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on Economics of Ageing |
| By: | van der Vaart, J; Groneck, M; van Ooijen, R |
| Abstract: | A well-established negative correlation exists between lifetime income and health and mortality risk. We quantify the welfare implications of living longer and using less LTC by higher incomes, implying higher lifetime retirement income and lower lifetime LTC cost. To this end, we model singles’ and couples' consumption and saving behavior throughout the life cycle. Households face uncertain labor income at working age and uncertain and heterogeneous health and mortality across socioeconomic groups, so precautionary savings will differ across these groups. In addition, we assume that households value living and giving bequests to their heirs, implying a potential saving motive for bequests. We estimate the parameters of the model using unique administrative data from the Netherlands. Old-age insurance programs for retirement and LTC provision result in a substantial redistribution of welfare due to socioeconomic inequalities in LTC needs and mortality. The welfare effect amounts to 23.4% additional consumption after age 65 for the income-rich compared to those in the bottom lifetime income quartile. A large part of 22.2pp of the welfare gain for the richer households is explained by their strong preferences for leaving bequests: they have lower co-payments for LTC and more retirement income, which they spend on leaving a larger bequest upon death. |
| Keywords: | socioeconomic inequalities; long-term care and mortality risk; retirement programs; couples' life-cycle model |
| JEL: | D15 H55 I14 J14 J17 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:24/20 |
| By: | Sourish Das; Bikramaditya Datta; Shiv Ratan Tiwari |
| Abstract: | This study examines how market risks impact the sustainability and performance of the New Pension System (NPS). NPS relies on defined contributions from both employees and employers to build a corpus during the employee's service period. Upon retirement, employees use the corpus fund to sustain their livelihood. A critical concern for individuals is whether the corpus will grow sufficiently to be sustainable or if it will deplete, leaving them financially vulnerable at an advanced age. We explore the impact of market risks on the performance of the corpus resulting from the NPS. To address this, we quantify market risks using Monte Carlo simulations with historical data to model their impact on NPS. We quantify the risk of pension corpus being insufficient and the cost to the Government to hedge the risk arising from guaranteeing the pension. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.13200 |
| By: | Charles Yuji Horioka; Luigi Ventura |
| Abstract: | We analyze the saving motives of European households using micro-data from the Household Finance and Consumption Survey (HFCS), which is conducted by the European Central Bank. We find that the rank ordering of saving motives differs greatly depending on what criterion is used to rank them. For example, we find that the precautionary motive is the most important saving motive of European households when the proportion of households saving for each motive is used as the criterion to rank them but that the retirement motive is the most important saving motive of European households if the quantitative importance of each motive is taken into account. Moreover, the generosity of social safety nets seems to affect the importance of each saving motive, with saving for the retirement motive being less important in countries with generous public pension benefits and saving for the precautionary motive being less important in countries with generous health systems. These findings suggest that the retirement motive and the precautionary motive are the dominant motives for saving in Europe partly because social safety nets are not fully adequate. Finally, our findings suggest that the selfish life-cycle model is more applicable in Europe than is the altruism model. |
| JEL: | D12 D14 D15 D64 E21 J14 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32838 |
| By: | Singh, Yadawendra; Chakraborty, Lekha |
| Abstract: | Against the backdrop of demographic transition in India, the study highlights the necessity of integrating the elderly population as a critical factor in formula-based intergovernmental fiscal transfers. The demographic transition, characterized by an increasing elderly population, imposes unique fiscal challenges on states, necessitating a revision of transfer formulas to ensure equitable and efficient resource distribution. The paper employs a historical analysis of fiscal devolution criteria, and analysing the impact of incorporating the elderly population into the devolution formula on the share of states in the total tax transfer to states. The findings indicate that integrating the elderly population into the tax devolution formula can significantly alter the distribution of resources among states, with states having higher shares of elderly populations benefiting more. The study recommends that there is a need to consider demographic changes by incorporating the share of elderly population to working age population ratio as a criterion by the Sixteenth Finance Commission to promote a more equitable and efficient allocation of resources. |
| Keywords: | Finance Commission, Tax Transfers , Demographic Transition, Elderly Population |
| JEL: | E6 E62 H0 H77 |
| Date: | 2024–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121658 |
| By: | Dalle, Axana (Ghent University); Wybo, Toon (Ghent University); Baert, Stijn (Ghent University); Verhaest, Dieter (KU Leuven) |
| Abstract: | In many countries, age discrimination appears to be driven by negative perceptions that recruiters stereotypically hold about older candidates' technological skills, trainability, and flexibility. Based on human capital, signalling, and screening theories, we hypothesise that training programmes might both compensate for and mitigate these ageist stereotypes and thereby improve these candidates' hiring chances. We test this pathway out of age discrimination by designing a scenario experiment in which professional recruiters assess the recruitability and human capital perceptions of fictitious candidates varying in age and (willingsness for) participation in apprenticeship training at older ages. Our results demonstrate that candidates indicating their (willingness for) participation in such training to obtain relevant work experience are more likely to be recruited than candidates without such experience, regardless of their age. Although apprenticeship training can compensate for age discrimination, it cannot mitigate this as the premium it yields is not higher for older workers. |
| Keywords: | hiring discrimination, older workers, labour market programmes, apprenticeships, signalling, scenario experiment |
| JEL: | J14 J24 J71 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17225 |
| By: | Agar Brugiavini (Department of Economics, Ca’ Foscari University of Venice); Raluca Elena Buia (Department of Economics, Ca’ Foscari University of Venice); Irene Simonetti (Department of Economics, Ca’ Foscari University of Venice) |
| Abstract: | The extremely tight restrictions meant to limit the spread of COVID-19 pandemic strongly hit the economic activity in all countries, resulting in exceptional work disruptions and sizable (temporary) layoffs. Recent literature document the existence of an age-bias in the recruitment of new employees, which may make of older workers a vulnerable category, if experiencing work disruptions. Using data from the Survey on Health, Ageing and Retirement in Europe, we enquire to what extent having experienced work interruptions in the first wave of the pandemic might have affected the working career of older workers. Our results indicate that having undergone work disruptions in 2020 is associated with a significantly larger probability of ending up as retirees or not employed in both 2021 and 2022. The effect is not homogenous among countries. While the estimate is not significant for Northern countries, it is significant for the other country clusters, the magnitude of the effect being larger for Central-East European countries. |
| Keywords: | work interruptions, retired, unemployed, not employed |
| JEL: | J08 J71 J78 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2024:10 |
| By: | Taha Choukhmane; Jorge Colmenares; Cormac O'Dea; Jonathan L. Rothbaum; Lawrence D.W. Schmidt |
| Abstract: | U.S. employers and the federal government devote over 1.5% of GDP annually toward promoting defined contribution (DC) retirement saving. Using a new employer-employee linked dataset covering millions of Americans, we show that this system of saving incentives benefits White workers and those with richer parents more than their similar-income coworkers who are Black or Hispanic or from lower-income families. Breaking the link between contribution choices and saving subsidies—through revenue-neutral reforms—could close the gaps in DC wealth between White and Black or Hispanic workers and between those with the richest and those with the poorest parents by approximately one-third. |
| JEL: | D14 G5 H2 H31 J15 J32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32843 |
| By: | Geyer, Johannes (DIW Berlin); Haan, Peter (DIW Berlin); Teschner, Mia (IZA) |
| Abstract: | The price for institutional long-term care is a central determinant of the demand for formal and informal long-term care. In this paper, we show how macroeconomic conditions affect these prices. The analysis is based on administrative data that contains rich information on the universe of nursing homes and ambulatory care services and about all recipients of long-term care benefits in Germany. For identification, we exploit variation in macroeconomic conditions measured by the unemployment rate across districts and over time, applying a panel data approach with facility and time fixed effects. Our empirical results show that a higher unemployment rate increases prices for permanent long-term care as well as for prices of accommodation and meals in nursing homes. We provide empirical evidence for the mechanism of these price effects. While we find that employment, working hours, and quality of care in nursing homes are not significantly affected by macroeconomic conditions, our results show that a higher unemployment rate increases the price of nursing homes through a change in the composition of patients: it induces a shift from care recipients with a low degree of impairment to patients with high demands for labor-intensive care. We also document a substitution of low-impairment care from nursing homes toward ambulatory and informal home care. |
| Keywords: | long-term care, nursing home prices, unemployment rate, macroeconomic conditions, informal care |
| JEL: | E32 I11 J20 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17197 |
| By: | Foutzopoulos, Giorgos; Pandis, Nikolaos; Tsagris, Michail |
| Abstract: | The aim of this analysis is to predict whether an National Basketball Association (NBA) player will be active in the league for at least 10 years so as to be qualified for NBA's full retirement scheme which allows for the maximum benefit payable by law. We collected per game statistics for players during their second year, drafted during the years 1999 up to 2006, for which, information on their career longetivity is known. By feeding these statistics of the sophomore players into statistical and machine learning algorithms we select the important statistics and manage to accomplish a satisfactory predictability performance. Further, we visualize the effect of each of the selected statistics on the estimated probability of staying in the league for more than 10 years. Finally, as an illustration, we collected data from players that were drafted 11 years ago (and some are still active) and estimated their probability of surviving in the league for at least 10 years. |
| Keywords: | BA, career duration, exit discrimination, retirement scheme |
| JEL: | C21 C38 C4 C53 |
| Date: | 2024–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121540 |
| By: | Aranco, Natalia; Bauhoff, Sebastian; Schwarz, Natalie Vanessa; Stampini, Marco |
| Abstract: | Prolonged hospital stays, or hospital stays that are longer than medically necessary, are a major concern for patients, payers, and providers. We conceptualize and empirically estimate the prevalence and cost of prolonged stays among elderly hospital patients (65 years and older) in Brazil and Mexico. We develop a continuum-of-care conceptual framework based on prior literature and insights obtained through interviews and focus group discussions with experts from Mexico, Argentina, and Colombia. In this framework, hospitals are part of a wider system. This system involves both pre-admission and post-discharge medical and social care services. There are three main sources of prolonged stays: (i) lack of appropriate primary healthcare that leads to more complex admissions; (ii) hospital inefficiency; and (iii) lack of rehabilitation, social, and long-term care at discharge. We estimate the count and share of inappropriate hospital days due to prolonged stays overall and for each source. This estimation is based on administrative records on discharges from public sector hospitals in 2019. Our results show that hospital days due to prolonged stays account for approximately half of all hospital days. Although most of the inappropriate days can be attributed to hospital inefficiency (36% in Brazil and 49% in Mexico), an important share is linked to the lack of rehabilitation, social, and long-term care. Lack of these services accounts for 12% of total hospital days in Brazil and 7% in Mexico. In a back-of-the-envelope calculation, we estimate that providing six weeks of long-term care services to address the care needs brought about by only thirteen causes of admission would generate annual net savings of approximately US$174 million per year in Brazil and US$45 million in Mexico. |
| Keywords: | Healthcare costs;prolonged hospitalizations;primary health care;long-term care;medical care;population aging;older persons;public policy;social care;rehabilitation care |
| JEL: | I10 J14 H55 J18 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13701 |
| By: | James J. Choi; David Laibson; Jordan Cammarota; Richard Lombardo; John Beshears |
| Abstract: | Medium- and long-run dynamics undermine the effect of automatic enrollment and default savings-rate auto-escalation on retirement savings. Our analysis of nine 401(k) plans incorporates the facts that employees frequently leave firms (often before matching contributions from their employer have fully vested), a large percentage of 401(k) balances are withdrawn upon employment separation, and many employees opt out of auto-escalation. Steady-state saving rates increase by 0.6% of income due to automatic enrollment and 0.3% of income due to default auto-escalation. Only 40% of those with an auto-escalation default escalate on their first escalation date, and more opt out later. |
| JEL: | D14 G40 G51 J32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32828 |
| By: | Luca Salerno; Axel H. Börsch-Supan; Diana López-Falcón; Johannes Rausch |
| Abstract: | The COVID-19 pandemic led to significant economic disruptions, prompting many governments to implement short-time employment aid (STEA) to mitigate job losses and income reductions. This study examines the effectiveness of STEA in the short and long term in Europe among workers aged 50 and older, a part of the population that was especially threatened by the disease. Using data from the Survey of Health, Ageing and Retirement in Europe (SHARE), we analyze the impact of STEA on employment status, working hours, and income during and after the pandemic. STEA was widespread in Europe. Our findings indicate that the use of STEA was in general reasonably targeted and may have helped its recipients to avoid even worse economic losses during the pandemic, especially after a learning process from 2020 to 2021. However, STEA may have led to increased employment instability in the longer run. Specifically, recipients of STEA were more likely to experience unemployment or furloughs post-pandemic. These results highlight the importance of designing STEA policies that not only provide immediate economic relief but also support sustainable employment and economic resilience. |
| JEL: | H52 J20 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32760 |
| By: | Daniele Marazzina |
| Abstract: | In this note, we show how to solve an optimal retirement problem in presence of a stochastic wage dealing with a free boundary problem. In particular, we show how to deal with an incomplete market case, where the wage cannot be fully hedged investing in the risk-free and the risky asset describing the financial market. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.19190 |
| By: | Bähr, Tobias; Wollni, Meike |
| Abstract: | Smallholders play an important role as producers of cash-crops in developing countries and are often responsible for land clearing and agricultural expansion into pristine environments where productivity is low. Closing yield-gaps of smallholders to industrial plantations as well as diversifying production systems has been identified as a mean to prevent further environmental degradation. At the same time, developing and emerging economies are beginning to struggle with an ageing farmer population, potentially hindering advances in land productivity. In Indonesia, increased income from oil palm cultivation has led to rapid educational attainments within one generation. While this opens job opportunities for children of oil palm smallholders, it inhibits farm succession and thus contributes to ageing among smallholders. Using primary data from a random sample of 417 oil palm smallholders in Indonesia, we investigate trends of farm succession and test, how these moderate possible effects of ageing on plantation investments and outcomes. Our results suggest, that older farmers are associated with lower productivity levels generally and are less likely to replant mature plots. These trends are moderated by succession plans of households. Succession generally moderates negative effects on productivity – indifferent of the successor’s involvement. Households with a successor are generally more likely to replant. We argue that these results hint towards strategic decision- making in ageing smallholders and that observed trends of lower productivity and technology adoption in ageing farmer populations are likely a mix of both decreasing ability and strategic decisions by the farmer. |
| Keywords: | Community/Rural/Urban Development, Land Economics/Use |
| Date: | 2024–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:ags:cfcp15:344686 |
| By: | Congressional Budget Office |
| Abstract: | In CBO’s projections, spending for Social Security rises from 5.1 percent of gross domestic product (GDP) in 2024 to 6.7 percent in 2098. Most of that increase occurs over the next decade, as the baby boom generation retires. After that, outlays for Social Security continue to rise as a percentage of GDP because of projected increases in life expectancy. Unlike outlays, revenues for Social Security remain stable in relation to the size of the economy. |
| JEL: | H50 H55 H60 H68 J26 |
| Date: | 2024–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:cbo:report:60392 |
| By: | Salla Kalin; Antoine B. Levy; Mathilde Muñoz |
| Abstract: | This paper investigates whether and why pensioners move across borders in response to tax rate differentials. In 2013, retirees relocating to Portugal became eligible to a full tax exemption of foreign-source pensions. Contrary to the broadly held belief that seniors "age in place", we find substantial international mobility responses to the reform, concentrated among wealthy and educated pensioners in higher-tax origin countries. The implied migration elasticity of the stock of foreign pensioners to the net-of-tax rate is large (between 1.5 and 2) and increases at longer horizons. Tax-induced retirement migration clusters in space, and exhibits amplification and hysteresis patterns consistent with agglomeration through endogenous amenities. We show such forces theoretically and empirically have significant implications for optimal tax rates, and for the limited efficacy of unilateral policy responses to tax competition, like the source-based taxation of pensions. |
| JEL: | H21 H31 R12 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32890 |