of households exhibit varying degrees of responsiveness to the policy announcement, with higher-income households showing a greater impact. The increase in household savings can be attributed to negative perceptions about future pension income.
    Date: 2023–07
  7. By: L. GALIANA (Insee); L. WILNER (Insee, Crest)
    Abstract: This paper embeds a structural model of private wealth accumulation over the life-cycle within a dynamic microsimulation model (Destinie 2) designed for long-run projections of pensions. In such an environment, the optimal savings path results from consumption smoothing and bequests motives, on top of the mortality risk. Preferences are estimated based on a longitudinal wealth survey through a method of simulated moments. Simulations issued from these estimations replicate quite well a private wealth that is more concentrated than labor income. They enable us to compute “augmented” standards of living including capital income, hence to quantify both the countervailing role played by private wealth to earnings dropout after retirement and the impact of the mortality risk in this regard.
    Keywords: Microsimulation; Intertemporal Consumer Choice; Life-cycle; Inequality
    JEL: C63 C88 D15
    Date: 2023
  8. By: Reona Hagiwara (Faculty of Political Science and Economics, Waseda University)
    Abstract: Over the past few decades, the Japanese economy has experienced a secular decline in the real interest rate, which is the return on safe and liquid assets. At the same time, the gap between the returns on liquid bond and illiquid capital (i.e., the risk premium) has increased because of the steady return on risky assets. This paper explores the role of the health risk in the increase in the premium, using a general equilibrium overlapping generations model. In the model, individuals are heterogeneous in health status and they incur medical costs. The model also features the presence of additional medical transaction frictions, which increase with medical expenditure but can be reduced by holding liquid assets. I find that both demographic aging and the increase in the individual out-of-pocket medical costs could push down the return on bond and lead to the widening premium. However, the latter effect is dominant because higher medical burdens encourage individuals to save more liquid bond rather than illiquid capital in order to mitigate the medical transaction frictions. According to these findings, the changes in the medical systems will continue to contribute to the further widening risk premium, although the future trend will be affected by several factors, not only medical systems but also demographics and government bond supply.
    Keywords: Health Risk; Demographic Aging; Risk Premium; Overlapping Generations
    JEL: E21 G51 I10 J11
    Date: 2023–07
  9. By: Huenchuan, Sandra
    Abstract: En el dinámico contexto actual, la protección social está en constante evolución. El cambio demográfico, la transición epidemiológica, las preocupaciones sobre el cambio climático y las transformaciones de las familias y los mercados laborales son algunos de los factores que inciden en dicha evolución. La pandemia de enfermedad por coronavirus (COVID-19) dejó al descubierto disparidades y deficiencias en el ámbito de la protección social, tanto a nivel nacional como internacional. Diversos obstáculos relacionados con factores como la edad, el género, la discapacidad y el origen étnico indígena excluyen de manera sistemática a ciertas personas y grupos. Además, la falta de información, el miedo y el elevado costo o complejidad de los procedimientos, entre otros desafíos, dificultan aún más el acceso a estos servicios y prestaciones vitales. En este documento se analiza el impacto del cambio demográfico, haciendo hincapié en el envejecimiento y la longevidad, y en cómo estos fenómenos influyen en la protección social. Se exploran las diferentes dimensiones de las brechas de protección social presentes en el Caribe hispanohablante, Centroamérica y México, y se examina el enfoque del ciclo de vida en la protección social y su potencial para reducir las desigualdades en materia de bienestar.
    Date: 2023–07–19
  10. By: Siew Ling Yew; Jie Zhang
    Abstract: We explore optimal health subsidies in a dynastic model with health externalities to productivity that cause low health spending, productivity, longevity, savings and labor but high fertility. Public or firms’ health subsidies increase health spending, longevity and productivity and decrease fertility. Labor income taxes reduce the marginal benefit of health spending and the time cost of raising a child, while consumption taxes reduce the relative cost of raising a child. Appropriate public or firms’ health subsidies can internalize the externalities through age-specific labor income taxes and consumption taxes. Calibrating the model to the Australia economy, numerical results suggest policy improvements.
    Keywords: Health Externality, Longevity, Productivity, Fertility, Savings
    JEL: H21 I13 I15 J13 O41
    Date: 2023–07
  11. By: Nicole Maestas; Matt Messel; Yulya Truskinovsky
    Abstract: A significant share of the rapidly growing demand for long-term care is met by family members, many of whom also work, and family caregiving has been shown to affect labor market outcomes. We use survey responses about family caregiving roles linked to administrative earnings records to estimate the employment trajectories of family caregivers over a 25 year period around the reported start of a caregiving episode. These trajectories vary significantly by gender. Relative to a matched comparison group, caregiving precipitates a drop in both earnings and employment for women, while men only enter caregiving after experiencing significant labor supply disruptions.
    JEL: J14 J16
    Date: 2023–07

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