nep-dem New Economics Papers
on Demographic Economics
Issue of 2012‒11‒03
25 papers chosen by
Clarence Nkengne Tsimpo
University of Montreal and World Bank Group

  1. Longevity and savings in an OLG small open economy with endogenous labour supply and intra-family old-age support By Luciano Fanti
  2. Fully-Funded and PAYG pension schemes facing with demographic changes By Luciano Fanti
  3. Family Planning Policy in China: Measurement and Impact on Fertility By Wang, Fei
  4. Does the stork deliver happiness? Parenthood and life satisfaction By Gregori Baetschmann; Kevin E. Staub; Raphael Studer
  5. Women’s Empowerment and HIV Prevention in Rural Malawi By Gerritzen, Berit C.
  6. PAYG pensions and fertility drop: some (pleasant) arithmetic By Luciano Fanti
  7. Fertility and money in an OLG model By Luciano Fanti
  8. Why Don't Women Patent? By Garant, Jean-Philippe; Herman, Hannah; Hunt, Jennifer; Munroe, David
  9. How Distance to a Non-Residential Parent Relates to Child Outcomes By Astrid Würtz Rasmussen; Leslie S. Stratton
  10. Gender Differences in Residential Mobility: The Case of Leaving Home in East Germany By Ferdinand Geissler; Thomas Leopold; Sebastian Pink
  11. Growth, PAYG pension systems crisis and mandatory age of retirement. By Luciano Fanti
  12. Consequences of a boost of mandatory retirement age on long run income and PAYG pensions By Luciano Fanti
  13. Aging and pension reform: extending the retirement age and human capital formation By Edgar Vogel; Alexander Ludwig; Axel Börsch-Supan
  14. Habits, aspirations and endogenous fertility By Luciano Fanti
  15. Fully-Funded and PAYG pension schemes facing with demographic changes By Luciano Fanti
  16. Stature and life-time labor market outcomes: Accounting for unobserved differences By Bockerman, Petri; Vainiomäki, Jari
  17. Human Capital, Culture and the Onset of the Demographic Transition By David Cuberes; Alberto Basso
  18. Immigrant Networks and the Take-Up of Disability Programs: Evidence from U.S. Census Data By Delia Furtado; Nikolaos Theodoropoulos
  19. Personality Traits and the Marriage Market By Dupuy, Arnaud; Galichon, Alfred
  20. Pollution, mortality and optimal environmental policy By Goenka, A.; Jafarey, S.; Pouliot, W.
  21. Parent Transmit Happiness along with Associated Values and Behaviors to Their Children: A Lifelong Happiness Divided? By Bruce Headey; Ruud Muffels; Gert G. Wagner
  22. Estimating Healthcare Demand for an Aging Population: A Flexible and Robust Bayesian Joint Model By Arnab Mukherji; Satrajit Roychowdhury; Pulak Ghosh; Sarah Brown
  23. Pension reform in an OLG model with heterogeneous abilities By T. BUYSE; F. HEYLEN; R. VAN DE KERCKHOVE
  24. Ethnic discrimination and signals of trustworthiness in an online market: Evidence from two field experiments By Wojtek Przepiorka
  25. Public Pension Benefits Claiming Behavior: New evidence from the Japanese Study on Aging and Retirement By SHIMIZUTANI Satoshi; OSHIO Takashi

  1. By: Luciano Fanti
    Abstract: In a simple OLG small open economy with endogenous fertility, endogenous labour supply and intra-family old-age support, we show, in contrast with the preceding literature, that the saving rate is always reduced by an increasing longevity, while fertility is unaffected. As a consequence population ageing lead to an unambiguous increase in the long-run per capita foreign debt. Moreover transfers from children to parents are increasing (decreasing) for low (high) longevity rates.
    Keywords: Intra-family old-age support; Overlapping generations; Longevity; Labour supply.
    JEL: H52 J13 O41
    Date: 2012–09–01
  2. By: Luciano Fanti
    Abstract: We examine how subsidy policies to support child-rearing affect the fertility rate in a standard OLG small open economy with life uncertainty and involuntary bequests. It is shown the counter-intuitive result that increasing the child grant may actually reduce the long-run fertility rate.
    Date: 2012–09–01
  3. By: Wang, Fei
    Abstract: The extent to which China's family planning policy has driven its fertility transition over the past decades is debatable. The disagreement is partly sourced from the different ways of measuring the policy. Most existing measures, constructed on the policy history, generally, do not include complete secular and cross-sectional policy variations, fail to heterogeneously reflect people's exposure to the policy, and often suffer from endogeneity. This paper reviews the entire history of China's family planning policy and accordingly, proposes a new policy measure that integrates the policy variations more completely, heterogeneously, and exogenously by using the cross-sectional data of the China Health and Nutrition Survey. The new measure estimates the effect of policy on fertility and generates negative regression coefficients that well reproduce the history. As for the contribution of the policy to fertility transition, the measure explains a sizable level shift of fertility for major cohorts, but only accounts for a small portion of the fertility decline over generations. In addition, a more-educated woman, a woman residing in a better-developed coastal province, or a woman whose first child is a son tends to desire fewer children and thus, receives lighter pressure from the policy. Other than fertility, a woman would delay her marriage in response to the policy, particularly when it is strongly enforced. Finally, the paper shows that using an incomplete measure could systematically underestimate the effect of policy on fertility and adopting an endogenous measure or a measure lacking heterogeneity could even produce a positive effect of the policy.
    Keywords: Family Planning Policy; Fertility; China
    JEL: J13 O22 J18
    Date: 2012–10–21
  4. By: Gregori Baetschmann; Kevin E. Staub; Raphael Studer
    Abstract: This paper examines the relationship between parenthood and life satisfaction using longitudinal data on women from the German Socio-Economic Panel. Previous studies have focused on satisfaction differences between parents and comparable childless adults, mostly finding small and often negative effects of parenthood. These comparisons of ex-post similar individuals are problematic if a self-selection into motherhood exists. In this study we examine the selection issue in detail by exploiting the extended longitudinal dimension of the panel to track self-reported life satisfaction of women eventually to become mothers and of women eventually attaining a completed fertility of zero. We document that these groups' satisfaction paths diverge around five years before mothers' first birth, even after adjusting for differences in observables. In our estimations, we employ matching and regression techniques which account for this selection into motherhood. We find motherhood to be associated with substantial positive satisfaction gains.
    Keywords: Happiness, subjective well-being, children, fertility, mother- hood, parenthood, life cycle, selection, matching, fixed effects
    JEL: D10 J11 J12 J13
    Date: 2012–10
  5. By: Gerritzen, Berit C.
    Abstract: Condom use and communication among sexual partners are important strategies for HIV prevention. Using a panel data set of more than 1,200 married women in rural Malawi from 1998-2008, this paper shows that adequate HIV prevention strategies, i.e. condom use within marriage and HIV-related spousal communication, are more widely used as women's bargaining power increases. I focus on different dimensions of women’s empowerment, namely personal and interpersonal empowerment. Among the proxies used for women's empowerment, own income, knowledge of other local languages and awareness of exit options from marriage are found to play a particularly important role in promoting adequate preventive behaviors. The main findings continue to hold after individual-specific fixed effects and time dummies are included in order to account for unobserved hetereogeneity and time trends.
    Keywords: HIV/AIDS, Sub-Saharan Africa, gender, development, spousal communication, condom use within marriage
    JEL: I14 O15 J16
    Date: 2012–10
  6. By: Luciano Fanti
    Abstract: This paper explores whether the common belief that the currently observed fertility drop is a threat (or, conversely, the invoked fertility recovery is beneficial) for PAYG pensions is really always validated by the basic accounting of the PAYG pension budget. It is shown, through a simple arithmetic, that, rather surprisingly, in the long run a fertility drop may be beneficial, while, conversely, a fertility recovery may be harmful for pensions, under rather realistic conditions as regards both fertility changes and time costs of childrearing. Furthermore, this result also holds a fortiori in the short run.
    Keywords: Fertility; PAYG pension; OLG model.
    JEL: J26 O41
    Date: 2012–09–01
  7. By: Luciano Fanti
    Abstract: We extend the two-period-lived-agent overlapping generations model with endogenous fertility and demand for money to understand whether and how the introduction of a money sector modifies what we have so far learned about fertility behaviours. It is shown that the existence of money may tend to exacerbate existing problems of either under-population or over-population.
    Keywords: Fertility; Money; Overlapping generations.
    JEL: J13 E41 O41
    Date: 2012–09–01
  8. By: Garant, Jean-Philippe; Herman, Hannah; Hunt, Jennifer; Munroe, David
    Abstract: We investigate women's underrepresentation among holders of commercialized patents: only 5.5% of holders of such patents are female. Using the National Survey of College Graduates 2003, we find only 7% of the gap in patenting rates is accounted for by women's lower probability of holding any science or engineering degree, because women with such a degree are scarcely more likely to patent than women without. Differences among those without a science or engineering degree account for 15%, while 78% is accounted for by differences among those with a science or engineering degree. For the latter group, we find that women's underrepresentation in engineering and in jobs involving development and design explain much of the gap.
    Keywords: Gender; Innovation
    JEL: J15 O31
    Date: 2012–10
  9. By: Astrid Würtz Rasmussen (Department of Economics and Business, Aarhus University, Denmark); Leslie S. Stratton (Virginia Commonwealth University)
    Abstract: Family courts now encourage both parents to maintain contact with their children following separation/divorce, driven by the belief that such contact benefits the child. We test this assumption with a population sample of children from nonnuclear families in Denmark, using distance between non-residential parents and their children to proxy for contact. The results indicate significantly better educational and behavioral outcomes for children at a greater distance. Failing to control for endogeneity biases the results in favor of more proximate parents. These findings suggest that policy efforts to keep separated parents geographically closer for their children’s sake may not be advantageous.
    Keywords: Child outcomes, parental separation, distance
    JEL: D13 I12 I21 J12 J13
    Date: 2012–10–24
  10. By: Ferdinand Geissler; Thomas Leopold; Sebastian Pink
    Abstract: This paper investigates gender differences in the spatial mobility of young adults when initially leaving their parental home. Using individual data from 11 waves (2000-2010) of the SOEP, we examine whether female home leavers in East Germany move across greater distances than males and whether these differences are explained by the gender gap in education. Our results reveal that female home leavers in East Germany are exceptionally mobile. This effect is attributable to their higher propensity of moving to West Germany. Education does not explain these gender differences.
    JEL: C23 J61 R23
    Date: 2012
  11. By: Luciano Fanti
    Abstract: Since in many countries - plagued by low fertility - significant increases of the mandatory retirement age have been recently introduced with the declared objective to sustain PAYG pension budgets, then in this paper we investigate whether and how such boosts are effective. It is shown - in the basic two-period overlapping generations model of endogenous growth, which is maybe the toy-model most used for pension policy analyses - that the postponement of the retirement age is always harmful for growth and even for pension payments. Therefore this result suggests that the effects of boosts of mandatory retirement ages for sustaining PAYG pension budgets may not be warranted.
    Keywords: Retirement age; Pensions; OLG model
    JEL: J26 O41
    Date: 2012–09–01
  12. By: Luciano Fanti
    Abstract: In this paper we study the effects of a boost of the mandatory retirement age, which is largely advocated in most countries facing with both the decline in the labour force participation of elderly workers and the increasing population ageing. It is shown, in the basic two-period overlapping generations model of growth (Diamond, 1965), that the postponement of the retirement age may be harmful for long run income and when the capital’s share is sufficiently high even PAYG pensions are reduced. In conclusion, since it is shown that the age of retirement might be reduced obtaining a higher income and even higher pension benefits, then our results suggest that the idea that a higher mandatory age of retirement is always beneficial in the long run for income and pension payments is theoretically controversial.
    Keywords: Retirement age; Pensions; OLG model
    JEL: J26 O41
    Date: 2012–09–01
  13. By: Edgar Vogel (European Central Bank); Alexander Ludwig (CMR, Department of Economics and Social Sciences, University of Cologne); Axel Börsch-Supan (Max Planck Institute for Social Law and Social Policy, Munich Center for the Economics of Aging)
    Abstract: Projected demographic changes in industrialized countries will reduce the share of the working-age population. Analyses based on standard OLG models predict that these changes will increase the capital- labor ratio. Hence, rates of return to capital decrease and wages increase with adverse welfare consequences for current middle aged asset rich agents. This paper addresses three important adjustments channels to dampen these detrimental effects of demographic change: investing abroad, endogenous human capital formation and increasing the retirement age. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points. JEL Classification: C68, E17, E25, J11, J24
    Keywords: Population aging, human capital, welfare, pension reform, retirement age, open economy
    Date: 2012–09
  14. By: Luciano Fanti
    Abstract: Motivated by the increasing literature on endogenous preferences as well as on endogenous fertility, this paper investigates the implications of the interaction of the endogenous determination of the number of children with habit and aspiration formation in an OLG model. In contrast with the previous literature, we show that greater aspirations may lead to higher savings, and more interestingly, always increase the neoclassical economic growth.
    Keywords: Endogenous preferences; Fertility; OLG model.
    JEL: J13 O41
    Date: 2012–09–01
  15. By: Luciano Fanti
    Abstract: Motivated by the recent population aging process as well as the tendency towards the substitution of PAYG with Fully Funded pension systems, we analyze the different features of both funded and unfunded pensions under the pressure of population aging. While virtually all previous work in this literature has predicted a reduction in pension benefits as well as a greater relative immunization of FF systems in the face of population aging, this paper shows that the former prediction only holds for specific assumptions relating to technology (i.e. sufficiently low capital shares), while the latter prediction is more likely to be reverted (i.e. the current dramatic aging could be more harmful (less beneficial) for FF pension systems than for PAYG pension systems).
    Keywords: Demographic change; unfunded and funded pensions; OLG model.
    JEL: J14 J18 O41
    Date: 2012–09–01
  16. By: Bockerman, Petri; Vainiomäki, Jari
    Abstract: We use twin data matched to register-based individual information on earnings and employment to examine the effect of height on life-time labor market outcomes. The use of twin data allows us to remove otherwise unobserved ability and other differences. The twin pair difference estimates from instrumental variables estimation for genetically identical twins reveal a significant height-wage premium for women but not for men. This result implies that cognitive ability explains the effect of height on life-time earnings for men. Additional findings using capital income as the outcome variable suggest that discrimination against short persons may play a role for women.
    Keywords: Height; Weight; BMI; Height premium; Earnings; Employment
    JEL: J31 J23 I10
    Date: 2012–10–25
  17. By: David Cuberes (Department of Economics, The University of Sheffield); Alberto Basso (University of Alicante, Spain)
    Abstract: This paper uses estimates of the dates at which different countries have experienced their demographic transitions to examine the main historical determinants of these transitions. We first show that genetic distance to the United Kingdom, a measure of cultural relatedness used in Spolaore and Wacziarg (2009), is positively associated with the onset of the demographic transition, implying that countries that have a larger genetic distance from the UK tend to experience later transitions. We then unveil a plausible mechanism that can rationalize this result. We show that genetic distance to the UK is negatively related to a country's initial human capital, measured as its schooling level in 1870. One interpretation of this finding is that a larger genetic distance is associated with higher barriers to technological diffusion and hence a lower demand for human capital. This low demand for human capital then delays the demographic transition by providing less incentives for households to switch from quantity to quality of children. Instrumenting initial human capital using genetic distance to the UK and alternative measures of adherence to Protestantism, we confirm the causal link between human capital and the onset of the demographic transition. Further, we show that the impact of cultural relatedness to the UK can be mainly attributed to its effect on educational levels.
    Keywords: education, culture, fertility transition, unified growth theory
    JEL: J10 N10 O18 I20
    Date: 2012
  18. By: Delia Furtado; Nikolaos Theodoropoulos
    Abstract: This paper examines the role of ethnic networks in disability program take-up among working-age immigrants in the United States. We find that even when controlling for country of origin and area of residence fixed effects, immigrants residing amidst a large number of co-ethnics are more likely to receive disability payments when their ethnic groups have higher take-up rates. Although this pattern can be partially explained by cross-group differences in satisfying the work history or income and asset requirements of the disability programs, we also find that social norms and, to a lesser extent, information sharing play important roles.
    Date: 2012–10
  19. By: Dupuy, Arnaud (Reims Management School); Galichon, Alfred (Sciences Po, Paris)
    Abstract: Which and how many attributes are relevant for the sorting of agents in a matching market? This paper addresses these questions by constructing indices of mutual attractiveness that aggregate information about agents' attributes. The first k indices for agents on each side of the market provide the best approximation of the matching surplus by a k-dimensional model. The methodology is applied on a unique Dutch household survey containing information about education, height, BMI, health, attitude towards risk and personality traits of spouses. Three important empirical conclusions are drawn. First, sorting in the marriage market is not unidimensional: individuals face important trade-offs between the attributes of their spouses which are not amenable to a single-dimensional index. Second, although education explains a quarter of a couple's observable surplus, personality traits explain another 20%. Third, different personality traits matter differently for men and for women.
    Keywords: multidimensional sorting, saliency analysis, marriage market, personality traits, continuous logit
    JEL: D3 J21 J23 J31
    Date: 2012–10
  20. By: Goenka, A.; Jafarey, S.; Pouliot, W.
    Abstract: We study an overlapping generations economy in which environmental degradation results from economic activity and affects agents' uncertain lifetimes. Life expectancy depends positively on economic activity and negatively on the stock of pollution. This can make the growth-survival relationship convex over some region and lead to two non-trivial steady states, with one a poverty trap. Uniform abatement taxes can cause the poverty trap to widen while increasing incomes at the high steady state. We also study the properties and dynamics of an optimal second-best abatement tax. It is non-homogeneous and increasing in the capital stock, and leads to a variety of dynamic possibilities, including non-existence and multiplicity of steady states, and cycles around some of the steady states, where there were none under exogenous taxes. Thus, optimal taxes can be an independent source of non-linearities.
    Keywords: Overlapping generations model; poverty traps; non-convexities; multiple steady states; pollution; optimal environmental policy; optimal abatement tax
    Date: 2012
  21. By: Bruce Headey; Ruud Muffels; Gert G. Wagner
    Abstract: There are strong two-way links between parent and child happiness (life satisfaction), even for ‘children’ who have grown up, moved to their own home and partnered themselves. German panel evidence shows that transmission of (un)happiness from parents to children is partly due to transmission of values and behaviors known to be associated with happiness (Headey, Wagner and Muffels, 2010, 2012). These values and behaviors include giving priority to pro-social and family values, rather than material values, maintaining a preferred balance between work and leisure, active social and community participation, and regular exercise. Both parents have about equal influence on the values and behaviors which children adopt. However, the life satisfaction of adult ‘children’ continues to be directly influenced by the life satisfaction of their mothers, with the influence of fathers being only indirect, via transmission of values and behaviors. There appears to be a lifelong happiness dividend (or unhappiness dividend) due to parenting.
    Keywords: Life satisfaction, inter-generational transmission, German panel survey (SOEP)
    Date: 2012
  22. By: Arnab Mukherji (Centre for Public Policy, Indian Institute of Management Bangalore); Satrajit Roychowdhury (Expert Statistical Methodologist, Novartis Pharmaceutical Company); Pulak Ghosh (Department of QM & IS, Indian Institute of Management Bangalore); Sarah Brown (Department of Economics, The University of Sheffield)
    Abstract: In this paper, we analyse two frequently used measures of the demand for health care, namely hospital visits and out-of-pocket health care expenditure, which have been analysed separately in the existing literature. Given that these two measures of healthcare demand are highly likely to be closely correlated, we propose a framework to jointly model hospital visits and out-of-pocket medical expenditure. Furthermore, the joint framework allows for the presence of non-linear effects of covariates using splines to capture the effects of aging on healthcare demand. Sample heterogeneity is modelled robustly with the random effects following Dirichlet process priors with explicit cross-part correlation. The findings of our empirical analysis of the U.S. Health and Retirement Survey indicate that the demand for healthcare varies with age and gender and exhibits significant cross-part correlation that provides a rich understanding of how aging affects health care demand, which is of particular policy relevance in the context of an aging population.
    Keywords: aging; Bayesian methods; healthcare demand; joint model; splines
    JEL: C11 C14 I10
    Date: 2012
    Abstract: We study the effects of pension reform in a four-period OLG model for an open economy where hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate growth, are all endogenous. Within each generation we distinguish individuals with high, medium or low ability to build human capital. This extension allows to investigate also the effects of pension reform on the income and welfare levels of different ability groups. Particular attention goes to the income at old-age and the welfare level of low-ability individuals. Our simulation results prefer an intelligent pay-as-you-go pension system above a fully-funded private system. When it comes to promoting employment, human capital, growth, and aggregate welfare, positive effects in a pay-as-you-go system are the strongest when it includes a tight link between individual labor income (and contributions) and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base. Such a regime does, however, imply welfare losses for the current low-ability generations, and rising inequality in welfare. Complementing or replacing this ‘intelligent’ pay-as-you-go system by basic and/or minimum pension components is negative for aggregate welfare, employment and growth. Better is to maintain the tight link between individual labor income and the pension also for low-ability individuals, but to strongly raise their replacement rate.
    Keywords: employment by age; endogenous growth; retirement; pension reform; heterogeneous abilities; overlapping generations
    JEL: E62 H55 J22 J24
    Date: 2012–08
  24. By: Wojtek Przepiorka (University of Oxford)
    Abstract: Results from two field experiments which were designed to identify possible ethnic discrimination on a German internet auction platform are discussed. A first set of results is produced by a secondary analysis of an earlier experiment. The second experiment additionally tests whether costly signals can help to overcome trust problems between buyers and sellers in online markets. The evidence is rather mixed with respect to ethnic discrimination, and it does not support the signaling hypothesis.
    Keywords: Discrimination, Costly signaling, Trust, Online market, Field experiment
    JEL: C93 D82 J15 L81
    Date: 2012–10
  25. By: SHIMIZUTANI Satoshi; OSHIO Takashi
    Abstract: This paper explores the public pension claiming behavior of the Japanese. First, we perform financial simulations and estimate the expected utility, depicting the typical patterns of pension benefits in a lifecycle model. We show that the optimal retirement age depends on the beneficiaries' mortality risk, discount rate, initial wealth, and risk attitude. Second, we use individual-level data from the Japanese Study on Aging and Retirement to examine empirically the determinants of the take-up timing. We find supportive evidence that most of the factors examined in the simulation are indeed significantly associated with early claiming of pension benefits for wage earners.
    Date: 2012–10

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