nep-age New Economics Papers
on Economics of Ageing
Issue of 2024‒05‒27
six papers chosen by
Claudia Villosio, LABORatorio R. Revelli

  1. The Impact of Lump-Sum Retirement Withdrawals on Labor Supply: Evidence from Peru By Carla Moreno; Sita Slavov
  2. Politics of Public Education and Pension with Endogenous Fertility By Yuki Uchida; Tetsuo Ono
  3. Caring for carers? The effect of public subsidies on the wellbeing of unpaid carers By Costa-Font, Joan; D'Amico, Francesco; Vilaplana-Prieto, Cristina
  4. Intergenerational Redistribution in a Pay-as-you-go Pension System By Lundberg, Jacob
  5. Great Layoff, Great Retirement and Post-pandemic Inflation By Guido Ascari; Jakob Grazzini; Dominico Massaro
  6. Healthcare expenditure projections up to 2050: ageing and the COVID-19 crisis By Colombier, Carsten; Braendle, Thomas

  1. By: Carla Moreno; Sita Slavov
    Abstract: We examine the labor supply impact of a 2016 policy that allows retirement-eligible individuals covered by Peru’s private pension system to receive retirement benefits as a lump sum rather than as an annuity. We present a theoretical model predicting that, for liquidity constrained workers, the lump sum option makes formal employment (requiring pension participation) more attractive relative to informal employment (not requiring pension participation); it also encourages early retirement. Using household panel data, we estimate the impact of the 2016 policy on the labor supply of workers covered by the private pension system compared to workers covered by the alternative pay-as-you-go defined benefit pension (which was unaffected by the policy). The policy is associated with an increase in the probability of being retired at ages 50 (early retirement age for women), 55 (early retirement age for men), and 65 (full retirement age for all workers). We also find increases in formal sector employment among women in their late 40s and men in their early 50s, consistent with increased efforts to qualify for early retirement (which requires recent pension contributions). The policy’s effects are concentrated among workers with less education, who are more likely to be liquidity constrained.
    JEL: G51 H55 J26
    Date: 2024–04
  2. By: Yuki Uchida (Faculty of Economics, Seikei University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: Implications of increased life expectancy on parental fertility decisions and subsequent shifts in political influence between younger and older generations carry significant consequences for government policies concerning education and pension. This study introduces an overlapping generations growth model incorporating these effects, qualitatively indicating that increased life expectancy correlates with lower fertility rates, decreased education expenditure-GDP ratio, and increased pension benefit-GDP ratio. A model simulation evaluates the impact of the projected increase in life expectancy until 2100 on four country groups: synthetic rich OECD, synthetic rich OECD Europe, Japan, and the United States. The findings demonstrate similar trends as in the qualitative analysis, yet growth rates are projected to vary significantly across regions and countries due to differing life expectancy increases.
    Keywords: Fertility; Public Pension; Public Education; Probabilistic Voting; Overlapping Generations
    JEL: D70 E62 H52 H55
    Date: 2024–05
  3. By: Costa-Font, Joan; D'Amico, Francesco; Vilaplana-Prieto, Cristina
    Abstract: We study the effect of long-term care subsidies and supports on the well-being of unpaid caregivers. We draw on evidence from a policy intervention, which universalized previously means-tested caregiving supports in Scotland, known as free personal care (FPC). We document causal evidence of an increase in the well-being (happiness) of unpaid carers after the introduction of FPC. Our estimates suggest economically relevant improvements in happiness (12 percentage point increase in subjective well-being) among caregivers exposed to FPC and who provide at least 35 hours of care per week. Consistently, these results are larger among women and non-actively employed caregivers (17 percentage point increase in happiness). Estimates are not driven by selection into caregiving; they are explained by income effects of FPC among caregivers.
    Keywords: caregiving; long-term care subsidies; Scotland; caregiver’s well-being; subjective well-being
    JEL: I18 J22
    Date: 2023–10–23
  4. By: Lundberg, Jacob (Research Institute of Industrial Economics (IFN))
    Abstract: This study provides a comprehensive analysis of the generational wealth transfer within Sweden’s public pay-as-you-go pension system introduced in 1960. Using extensive administrative registers, the paper quantifies the contributions made and benefits received by each birth cohort. The findings reveal a substantial fiscal imbalance favouring the initial generation (born in the early 20th century), who received a net gain of $1.5 trillion in today’s present value, equivalent to up to 13% of their discounted lifetime income. This windfall for the initial generation resulted in an implicit tax on current workers, accounting for 70% of their pension contributions. However, the study also highlights the effectiveness of Sweden’s 1999 notional defined-contribution pension reform in stabilizing this imbalance. Unlike many international counterparts, Sweden’s reformed system successfully mitigates further generational inequities in the pension system.
    Keywords: Pensions; Social security; Pay-as-you-go; Generational equity; Generational accounting
    JEL: H55 N34
    Date: 2024–05–02
  5. By: Guido Ascari; Jakob Grazzini; Dominico Massaro
    Abstract: The Covid-19 shock caused a dramatic spike in the number of retirees – a phenomenon dubbed the “Great Retirement†– and a prolonged con- traction in the labor force. This paper investigates the impact of the Great Retirement on the post-pandemic surge of inflation, via the labor market. First, retirement is generally countercyclical, and the peculiarity of the pan- demic shock was just in its size: the “Great Layoff†in March and April 2020 triggered the Great Retirement. Hence, a transitory labor demand shock generated a persistent labor supply shock. Second, counties more exposed to the Great Layoff exhibit a relatively higher increase in wages. Finally, an estimated model with endogenous labor market participation quantitatively assesses the overall contribution of the Great Retirement to inflation from 2020:Q1 up to 2023:Q2 to be roughly equal to 3.7 percentage (cumulative) points.
    Keywords: Great Retirement; Labor Force; Wages; Inflation
    JEL: E30 E24 J21
    Date: 2024–05
  6. By: Colombier, Carsten; Braendle, Thomas
    Abstract: Even before the COVID-19 crisis, rapidly growing healthcare expenditure was calling the sustainabi- lity of public finances into question. The pandemic has reinforced these concerns and also under- lined the importance of resilient healthcare systems. To highlight the need for economic policy action in the healthcare sector, this paper provides expenditure projections for Switzerland up to 2050. The expenditure projections take into account the financial impact of the COVID-19 crisis and foreseeable ageing of the population. The projections show that while COVID-related health- care expenditure is a burden on public budgets in the short term, the ageing of the population will put continued and growing pressure on public budgets and compulsory health insurance until 2050. In the medium to long term, however, healthcare expenditure is driven not only by demogra- phic change, but also by non-demographic factors such as rising income, medical advances and Baumol's cost disease. The projections also suggest that long-term care will be affected by higher cost growth than the rest of the healthcare system. The sensitivity analyses show that the strongest cost pressure comes from alternative assumptions about the effect of the non-demographic cost drivers. In addition, a policy scenario discusses the cost-dampening effects of cost targets.
    Keywords: healthcare expenditure growth, population ageing, long-term projections, sustainabi- lity, public finances, health insurance, budgetary target, Baumol's cost disease
    JEL: H51 I13 I18
    Date: 2022–07–01

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