nep-dem New Economics Papers
on Demographic Economics
Issue of 2018‒09‒17
eight papers chosen by
Héctor Pifarré i Arolas
Max-Planck-Institut für demografische Forschung

  1. Economics Uncertainty and Fertility Cycles: The Case of the Post-WWII Baby Boom By Bastien Chabé-Ferret; Paula Eugenia Gobbi
  2. Household Time Use Among Older Couples: Evidence and Implications for Labor Supply By Richard Rogerson; Johanna Wallenius
  3. Changes in Inequality in Mortality: New Evidence for Spain By Libertad González; Ana Rodriguez-Gonzalez
  4. Decomposing the Rise in Top Wealth Inequality By Matthieu Gomez
  5. The inherited inequality: How demographic aging and pension reforms can change the intergenerational transmission of wealth By KLIMAVICIUTE Jutina,; ONDER Harun,; PESTIEAU, Pierre,
  6. Long-term care insurance with family altruism: Theory and empirics By KLIMAVICIUTE Justina,; PESTIEAU Pierre,; SCHOENMAECKERS Jérôme,
  7. How Is the Mortality Gap Affecting Social Security Progressivity? By Matthew S. Rutledge
  8. Should We Discount the Welfare of Future Generations? Ramsey and Suppes versus Koopmans and Arrow By Chichilnisky, Graciela; Hammond, Peter J.; Stern, Nicholas

  1. By: Bastien Chabé-Ferret; Paula Eugenia Gobbi
    Abstract: Using the US Census waves 1940-1990 and CPS 1990-2010, we look at how economic uncertainty affected fertility cycles over the course of the XXth century. We use cross-state and cross-cohort variation in the volatility of income growth to identify the causal link running from uncertainty to fertility. We find that economic uncertainty has a large and robust negative effect on completed fertility. We hypothesize that a greater economic uncertainty increases the risk of large consumption swings, which individuals mitigate by postponing fertility and ultimately decreasing their completed fertility. Differences in volatility account for between 45% and 61% of the one child variation observed during the post WWII baby boom
    Keywords: baby boom, baby bust, fertility, economic uncertainty
    Date: 2018–07
  2. By: Richard Rogerson (Princeton University); Johanna Wallenius (Stockholm School of Economics)
    Abstract: Using the Consumption Activities Mail Survey (CAMS) module in the HRS we document how time allocations change for individuals within a household when one or more members transitions from full time work to not working. Our basic finding is that the ratio of home production to leisure time is approximately constant for both family members. We then build a model of household labor supply to understand the implications of this finding for preferences and the home production function. We conclude that this fact suggests a relatively large elasticity of substitution between the leisure of the two members. For commonly used preference specifications, this also implies a large (i.e., greater than one) intertemporal elasticity of substitution for leisure.
    Date: 2018
  3. By: Libertad González; Ana Rodriguez-Gonzalez
    Abstract: We analyze the evolution of inequality in mortality in Spain during 1990-2014. We focus on age-specific mortality and consider inequality across narrowly defined geographical areas, ranked by average socioeconomic status. We find substantial decreases in mortality over the past 25 years for all age groups, which were particularly pronounced for men, resulting in a sizeable reduction in the gender gap in mortality. Inequality in mortality also decreased during this period, including during the recent recession, so that by the 2010’s mortality presents a flat socioeconomic gradient for most age groups. Compared to the US and Canada, decreases in mortality have been larger in Spain, and inequality is the lowest of the three countries. We find essentially no change in inequality among the elderly, in contrast to the increase found in the US.
    Keywords: mortality, Inequality, Health
    JEL: J11 I14
    Date: 2018–08
  4. By: Matthieu Gomez (Princeton University)
    Abstract: There has been a dramatic rise in top wealth inequality in the United States since 1980. This paper stresses the role of composition effects in driving this phenomenon. I first show an analytical formula that expresses the growth of top wealth shares as the sum of three terms: the relative wealth growth of individuals at the top, a term due to idiosyncratic wealth shocks, and a term due to population renewal. I propose an accounting decomposition to estimate each term from a panel data of wealthy individuals. I then apply this decomposition to the annual ranking of Forbes Magazine’s list of the 400 wealthiest Americans. This exercise reveals that the rise in the top 400 wealth share in 1982-1994 is mostly driven by an increase of the variance of idiosyncratic wealth shocks, while the rise in the top 400 wealth share in 1995-2015 is mostly driven by an increase of the wealth growth of individuals at the top.
    Date: 2018
  5. By: KLIMAVICIUTE Jutina, (Université de Liège); ONDER Harun, (World Bank); PESTIEAU, Pierre, (Université de LIège, CORE, and PSE)
    Abstract: The role of inherited wealth in modern economies has increasingly come under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. It shows that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however could offset and potentially reverse these effects. The paper also shows that individual bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the effect of increasing longevity on their distribution is non-monotonic.
    Keywords: inherited wealth, inheritance, aging, inequality, social security
    JEL: D14 D31 D64 D91 E21 H55 J11
    Date: 2018–03–16
  6. By: KLIMAVICIUTE Justina, (Université de Liège); PESTIEAU Pierre, (Université de Liège, CORE, Université catholique de Louvain, and Paris School of Economics); SCHOENMAECKERS Jérôme, (Université de Liège)
    Abstract: This paper studies long-term care (LTC) insurance in the presence of family altruism. In the first, theoretical, part of the paper, we explore whether and how family solidarity affects the application to LTC of Arrow’s (1963) theorem of the deductible, which is shown to apply in models without family by a number of papers. We consider two tyes of family altruism, perfect and imperfect, and find that Arrow’s theorem generally holds, even though some departures from the standard model and some differences between the types of altruism exist. Oour analysis highlights a complex interplay between parents’ insurance and their children’s aid, which implies that a number of intuitive conjectures are not always verified. For instance, while one would expect the deductible to be increasing in the child’s degree of altruism, this is unambiguously verified only under certain conditions. Given the ambiguity of some results, in the second part of the paper, we resort, more generally, to an empirical test of the relation between LTC insurance and children’s altruism using the data from the Health and Retirement Study (HRS). Our findings suggest that children’s altruism has a negative impact on parents’ LTC insurance purchases, even though some results also point to this relationship being more complex than one might think.
    Keywords: long-term care insurance, deductible theorem, alturism, family aid
    JEL: D64 I13 J14
    Date: 2018–04–06
  7. By: Matthew S. Rutledge
    Abstract: Over the last half-century, average life expectancy at age 65 in the United States has increased by six years for men and four years for women. But these gains have been unequal across the population. While those with greater earnings and education have enjoyed substantially longer life spans, those with lower socioeconomic status (SES) have seen relatively small improvements in their late-life mortality. The unequal increase in life expectancy works against the progressive benefit design of Social Security. The program is set up to award more generous benefits – relative to pre-retirement earnings – to lower earners. But, due to the gap in life expectancy by SES, lower earners receive their benefits for relatively fewer years than their longer-lived counterparts. This brief reviews research by the Social Security Administration’s Retirement Research Consortium and others that investigates this widening gap and examines its consequences. The discussion proceeds as follows. The first section quantifies the growing gap in life expectancy by SES. The second section reviews evidence on why the gap has widened. The third section discusses how the gap affects lifetime Social Security benefits and the progressivity of the system. The final section concludes that, over time, the increasing mortality gap has significantly reduced Social Security’s progressivity
    Date: 2018–09
  8. By: Chichilnisky, Graciela (Dept. of Economics, International Affairs Building, Columbia University); Hammond, Peter J. (Dept. of Economics, and CAGE (Competitive Advantage in the Global Economy), University of Warwick); Stern, Nicholas (Dept. of Economics, and Grantham Research Institute on Climate Change and the Environment, LSE)
    Abstract: Ramsey famously pronounced that discounting “future enjoyments” would be ethically indefensible. Suppes enunciated an equity criterion implying that all individuals’ welfare should be treated equally. By contrast, Arrow (1999a, b) accepted, perhaps rather reluctantly, the logical force of Koopmans’ argument that no satisfactory preference ordering on a sufficiently unrestricted domain of infinite utility streams satisfies equal treatment. In this paper, we first derive an equitable utilitarian objective based on a version of the Vickrey–Harsanyi original position, extended to allow a variable and uncertain population with no finite bound. Following the work of Chichilnisky and others on sustainability, slightly weakening the conditions of Koopmans and co-authors allows intergenerational equity to be satisfied. In fact, assuming that the expected total number of individuals who ever live is finite, and that each individual’s utility is bounded both above and below, there is a coherent equitable objective based on expected total utility. Moreover, it implies the “extinction discounting rule” advocated by, inter alia, the Stern Review on climate change.
    JEL: D63 D70 D90 Q54 Q56
    Date: 2018

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