nep-age New Economics Papers
on Economics of Ageing
Issue of 2023‒10‒09
eleven papers chosen by
Claudia Villosio, LABORatorio R. Revelli

  1. Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag? By Kotschy, Rainer; Bloom, David E.
  2. Rural Pensions, Intra-Household Bargaining, and Elderly Medical Expenditure in the People’s Republic of China By Chen, Zeyuan; Park, Albert
  3. Graying and Staying on the Job: The Welfare Implications of Employment Protection for Older Workers By Morris, Todd; Dostie, Benoit
  4. The Conundrum of the Pension System in India: A Comprehensive study in the context of India's Growth Story By Aditya Deeti
  5. Heterogeneous Treatment Effect of Retirement on Cognitive Function By Koryu Sato; Haruko Noguchi; Kosuke Inoue
  6. The impact of COVID-19 on longer careers – an initial assessment for Malta By Aaron George Grech
  7. Mortality Regressivity and Pension Design By Youngsoo Jang; Svetlana Pashchenko; Ponpoje Porapakkarm
  8. Optimal Management of DC Pension Plan with Inflation Risk and Tail VaR Constraint By Hui Mi; Zuo Quan Xu; Dongfang Yang
  9. Labor Supply Response to Windfall Gains By Dimitris Georgarakos; Tullio Jappelli; Geoff Kenny; Luigi Pistaferri
  10. Report of the second regional seminar on social development. Social security (pensions and health) and the protracted crisis: an opportunity to combat inequality in the framework of a welfare state in Latin America and the Caribbean By -
  11. Public Education, Pension and Debt Policy By Kazumasa Oguro; Masaya Yasuoka

  1. By: Kotschy, Rainer (Harvard School of Public Health); Bloom, David E. (Harvard School of Public Health)
    Abstract: This paper examines the extent to which changes in working-age shares associated with population aging might slow economic growth in upcoming years. We first analyze the economic effects of changing working-age shares in a standard empirical growth model using country panel data from 1950–2015. We then juxtapose the estimates with predicted shifts in population age structure to project economic growth in 2020–2050. Our results indicate that population aging will slow economic growth throughout much of the world. Expansions of labor supply due to improvements in functional capacity among older people can cushion much of this demographic drag.
    Keywords: population health, life expectancy, prospective aging, labor supply, economic development
    JEL: J11 O11 O47
    Date: 2023–08
  2. By: Chen, Zeyuan (Southwestern University of Finance and Economics); Park, Albert (Asian Development Bank)
    Abstract: The rural elderly in the People’s Republic of China spend less on medical expenditures as they age despite declining health, which raises welfare concerns. This paper investigates the role of intra-household bargaining power on health expenditures of the elderly by evaluating the impact of cash transfers from a new social pension program. The program provided windfall payments to those above age 60, making it possible to employ a regression discontinuity design based on age of eligibility to estimate causal effects. Using data from the 2011 and 2013 waves of the China Health and Retirement Longitudinal Study, we find that receiving pension payments increases both the utilization of outpatient care and outpatient expenditures by the elderly who experienced illness. This result is robust to controlling for total household expenditures per capita, ruling out income effects as the main channel. Consistent with pensions increasing elderly bargaining power, we find that pensions significantly increase medical expenditures only for those elderly who co-reside with children or grandchildren but have no effect on those who live independently.
    Keywords: medical expenditures; pension; elderly; intra-household bargaining; regression discontinuity design; People’s Republic of China
    JEL: J14 J26
    Date: 2023–09–28
  3. By: Morris, Todd (HEC Montreal); Dostie, Benoit (HEC Montreal)
    Abstract: We study the welfare implications of employment protection for older workers, exploiting recent bans on mandatory retirement across Canadian provinces. Using linked employer- employee tax data, we show that the bans cause large and similar reductions in job separation rates and retirement hazards at age 65, with further reductions at higher ages. The effects vary substantially across industries and firms, and around two-fifths of the adjustments occur between ban announcement and implementation dates. We find no evidence that the demand for older workers falls, but the welfare effects are mediated by spillovers on savings behavior, workplace injuries, and spousal retirement timing.
    Keywords: employment protection, retirement, welfare, active and passive savings responses, health effects, spousal spillovers
    JEL: J26 J78 H55
    Date: 2023–09
  4. By: Aditya Deeti
    Abstract: India is the largest democracy in the world and has recently surpassed China to be the highest-populated country, with an estimated 1.425 billion (approximately 18% of the world population). Moreover, India's elderly population is projected to increase to 138 million by 2035. Indian economy is already reeling under the pressure of exorbitant pension liabilities of the government for existing pensioners. As such, India has introduced a National Pension System (NPS), which is a Defined Contribution Scheme for employees joining government service on or after 1st January 2004, bidding adieu to the age-old, tried and tested Old Pension System (OPS) which is a Direct Benefit Scheme, in vogue in India since the British Raj. This is an epoch-making move by the government as it seeks to inculcate Disciplined Saving among the people while significantly reducing the government burden by reducing the Pension Liabilities of the Central and State Governments. This paper aims to analyse various features and intricacies of the NPS and address the claims of various stakeholders like the Central Government, State Government, Employees, Pensioners, etc. In light of the above, and taking cognisance of the fact that many states such as Rajasthan, Chattisgarh, Jharkhand, etc, have exited the NPS scheme and have sought back their share of NPS employee and employer contribution, this study is relevant to address the current economic and fiscal issues of India to propel towards the ambitious goal of becoming a $ 5 trillion dollar economy by 2025. Keywords: Old Pension Scheme (OPS), National Pension System (NPS), Direct Benefit Scheme, Defined Contribution Scheme, Pension Liabilities.
    Date: 2023–09
  5. By: Koryu Sato (Department of Social Epidemiology, Graduate School of Medicine and School of Public Health, Kyoto University); Haruko Noguchi (Faculty of Political Science and Economics, Waseda University); Kosuke Inoue (the Hakubi Project, Department of Social Epidemiology, Graduate School of Medicine and School of Public Health, Kyoto University)
    Abstract: This study used instrumental variable causal forests to explore the heterogeneous treatment effect of retirement on cognitive function using data from 19 countries. We found that, on average, retirees have better cognitive function than workers and that the conditional average treatment effects vary depending on individuals’ characteristics. Policymakers should provide early retirement options in the pension system to allow individuals to decide when to retire. The balance between the social benefits of raising the state pension age and the individual costs of increasing the risk of dementia by delaying retirement should be considered.
    JEL: I10 J26 C26
    Date: 2023–09
  6. By: Aaron George Grech
    Abstract: Since older cohorts were more vulnerable to COVID-19, the pandemic was expected to be an age-specific shock to the labour market, undoing the lengthening of working lives of previous decades. In the case of Malta, the existence of the early exit age of 61 enhanced these fears, as older workers could withdraw more easily from the labour market and draw a more generous benefit than the COVID-19 wage supplement. Labour Force Survey data suggest that initially those aged 60 to 64 withdrew more rapidly from employment than other age groups. However, Jobsplus employment register data confirm that this development was not long-lasting and that the proportion of those resorting to an early pension did not rise. The pandemic does not appear to have had any discernible impact on labour market behaviour of older workers, and the positive economic and fiscal impacts of the gradual rise in pension age appear unaffected.
    JEL: E37 J26 H55
  7. By: Youngsoo Jang (University of Queensland); Svetlana Pashchenko (University of Georgia); Ponpoje Porapakkarm (National Graduate Institute for Policy Studies)
    Abstract: How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.
    Keywords: mortality-related redistribution, pensions, social security, annuities, life-cycle model
    JEL: G22 H21 H55 I38
    Date: 2023–09
  8. By: Hui Mi; Zuo Quan Xu; Dongfang Yang
    Abstract: This paper investigates an optimal investment problem under the tail Value at Risk (tail VaR, also known as expected shortfall, conditional VaR, average VaR) and portfolio insurance constraints confronted by a defined-contribution pension member. The member's aim is to maximize the expected utility from the terminal wealth exceeding the minimum guarantee by investing his wealth in a cash bond, an inflation-linked bond and a stock. Due to the presence of the tail VaR constraint, the problem cannot be tackled by standard control tools. We apply the Lagrange method along with quantile optimization techniques to solve the problem. Through delicate analysis, the optimal investment output in closed-form and optimal investment strategy are derived. A numerical analysis is also provided to show how the constraints impact the optimal investment output and strategy.
    Date: 2023–09
  9. By: Dimitris Georgarakos (European Central Bank and University of Glasgow); Tullio Jappelli (Università di Napoli Federico II, CSEF, and CEPR); Geoff Kenny (European Central Bank); Luigi Pistaferri (Stanford University, SIEPR, NBER and CEPR)
    Abstract: Using a large survey of euro area consumers, we design an experiment in which respondents report how they would change the decision to participate in the labor market, the hours worked, and their search effort (if not employed) in response to randomly assigned windfall gain scenarios. Windfall gains reduce labor supply, but only if they are significant in size. At the extensive margin, we find no effect for gains below €25, 000, and a decline in the probability of working of 3 percentage points for gains between €25, 000 and €100, 000. At the intensive margin, there is no effect for small gains, and a drop of roughly one weekly hour for gains above €50, 000. Women and workers closer to retirement respond more strongly to windfall gains. Finally, the proportion of those who stop searching for a job or search less intensively falls by 1 percentage point for each €10, 000 gain, and the effect is more pronounced for older individuals receiving the largest prize.
    Keywords: Survey Experiment; Labor Supply; Job Search; Wealth Shocks; Consumer Expectations Survey.
    JEL: E24 D10 J22 J68
    Date: 2023–09–18
  10. By: -
    Abstract: This document is the report of the Second Regional Seminar on Social Development “Social security and protracted crisis: an opportunity to combat inequality in the framework of a welfare state in Latin America and the Caribbean”. This seminar was organised by the Social Development Division of ECLAC in collaboration with the International Labour Organization (ILO) and the Pan American Health Organization (PAHO/WHO) and in partnership with the German Cooperation and the European Union’s Transitional Development Facility Project, 1 and was held on 30 and 31 August and 1 September 2022. In its second version, the Regional Seminar focused on providing a space of dialogue and reflection on social security systems in the region, with a attention on diagnoses, challenges and strategic orientations for reform processes and restructuring of pension and health systems. As a backdrop, there is an uncertain context of recovery and the need to consolidate full guarantees for the exercise of social rights in the countries of the region.
    Date: 2023–08–16
  11. By: Kazumasa Oguro (Hosei University); Masaya Yasuoka (School of Economics, Kwansei Gakuin University)
    Abstract: In some OECD countries, public debt is increasing to the point that fiscal reforms should be considered. Our paper sets a government budget constraint with the deficit of primary balance and examines how such a policy affects public debt in the long run. In the model, we consider policies of three types to reduce the deficit of primary balance: decreases in pension benefits and public education investment, and an increase in income tax. A decrease in pension benefit or an increase in tax revenues can inevitably raise the capital stock per unit of effective labor. Depending on the parametric conditions, they can also reduce the public debt per unit of effective labor and the ratio of public debt to gross domestic product (GDP).
    Keywords: Education Investment, Fiscal Sustainability, Pension, Public Debt
    JEL: H63 H20 E61 I28
    Date: 2023–09

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