nep-age New Economics Papers
on Economics of Ageing
Issue of 2023‒10‒30
eleven papers chosen by
Claudia Villosio, LABORatorio R. Revelli

  1. Life Expectancy, Income and Long-Term Care: The Preston Curve Reexamined By Thibault, Emmanuel; Ponthieres, Grégory
  2. The Impact of the COVID-19 Pandemic on the Future Pensions of the Peruvian Pension System By Olivera, Javier; Valderrama, José A.
  3. The Impact of Covid-19 on Pensions due to Early Withdrawals of Pension Savings By Castro, Rubén; González, Leonardo; Schiappacasse, Ignacio; Tapia, Juan
  4. Population Aging and the Rise of Populist Attitudes in Europe By Despina Gavresi; Andreas Irmen; Anastasia Litina
  5. The Role of Disability Insurance on the Labour Market Trajectories of Europeans By Agar Brugiavini; Petru Crudu
  6. Impact of the COVID-19 Pandemic on the Formal Labor Market and the Pension System in El Salvador By Fuentes, Nelson; Aguilar, Gonzalo; Trillos, Camila
  7. Evaluating the Impact of COVID-19 on Pension Systems in Latin America and the Caribbean: The Case of Argentina By Rofman, Rafael; Baliña, Joaquín; López Méndez, Emanuel
  8. The Health Burden of Job Strain: Evidence from Europe By Petru Crudu; Giacomo Pasini
  9. Participation in supplementary pension savings in Iceland By Asgeir Danielsson; Rannveig Sigurdardottir; Svava J. Haraldsdottir
  10. Does mandatory saving crowd out voluntary saving? By Svend E. Hougaard Jensen; Sigurdur P. Olafsson; Arnaldur Stefansson; Thorsteinn S. Sveinsson; Gylfi Zoega
  11. La mauvaise perception des risques de longévité et de dépendance ne suffit pas à expliquer la faiblesse du marché de l'assurance dépendance (au Canada) By De Donder, Philippe; Boyer, Martin; Fluet, Claude; Michaud, Pierre-Carl; Leroux, Marie-Louise

  1. By: Thibault, Emmanuel; Ponthieres, Grégory
    Abstract: The Preston Curve - the increasing relation between income per capita and life expectancy - cannot be observed in countries where old-age dependency is widespread (that is, where long-term care (LTC) spending per capita is high). The absence of the Preston Curve in countries with high old-age dependency can be related to two other stylized facts: (1) the inverted-U relation between LTC spending and life expectancy; (2) the inverted-U relation between LTC spending and preventive health investments. This paper develops a two-period OLG model where survival to the old age depends on preventive health spending chosen by individuals while anticipating (fixed) old-age LTC costs. In that model, anticipated LTC costs are shown to have a non-monotonic effect on preventive health investment, thus rationalizing stylized facts (1) and (2). This framework is shown to provide an explanation for the absence of the Preston Curve in countries where old-age dependency is more acute.
    Keywords: Preston Curve, ; life expectancy; OLG models, ; long-term care
    JEL: E13 E21 I15 J14
    Date: 2023–10–09
  2. By: Olivera, Javier; Valderrama, José A.
    Abstract: We study the effects of the COVID-19 pandemic and the pension policy response on the private and public pension systems of Peru. We find that the policies allowing early withdrawals from the private pension balances imply a significant reduction in expected pension wealth by about 40 people, yet there are important heterogeneous effects: the losses are larger for males, for affiliates at the bottom of the distribution of income or pension wealth, and for older people as they have less time to rebuild their pension pots. We detect that the excess of mortality due to the pandemic will reduce the actuarial net liability of the public pension system by about 2.4 percent, even after accounting for new survival pensions and a drop in contributions. The effect is largely driven by savings due to the anticipated deaths of pensioners. Moreover, a new set of reduced pension benefits implemented in the public pension system during the pandemic could cost about 4 percent of the actuarial net reserve.
    Keywords: COVID-19;Old-age security
    JEL: D31 G28 H55 J14 J32
    Date: 2022–10
  3. By: Castro, Rubén; González, Leonardo; Schiappacasse, Ignacio; Tapia, Juan
    Abstract: The Chilean pension system was hit hard during 2020-2021 by the withdrawal of 25 per cent of the individual pensions funds accumulated by 2019, an amount equivalent to 20 per cent of Chiles GDP. We estimate here the impact of those withdrawals on new pension allowances, using a combination of official data sets and the IDB model for the actuarial projection of pensions, including its heterogeneity matrix, to simulate the distribution of pension impacts. The withdrawal impact decreases in new retirees of future years until disappearing around the year 2065. We estimate respective impacts of about 31 percent and 37 percent for males and females new self-financed pensions around the year 2022, which goes to about 56 percent among the third of the affiliates with the lowest savings. However, we found that the recent increase in non-contributory pensions more than counteracted this impact for roughly 90 percent of 2022 new retirees. Regarding labor markets shocks, we found only a moderate role for them in the long-term evolution of the pension system, as we also found to be the case of seven Caribbean countries (Cuba, Haiti, Dominican Republic, Jamaica, Trinidad and Tobago, Bahamas and Barbados). As an overall conclusion, we recommend studying contribution rates, because low-salary workers attain a substantial replacement rate with just the non-contributory pension, which casts doubt on whether a mandatory contribution is appropriate for them.
    Keywords: COVID-19;Labor markets
    JEL: H55 H68 J20
    Date: 2022–10
  4. By: Despina Gavresi (DEM, Université du Luxembourg); Andreas Irmen (DEM, Université du Luxembourg); Anastasia Litina (University of Macedonia, Thessaloniki, GR)
    Abstract: In the light of the rise in populism in Europe, this paper empirically explores the interplay between population aging and populist attitudes. We test this hypothesis by conducting a multilevel analysis of individuals living in European countries over the period 2002-2019. Our measure of population aging is the country’s old-age dependency ratio, thus we focus on population or societal aging as opposed to individual aging. Populist attitudes are derived from individual-level data that provide information about voting for populist parties, political trust and attitudes towards immigration available in nine consecutive rounds of the European Social Survey. Our findings suggest that societal aging is associated with a fall in trust in national and European institutions and a rise in attitudes against immigrants. There are two potential mechanisms driving our results. First, a shift in the median voter age. Older people tend to be more conservative, voting more for right-wing populist parties and this is reflected on the median vote and attitude as well. The second mechanism appeals to the impact that the presence of the “old” group in the society has on the society and the economy as a whole, it is thus more of an “externality” effect. Living in an aging society, young people are aware of the fact that they have to cater for a large share of old people and this gives rise to different incentives and attitudes compared to individuals living in “young” societies
    Keywords: Population Aging, Populist Vote, Immigrant Attitudes, Trust.
    JEL: D72 J10 P16 Z13
    Date: 2023
  5. By: Agar Brugiavini (Department of Economics, University Of Venice CÃ Foscari; Institute for Fiscal Studies); Petru Crudu (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: This work documents the role played by disability insurance, typically part of a wider public pension provision package, on the labour market trajectories and retirement decisions. We will first employ a machine learning approach to estimate a Transition Probability Model able to uncover the most likely labour market histories and then evaluate the effects of policy reforms, including reforms to the eligibility for disability insurance benefits. The main contribution is the introduction of disability insurance programs within a framework, which models the entire life course of older Europeans. This requires the detailed administrative eligibility criteria prevailing in each of the 11 countries from 1970 to 2017. Results show that the disability route and early retirement are substitutes. In addition, tightening eligibility rules of disability programs crowd out disabled workers, whose reductions in working capacities are correctly assessed, towards other compensatory schemes (e.g., unemployment benefits or early pension) in which working is not expected. On the contrary, individuals with over-assessed reductions in working capacities are the most reactive to disability policy restrictions. In conclusion, efficient disability assessment procedures are crucial for incentivising labour market participation without hurting individuals most in need.
    Keywords: Retirement, Disability, Path Dependence, Simulation
    JEL: J14 J26 I38 H55
    Date: 2023
  6. By: Fuentes, Nelson; Aguilar, Gonzalo; Trillos, Camila
    Abstract: Using an impact evaluation methodology for interrupted time-series and the IDB Pension Projection Model, this study estimates that the COVID-19 pandemic could have notably effects on the private pension system in El Salvador as a consequence of the relaxation of requirements to repay early withdrawals that was established in the context of the pandemic. This fact could negatively affect passive coverage rate, system incomes, short-run system surplus and replacement rates, generating an increase in the fiscal cost. The problems of the Salvadoran pension system are structural, and the COVID-19 pandemic has exacerbated them. Consequently, although it is possible to discuss policies to reduce these effects, it is necessary to frame this discussion in the context of a comprehensive reform of the system.
    Keywords: COVID-19;Salvadoran pension system;Early Withdrawals;Impact evaluation;Pension reform
    JEL: C22 G28 H55 J14 J32 J33
    Date: 2022–10
  7. By: Rofman, Rafael; Baliña, Joaquín; López Méndez, Emanuel
    Abstract: This paper presents a first approximation to assess the impact of the COVID-19 outbreak on Argentinas pension system in both the short and medium/long-term. To this end, we have used the Pension Projection Model of the Inter-American Development Bank (IDB) to design and analyze possible scenarios and outcomes, based on alternative scenarios. According to the data analyzed and the projections, the impact of COVID-19 on Argentinas pension system in the short run seems to have been limited, particularly given the rapid recovery during the last months of 2021. The long-term impact is harder to predict. Given the macroeconomic effects of the efforts made by authorities to protect the system and pensioners during the pandemic on the one hand; and the effects of COVID-19 within the labor market on the other, overall consequences are still to be fully understood.
    JEL: I31 I38 J11 J14
    Date: 2022–10
  8. By: Petru Crudu (Department of Economics, University Of Venice CÃ Foscari); Giacomo Pasini (Department of Economics, University Of Venice CÃ Foscari; NETSPAR)
    Abstract: This study examines the impact of occupational stressors and tasks throughout an individual’s career on their health in older age. Leveraging comprehensive job occupation data from the SHARE dataset, we establish precise connections between stressors and specific jobs at the 4-digit ISCO code level. To ensure accurate measurement of physical exertion, we propose the use of Metabolic Equivalent of Task (MET) based on the metabolic rate consumption associated with each task. Our study makes two key contributions. First, we provide compelling evidence that individuals, especially women, engaged in physically demanding jobs experience significantly worse health in older age. Our results remain valid after conducting several robustness checks and after controlling for a rich set of variables. Secondly, we introduce a novel methodology to identify harmful tasks and measure overall Job Strain Intensity, which also incorporates unobserved occupational stressors. This approach allows us to pinpoint specific harmful tasks and 4-digit ISCO codes, providing valuable insights for targeted retirement schemes and addressing important considerations regarding the fairness of statutory retirement ages. Additionally, policymakers can benefit from our findings to foster healthier work environments and guide investments towards automating high-risk tasks, thereby improving overall workplace safety and well-being.
    Keywords: Health, Job Tasks, Working Conditions, MET
    JEL: I1 I14 I18 J24 J28
    Date: 2023
  9. By: Asgeir Danielsson; Rannveig Sigurdardottir; Svava J. Haraldsdottir
    Abstract: We analyse participation in supplementary pension savings in Iceland using microdata on every person, aged 16 and over, registered in Iceland in 1999-2017. Although sizeable subsidies are offered, a large share of those eligible do not participate. The significant increase in subsidies in 2014 did affect participation, although less than expected. We find that women participate significantly more than men, apart from the youngest and oldest age groups. The difference between women and men is larger for single persons than for couples. It is also larger for those with only primary education than for those with tertiary education. The subsidies are such that the rate of return on the savings increases with age. Despite this, we find that participation rates are nearly constant between age 30 and age 60, whereupon participation starts to decline at around the time the savings can be withdrawn. We observe a significant correlation between the decision to start withdrawing funds and the decision to stop participating. Estimating equations for wage income using cross-sectional data, we find the usual concave (Mincer) shape, except for people in their late sixties, whose average wage income starts to increase, reflecting the tendency among higher-income people to retire later. We discuss the problems caused by the correlation between income and education, and between income and gender, and we use two-stage probit least squares to test for exogeneity of income.
    JEL: H2 H3 D12 D14
    Date: 2023–08
  10. By: Svend E. Hougaard Jensen; Sigurdur P. Olafsson; Arnaldur Stefansson; Thorsteinn S. Sveinsson; Gylfi Zoega
    Abstract: Recently, mandatory pension contributions in Iceland were increased substantially in the private sector while remaining unchanged in the public sector. Taking this as a large natural experiment, this paper studies the effects of this change on households’ voluntary saving using comprehensive third-party reported information on tax-payers’ income, assets and debt for all taxpayers. Using difference-in-differences, we find that households do not reduce voluntary saving when faced with a rise in mandatory saving. Our results are confirmed by an event study of workers switching from the private sector to the public sector. Survey evidence suggests widespread ignorance about the pension system.
    JEL: E21 E24
    Date: 2023–09
  11. By: De Donder, Philippe; Boyer, Martin; Fluet, Claude; Michaud, Pierre-Carl; Leroux, Marie-Louise
    Abstract: This article studies the some of the reasons underlying the under-provision of LTC insurance in Québec and Ontario. Using 2016 survey data, we demonstrate that misperception biases regarding demographic risks (of mortality and of dependency) cannot alone explain the low demand for this insurance product. Even if individual perceptions of these risks are heterogenous, individuals tend on average to over-estimate their survival probability and the probability of entering a LTC home, which should lead to over-insurance rather than to under-insurance for LTC. We show instead that the most probable reason for the under-provision of LTC insurance is that individuals do not know this financial product. Hence, if policy makers were to foster the purchase of LTC insurance, they should run advertising campaigns to inform the public about these products. Another interesting policy could be to develop bundled insurance products.
    JEL: D82 D83 G22 I13
    Date: 2023–10–12

This nep-age issue is ©2023 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.