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on Economics of Ageing |
| By: | Walter H. Fisher; Christian Keuschnigg |
| Abstract: | This paper investigates how parametric reform in a pay-as-you-go pension system with a tax benefit link affects retirement incentives and work incentives of prime-age workers. We find that postponed retirement tends to harm incentives of prime-age workers in the presence of a tax benefit link, thereby creating a policy trade-off in stimulating aggregate labor supply. We show how several popular reform scenarios are geared either towards young or old workers, or, indeed, both groups under appropriate conditions. We also provide a sharp characterization of the excess burden of pension insurance and show how it depends on the behavioral supply elasticities on the extensive and intensive margins and the effective tax rates implicit in contribution rates. |
| Keywords: | Pension reform, retirement, hours worked, tax benefit link, actuarial adjustment, excess burden |
| JEL: | H55 J26 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2007:2007-13&r=age |
| By: | David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Michael Moore; Younghwan Song |
| Abstract: | We explore the proposition that expected longevity affects retirement decisions and accumulated wealth using micro data drawn from the Health and Retirement Study for the United States. We use data on a person’s subjective probability of survival to age 75 as a proxy for their prospective lifespan. In order to control for the presence of measurement error and focal points in responses, as well as reverse causality, we instrument subjective survival probabilities using information on current age, or age at death, of the respondent’s parents. Our estimates indicate that increased subjective probabilities of survival result in increased household wealth among couples, with no effect on the length of the working life. These findings are consistent with the view that retirement decisions are driven by institutional constraints and incentives and that a longer expected lifespan leads to increased wealth accumulation. |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:1706&r=age |
| By: | Nancy Elizabeth Argueta Joya |
| Abstract: | This paper focuses on old-age income security, with the objective to explore obstacles and opportunities to expand social protection for informal workers in El Salvador. It first introduces the main concepts and debates on social security, social protection, coverage and informality, to later assess the extent to which the social security system – and particularly the pension system – is handling the challenges to include the excluded. The paper reviews formal attitudes, risk assumptions, legal frameworks and official indicators as well as informal workers’ opinions on topics related to work, income, savings and security to highlight the existing gaps between formal and informal worlds and visions. Bearing in mind these differences and some particular context factors, the paper rules out the short-term possibility that old-age social protection in El Salvador will be expanded through social security measures. As a result, it explores ideas on how, in spite of the obstacles and unfulfilled obligations, other institutions can come forward so that old-age social protection for less favored workers is no longer delayed. |
| Keywords: | informal sector, aged, social security, pension schemes |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:iss:wpaper:439&r=age |
| By: | David E. Bloom; David Canning (Harvard School of Public Health) |
| Abstract: | In the past 50 years, the world accelerated its transition out of long-term demographic stability. As infant and child mortality rates fell, populations began to soar. In most countries, this growth led to falling fertility rates. Although fertility has fallen, the population continues to increase because of population momentum; it will eventually level off. In the meantime, demographic change has created a ‘bulge’ generation, which today appears in many countries as a large working-age population. This cohort will eventually become a large elderly population, in both developed and developing countries. Population growth has been the subject of great debate among economists and demographers. Until recently, most have agreed on a middle ground, in which population growth per se has no effect on economic growth. New evidence suggests that changes in the age structure of populations – in particular, a rising ratio of working-age to non-working-age individuals – leads to the possibility of more rapid economic growth, via both accounting and behavioural effects. The experiences of east Asia, Ireland and sub-Saharan Africa all serve as evidence of the effect of demographic change on economic growth (or lack thereof). Both internal migration (from rural to urban areas) and international migration complicate this picture. The overall implications of population growth for policy lie in the imperative for investments in health and education, and for sound policies related to labour, trade and retirement. Understanding future trends is essential for the development of good policy. Demographic projections can be quite reliable, but huge uncertainties – in the realms of health, changes in human life span, scientific advances, migration, global warming and wars – make overall predictions extremely uncertain. |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:1406&r=age |
| By: | Pekka Ilmakunnas; Mika Maliranta |
| Abstract: | We study whether older workers are costly to firms. Our estimation equations are derived from a variant of the decomposition methods frequently used for measuring micro-level sources of industry productivity growth. By using comprehensive linked employer-employee data from the Finnish business sector, we study the productivity and wage effects, and hence the profitability effects, of hiring and separation of younger and older workers. The evidence shows that separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. Robustness checks include the use of regional labor supply and other variables as instruments for the potential endogeneity of the labor flows. |
| Keywords: | aging, productivity, wage, profits, hiring, separation, employer-employee data |
| JEL: | C43 J23 J24 J63 M51 |
| Date: | 2007–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1092&r=age |
| By: | Andrew D. Colegrave (Department of Economics, The University of Western Australia) |
| Abstract: | Using data from the 2001 Australian Census of Population and Housing, this article estimates private rates of return to university education at the bachelor degree level for males and females, and determines the age threshold when studying for university qualifications becomes no longer worthwhile. Employing a methodology analogous to Borland (2002), the results indicate that the rates of return for individuals undertaking three year university degrees at the median commencement age of 19 years are 24.8 per cent for males and 20.6 per cent for females; and that returns continue to outperform share market investments right up until males begin their studies in their late thirties and females, much later, in their mid fifties. This article has important policy implications for the problems associated with skilled-labour shortages and the ageing population. Greater subsidizing of tuition fees and extension of the retirement age are suggested to make the education investment of mature age individuals even more profitable. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:uwa:wpaper:06-11&r=age |
| By: | Rod Tyers; Jane Golley (College of Business and Economics, Australian National University) |
| Keywords: | Chinese economy, demographic change, labour market and economic growth |
| JEL: | C68 E27 F21 F43 J11 J13 J26 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:1106&r=age |
| By: | David E. Bloom; David Canning (Harvard School of Public Health) |
| Abstract: | Debates over the economic effects of demographic change have been raging for over 200 years. Since Thomas Malthus hypothesised in 1798 that rapid population growth would stretch the earth’s resources beyond the breaking point, leading to mass starvation and death, demographers and economists have argued: first, about whether this would come to pass, and then, about why it did not. More recently, discussions about population size have given way to theories suggesting population age structure and health status are key demographic determinants of economic progress. In this brief summary of the impacts of population change on macroeconomic performance, we first set out some key facts about the world’s population. We discuss the effects of improvements in population health on economic development in general, before focusing more specifically on demographic effects. We then trace the history of how Malthusian pessimism gave way to population “optimism”, which argued that rapid population growth could be an economic asset, and then to a “neutralist” view, which posited that population growth neither promoted nor impeded economic growth. Next, we examine how new ideas on the impact of population age structure and population health have challenged traditional thinking. Finally, we look at the policy implications of this finding – in particular, at how economies can reap the benefits of a baby boom and prepare for population ageing. |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:0806&r=age |
| By: | Rod Tyers; Jane Golley (College of Business and Economics, Australian National University) |
| Abstract: | China's economic growth has, hitherto, depended on its relative abundance of production labour and its increasingly secure investment environment. Within the next decade, however, China's labour force will begin to contract. This will set its economy apart from other developing Asian countries where relative labour abundance will increase, as will relative capital returns. Unless there is a substantial change in population policy, the retention of China's large share of global FDI will require further improvements in its investment environment. These linkages are explored using a new global demographic model that is integrated with an adaptation of the GTAP-Dynamic global economic model in which regional households are disaggregated by age and gender. Interest premia are integral with projections made using these models and in this paper their influence on China's economic growth performance is investigated under alternative assumptions about fertility decline and labour force growth. China's share of global investment is found to depend sensitively on both its labour force growth and its interest premium though the results suggest that a feasible continuation of financial reforms will be sufficient to compensate for a slowdown and decline in its labour force. |
| Keywords: | Chinese economy, demographic change, investment risk and economic growth |
| JEL: | C68 E22 E27 F21 F43 J11 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:1206&r=age |
| By: | David E. Bloom; David Canning; Günther Fink; Jocelyn Finlay (Harvard School of Public Health) |
| Abstract: | High ratios of working age to dependent population can yield a increases the rate of economic growth. We estimate the parameters model with a cross section of countries over the period 1960 to 1980 inclusion of age structure improves the model’s forecasts for the period that including age structure improves the forecast, although there instability between periods with an unexplained growth slowdown the model to generate growth forecasts for the period 2000–2020. |
| Keywords: | Economic Growth, Demography, Forecast Evaluation, Error Decomposition, Panel Analysis. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:2006&r=age |
| By: | Giovanni Mastrobuoni (Princeton University); Matthew Weinberg (University of Georgia) |
| Abstract: | Using data from the Continuing Survey of Food Intake by Individuals, this paper describes the shape of consumption profiles over the month for Social Security benefit recipients. Individuals with income mostly made up of Social Security benefits and who have some savings smooth consumption over the pay period, while individuals with little savings consume 25 percent fewer calories the week before checks are received relative to the week after checks are received. The findings for individuals with little savings are inconsistent with the Permanent Income/Lifecycle Hypothesis, but are consistent with hyperbolic discounting. |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:137mastrobuoni&r=age |
| By: | Li-Wei Chao (Population Studies Department, University of Pennsylvania); Helena Szrek (CETE, Faculdade de Economia, Universidade do Porto); Nuno Sousa Pereira (CETE, Faculdade de Economia, Universidade do Porto); Mark V. Pauly (Health Care Systems Department, The Wharton School, University of Pennsylvania) |
| Abstract: | Although theories in both evolutionary biology and economics predict that an individual’s health should be associated with the individual’s time preference, no prior study has been done to empirically support or refute such predictions. By collecting detailed measures of health, time preference, and expected longevity on a sample of individuals in townships around Durban, South Africa, this study breaks new ground by being the first to analyze in detail the relationship between time preference and health, in an area of the world with high mortality and morbidity. Interestingly, we find that both physical health and expectations of longevity have a U-shaped relationship with the person’s subjective discount rate. This suggests that those in very poor health have high discount rates, but those in very good health also have high discount rates. Similarly those with longevity expectations on the extremes have high discount rates. The research question addressed by this pilot project is policy relevant, as the study tries to determine the importance of health in economic development, not from the commonly asserted productivity-gain argument, but from a much broader investment-for-the-future argument. |
| Keywords: | Subjective discount rate; Longevity; Health; Age |
| JEL: | I10 D90 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:0706&r=age |
| By: | James Poterba; Steven Venti; David A. Wise |
| Abstract: | Over the past two and a half decades there has been a fundamental change in saving for retirement in the United States, with a rapid shift from employer-managed defined benefit pensions to defined contribution saving plans that are largely controlled by employees. To understand how this change will affect the well-being of future retirees, we project the future growth of assets in self-directed personal retirement plans. We project the 401(k) assets at age 65 for cohorts attaining age 65 between 2000 and 2040. We also project the total value of assets in 401(k) accounts in each year through 2040 and we project the value of 401(k) assets as a percent of GDP over this period. We conclude that cohorts that attain age 65 in future decades will have accumulated much greater retirement saving (in real dollars) than the retirement saving of current retirees. |
| JEL: | G23 J11 J14 J32 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13083&r=age |
| By: | Giovanni Mastrobuoni (Princeton University) |
| Abstract: | Beneficiaries of Social Security face restrictions on how much they can earn without incurring the earnings test (ET). In 2000, President Clinton eliminated the ET between ages 65 and 70. In this paper, I evaluate how this removal impacts the long-term finances of the Trust Fund. I find that starting in 2006 the Social Security Administration is actually saving money and that the removal appears to be Pareto-efficient. A removal of the remaining part of the ET is likely to be even less costly and to produce larger increases in labor supply and contributions. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:133mastrobuoni&r=age |
| By: | Jan M. Hoem (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | - |
| Keywords: | demography |
| JEL: | J1 Z0 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2007-019&r=age |