nep-dem New Economics Papers
on Demographic Economics
Issue of 2024‒04‒01
two papers chosen by
Héctor Pifarré i Arolas, University of Wisconsin

  1. Wage inequality consequences of expanding public childcare By Riedel, Lukas
  2. Conditioning Public Pensions on Health: Effects on Capital Accumulation and Welfare By Giorgio Fabbri; Marie-Louise Leroux; Paolo Melindi-Ghidi; Willem Sas

  1. By: Riedel, Lukas
    Abstract: This paper assesses the impact of a large expansion of public childcare in Germany on wage inequality. Exploiting regional variation in childcare supply over the 1990s, I show that in regions with stronger increases in childcare, wage inequality among women increased less strongly compared to regions with smaller increases. This is primarily driven by the lower half of the wage distribution and qualitatively similar for full- and part-time workers. Larger expansions in childcare, however, do not contribute to a further closing of the gender wage gap.
    Keywords: wage inequality, childcare, gender wage gap
    JEL: J13 J16 J31 J82
    Date: 2024
  2. By: Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRAE, Grenoble INP, GAEL); Marie-Louise Leroux (Departement des Sciences Economiques, ESG-UQAM; CORE, Louvain-la-Neuve; CESifo, Munich); Paolo Melindi-Ghidi (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Willem Sas (University of Stirling; Hasselt University; CESifo, Munich; UCLouvain & KU Leuven)
    Abstract: This paper develops an overlapping generations model that links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status by introducing a component indexed to society's average level of old-age disability. Reducing the average disability rate in the economy then lowers pension benefits as the need to finance long-term care services also drops. We study the effects of introducing such a 'comprehensive' Social Security system on individual decisions, capital accumulation, and welfare. We first show that health investments can boost savings and capital accumulation under certain conditions. Second, if individuals are sufficiently concerned with their health when old, it is optimal to introduce a health-dependent pension system, as this will raise social welfare compared to a system where pensions are not tied to the society's average level of old-age disability. Our analysis thus highlights an important policy recommendation: making PAYG pension schemes partially health-dependent can be beneficial to society.
    Keywords: Curative Health Investments, PAYG Pension System, Disability, overlapping generations, long-term care
    JEL: H55 I15 O41
    Date: 2024–03

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