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on Economics of Ageing |
| By: | Morsomme, Hélène (Université catholique de Louvain, LIDAM/ISBA, Belgium); Alonso-Garcia, Jennifer (Université Libre de Bruxelles); Devolder, Pierre (Université catholique de Louvain, LIDAM/ISBA, Belgium) |
| Abstract: | Population ageing undermines traditional social security pension systems that combine pay-as-you-go (PAYG) and defined benefits (DB). Indeed, demographic risk, if guaranteed benefits remain unaltered, will be borne entirely by workers through increases in the contribution rate. To avoid a substantial increase of the contributions and in order to maintain simultaneously the financial sustainability and the social adequacy of the public pension system, risk sharing and automatic balancing mechanisms need to be put in place. We present a two-step convex family of risk-sharing mechanisms. The first shares the risk between contributors and retirees through adjustments in the contribution rate, used to calculate the global covered wage bill, and the benefit ratio that represents the relationship between average pensions and wages. The second step studies how the retirees’ risk should be shared between the different retirees’ generations through adjustments in the replacement rate and a sustainability factor that affects pension indexation during retirement. We perform a detailed study of the effect of social planner’s targets and solidarity weight between various generations in a deterministic and stochastic environment. |
| Keywords: | Risk-sharing ; automatic balancing mechanisms ; pension design ; ageing |
| JEL: | H55 J18 G22 |
| Date: | 2024–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:aiz:louvad:2024011 |
| By: | Hermes Morgavi |
| Abstract: | Pension reforms, particularly those changing the normal retirement ages, are both crucial and controversial in ageing developed countries. This paper investigates the effects of such reforms on the labour market, focusing on the older-age employment rate. While existing cross-country estimates agree on a positive and significant effect of raising normal retirement ages, the estimated labour market effects are modest and usually much smaller than those derived from country-specific studies using micro data. This study attempts to reconcile these differences by introducing greater heterogeneity into the cross-country approach to better capture country-specific demographics and pension system characteristics, so that estimated effects are closer to those from single-country studies. Starting from a standard cross-country panel error correction model, several empirical innovations are introduced to better capture the influence of the demographic composition of countries, the possibility to retire at earlier ages, and the importance of private pension funds and early exit pathways. These changes result in larger and more heterogeneous predicted effects of changes in the normal retirement ages on the older-age employment rate and average age of labour market exit across countries. This suggests a greater and varied impact of pension reforms on the labour market than previously estimated with pooled cross-country estimations, emphasising the importance of considering countries’ demographic compositions and pension systems specificities when predicting the effects of pension reforms. The proposed model, distinguishing between minimum and normal retirement ages, allows for simulations on the effects of increasing normal retirement ages and narrowing the gap between normal and minimum retirement ages. In countries with the lowest older age employment rates, bridging these gaps could result in substantial increases in their employment rates. |
| Keywords: | employment rate, labour market policy, , normal retirement ages, older workers |
| JEL: | J26 J21 |
| Date: | 2024–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1823-en |
| By: | Timothy K. M. Beatty; Joakim A. Weill |
| Abstract: | We estimate the impact of anticipated transfers on labor supply using confidential driver-level data from Uber. Leveraging the staggered timing of Social Security retirement benefits within each month and a novel identification strategy, we find that the labor supply of older drivers declines by 2% on average in the week around benefit receipt—a precisely estimated but economically small effect. Individual-level analyses reveal that the average effect obscures heterogeneous micro-behavior: while the majority of drivers does not meaningfully adjust labor supply in response to social security benefits, a small group reduces labor supply by more than 40%. The results suggest that departures from standard models of labor supply are meaningful but only for a small number of individuals. |
| Keywords: | Labor supply; Retirement; Social security; Gig economy |
| JEL: | J14 J18 J22 C10 H55 J26 |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2024-79 |
| By: | Kevin S. Milligan; Tammy Schirle |
| Abstract: | We evaluate the retirement incentives embedded in Canada’s retirement income system with attention to where individuals are located in the income distribution. We find that larger social security benefits are available to individuals with lower earnings in their work history because of the benefit income tests, but those from the top of the income distribution tend to enjoy longer lives over which they may receive benefits. Overall, we see greater Social Security Wealth among individuals from lower deciles. The implicit tax rates on continued work tend to be higher for workers from lower-earning deciles. Considering changes to actuarial adjustments associated with early pension take up, these implicit tax rates on work at older ages fell substantially after 2011. Our regression estimates confirm the importance of incentives on retirement behavior, with substantially larger effects for individuals in lower deciles. These effects are greater for women than men. In simulations, we show that changes to the actuarial adjustment had some impact on retirement rates by lowering the implicit tax on work. The overall redistributive effect of these induced retirement changes was fairly small, however, as the actuarial adjustments brought the system closer to actuarial fairness. |
| JEL: | H55 J14 J26 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33069 |
| By: | Daniel Baksa; Boele Bonthuis; Mr. Si Guo; Zsuzsa Munkacsi |
| Abstract: | Population aging in Korea will pose substantial challenges to the financial sustainability of its public pension system. Under current policies and plausible assumptions, public pension spending can increase by as much as 4 percent of GDP during 2020-70, while contribution revenue will largely stay constant. This expected rise in public pension spending mainly reflects the increase in the old-age dependency ratio (and therefore the number of pension recipients), the deceleration in GDP growth in response to demographic changes, and, to a lesser extent, the maturing of the National Pension Scheme. Three pension policies are considered to stabilize the public debt- to-GDP ratio: a retirement age increase, higher social security contributions, and a lower pension replacement rate, and a combination of all three. The adjustments need to be large to stabilize the debt-to-GDP ratio if each policy lever is used in isolation. A combination of smaller adjustments of multiple parameters yields better results. |
| Keywords: | Aging; pensions; overlapping generations model |
| Date: | 2024–10–11 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/223 |
| By: | Cristina Belles-Obrero; Giulia La Mattina; Han Ye |
| Abstract: | The prevalence and determinants of intimate partner violence (IPV) among older women are understudied. This paper documents that the incidence of IPV remains high at old ages and provides the first evidence of the impact of access to income on IPV for older women. We leverage a Mexican reform that lowered the eligibility age for a non-contributory pension and a difference-in-differences approach. Women’s eligibility for the pension increases their probability of being subjected to economic, psychological, and physical IPV. The estimated effects are found only among women in the short term and are more pronounced for women who experienced family violence in childhood and those from poorer households. Looking at potential mechanisms, we find suggestive evidence that men use violence as a tool to control women’s resources. Additionally, women reduce paid employment after becoming eligible for the pension, which may result in more time spent at home and greater exposure to violent partners. In contrast, we show that IPV does not increase when men become eligible for the non-contributory pension. |
| Keywords: | Non-contributory pension, Intimate partner violence, Retirement, Income |
| JEL: | H55 I38 J12 J26 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_602 |
| By: | Angelo Lorenti (Max Planck Institute for Demographic Research, Rostock, Germany); Alessandra De Rose; Filomena Racioppi |
| Abstract: | As individuals age, they often face deteriorating health and significant lifestyle changes, including retirement. While retirement can alter individuals' economic and social roles, potentially increasing the risk of depression, involvement in volunteer activities has been found to be beneficial for retirees. Using data from the Health and Retirement Study, we apply the parametric g-formula to simulate an intervention aimed at estimating the effect of volunteering on depression and ist heterogeneity, and to assess the mediating role of limitations in activities of daily living. Our results show that engagement in volunteering reduces the probability of depression by approximately 5% in the whole population, with larger gains among early retirees. The results hold irrespective of gender, and indicate that the benefits are greater for women and racial minorities. Our findings show that about 10% of the positive impact of volunteering on depression operates via a reduction in the likelihood of experiencing limitations in activities of daily living. Therefore, we conclude that the benefits of volunteering extend to improving the overall health of both individuals and the population. Our simulated intervention targeting early retirees may be a viable public health strategy for protecting individuals against depression, while also enabling them to contribute to the public good. |
| Keywords: | USA, disability, mental depression, retirement, simulation, voluntary workers |
| JEL: | J1 Z0 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:dem:wpaper:wp-2024-038 |
| By: | Kevin S. Milligan |
| Abstract: | I develop and implement a methodology for cohort life expectancy using a panel of administrative tax data on a large sample born between 1930 and 1964. Over these 35 years, cohort life expectancy after age 54 grew by 5 years for women and 7 years for men. The income-longevity gradient for the top vs. bottom five percent of incomes is 9 years of post-54 life for men and 7 years for women. The life expectancy improvements arise across the income distribution in Canada, unlike the United States. Large differences across neighbourhoods emerge which cannot be explained by income differences alone. |
| JEL: | I14 J14 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33066 |
| By: | Chaliasos, Michael |
| Abstract: | Findings from four recent projects on how neighbors, peers, financial advisors, and exogenous stressors affect wealth accumulation are presented. Having neighbors with college economics or business education promotes retirement saving. Greater local wealth inequality and mobility at the start of economic life motivate college graduates to take portfolio risks and achieve greater wealth, leaving others behind. Financial advice from unbiased professionals differs from peer advice in how it relates to advisor and advisee characteristics. Background stressors, such as crises, wars, and personal problems, occupy savers' minds. In an incentivized online experiment, background cognitive load consistently dampened consumption and promoted saving. |
| Keywords: | Wealth accumulation, peer effects, household finance, retirement saving, wealth inequality, financial advice, cognitive load |
| JEL: | G5 G11 E21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:304393 |
| By: | Wolfgang Frimmel; Rene Wiesinger |
| Abstract: | We analyze how a worker’s severe health shock affects the employment and health behavior of their older coworkers. We link comprehensive administrative data on labor market histories and health records from Austria to identify coworker networks and severe health shocks in small firms, which cause substantial increases in healthcare expenditures, absenteeism, and mortality, as well as persistent reductions in the labor supply of affected workers. Combining a matching approach with a difference-in-difference framework, we find a significant impact of a health shock on the labor market outcomes and health behavior of older coworkers. Affected coworkers are about 2.3 percentage points more likely to be employed in the shock firm and tend to delay retirement. Although there is no change in daily earnings and earnings growth, coworkers are more likely to receive special bonus payments after leaving the firm. The employment effects are larger when the health shock affects a high-skilled worker and when the shocked worker leaves the firm after the health shock. Finally, we find that female coworkers in the treatment group are more likely to have a mammography, especially in response to health shocks due to cancer. We find no statistically significant effects on participation in general health check-ups and PSA tests, or on coworker absenteeism. |
| Keywords: | coworker health shock · employment · retirement · health behavior · difference-in-difference |
| JEL: | I10 I12 J20 J21 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:jku:econwp:2024-12 |
| By: | Su Y. Jang (Max Planck Institute for Demographic Research, Rostock, Germany); Anna Oksuzyan (Max Planck Institute for Demographic Research, Rostock, Germany); Frank J. van Lenthe; Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Silvia Loi (Max Planck Institute for Demographic Research, Rostock, Germany) |
| JEL: | J1 Z0 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:dem:wpaper:wp-2024-032 |
| By: | Haarhoff, Julius Robin; Wolf, Matthias |
| Abstract: | Dieser Artikel untersucht Reformansätze der Steuer- und Fördersystematik privater Altersvorsorge in Deutschland unter besonderer Berücksichtigung der Auswirkungen auf die Netto-Renditen als Messgröße für den Kundennutzen. Die zentrale Forschungsfrage lautet: Wie lassen sich Transparenz und Gerechtigkeit der bestehenden Steuer- und Fördersystematik privater Altersvorsorge verbessern? Dabei werden sowohl einseitige als auch zweiseitige Reformoptionen betrachtet, um verschiedene Ansätze zur Verbesserung des Systems zu analysieren. Die Ergebnisse zeigen, dass eine reine Fördersystematik mit beitragsproportionaler Grundzulage sowohl hinsichtlich der Transparenz als auch des Kundennutzens eine vielversprechende Option darstellt. Eine reine Anhebung des maximal möglichen Sonderausgabenabzugs im dualen System sowie die Implementierung einer reinen Steuersystematik ohne Fördersystem werden hingegen auf Basis dieser Analysen nicht empfohlen. Zudem wird festgestellt, dass bei Beibehaltung des dualen Systems eine Anpassung der Günstigerprüfung notwendig ist. Der Steuervorteil eines Sonderausgabenabzugs wird innerhalb der Günstigerprüfung derzeit überschätzt, da die resultierende zusätzliche Steuerlast im Rentenalter nicht berücksichtigt wird. Eine duale Systematik mit angepasster Günstigerprüfung könnte aus Sicht des Kundennutzens sinnvoll mit einer teilweise beitragsproportionalen Förderung kombiniert werden. Eine höhere Transparenz des Systems wäre dadurch jedoch eher nicht zu erreichen. |
| Abstract: | This article examines reform approaches to the tax and subsidy system for private retirement savings in Germany, with a particular focus on the impact on net returns as a measure of customer benefit. The central research question is: How can the transparency and fairness of the current tax and subsidy system for private retirement savings be improved? Both unilateral and bilateral reform options are considered to analyze different approaches for improving the system. The findings show that a pure subsidy system with a contribution-proportional basic allowance is a promising option in terms of both transparency and customer benefit. In contrast, a mere increase in the maximum allowable special expense deduction in the dual system, as well as the implementation of a purely tax-based system without subsidies, are not recommended. Additionally, it is noted that an adjustment to the "Günstigerprüfung" (favorable assessment) is necessary if the dual system is maintained. The tax advantage of a special expense deduction within the favorability test is currently overestimated, as the resulting additional tax burden in retirement is not taken into account. From the perspective of customer benefit, a dual system with an adjusted favorability test could be effectively combined with a partially contribution-proportional subsidy. Nevertheless, this would likely not lead to greater transparency in the system. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:thkivw:304407 |
| By: | Pierre-Carl Michaud |
| Abstract: | Dans cet article, nous analysons le lien entre l’âge de déclenchement de la rente de retraite du Régime de rentes du Québec (RRQ) et le revenu disponible (après impôts) une fois à la retraite. Malgré le fait que plusieurs déclenchent hâtivement la rente, nous montrons que ceux-ci atteignent un taux de remplacement à la retraite particulièrement élevé au Québec. Font-ils un bon choix de prendre la rente hâtivement? Nous exploitons un modèle prédictif de la mortalité estimé sur des données fiscales incorporant les effets du Supplément de revenu garanti (SRG) sur le report de la rente. Nous montrons que l’hétérogénéité d’espérance de vie n’est pas suffisante pour justifier financièrement un âge hâtif du début de la rente. Nous montrons que le gain financier du report est grandement affecté par la récupération du SRG, qui touche plus de 40% des cotisants. Malgré cet impact, le rendement alternatif mesuré par le rendement moyen effectif observé sur l’épargne demeure faible en comparaison, même sans ajustement pour le risque accru dans un placement alternatif. |
| Keywords: | rente de retraite, mortalité, revenu. |
| JEL: | H55 I14 J14 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:rsi:cjpcha:03 |
| By: | OECD |
| Abstract: | This paper explores the role of competition and regulation in shaping the outcomes and consumer experiences of the care industry (early childhood care and long-term care). Both services are vital to economic and social well-being, particularly in light of demographic change and the cross-cutting implications for other aspects of the economy, such as women’s participation in the labour market. This paper analyses how competition and regulation can drive quality and market outcomes, whilst addressing market failures and equity concerns within the industry, to arrive at a conclusion on the role competition authorities can play. |
| Date: | 2024–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:315-en |
| By: | Alvaredo, Facundo; Berman, Yonatan; Morelli, Salvatore |
| Abstract: | This paper studies the estimation of wealth distribution using estates left at death. We establish formal conditions for adopting a simplified version of the classic estate multiplier method, using only minimal information on estates and mortality. We empirically validate these conditions and apply the simplified approach to produce novel long-run top wealth share series for Belgium, Japan, and South Africa, where estate data have not yet been exploited. This approach may vastly expand the range of countries and years for which wealth inequality can be estimated, where estate data exist but the standard method cannot be applied. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2024–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:a4frb |