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on Economics of Ageing |
| By: | John Chalmers; Woodrow T. Johnson; Jonathan Reuter |
| Abstract: | The Oregon Public Employees Retirement System (PERS) is a hybrid pension plan that provides employees the security of a defined benefit (DB) pension plus the option to receive instead retirement benefits based on a defined contribution-style (DC) retirement account. We use PERS administrative data for 1990 to 2003 to study the effect of this hybrid design on employers’ costs and employees’ retirement-timing decisions. We have four findings. First, the option built into PERS is costly for employers to provide. Ex post, average retirement benefits are 49% higher in the hybrid plan than they would have been in a traditional DB plan. For the typical retiree, simulations show that our ex post estimate lies between the 50th and 75th percentiles of the ex ante distribution. Second, the hybrid plan distorts employees’ retirement timing decisions relative to a traditional DB plan. Looking across benefit formulas, we find that as an employee’s DC benefit increases above her DB benefit, so does the probability that she retires before the normal retirement age. Third, we find that retirement timing decisions respond to two sources of exogenous variation in the level of the DC benefit. Finally, we find evidence of peer effects in that employees respond more strongly to their own retirement incentives when more of their coworkers face similar incentives. The retirement waves that result from employees seeking to avoid declines in pension benefits are likely to impose significant administrative costs on employers. |
| JEL: | D83 H55 J26 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18517&r=age |
| By: | Pablo Antolin; Olga Fuentes (Studies Division, Chilean Pension Supervisor) |
| Abstract: | The purpose of this paper is to discuss a few issues related to how best to communicate uncertainty about projections of future pension benefits to members of DC plans, and especially to present a pension risk simulator developed by the Chilean regulator (Superintendencia de Pensiones, SP) that addresses directly how to convey that uncertainty and aims at eliciting a pro-active response from individuals in terms of contributing more and for longer.. |
| Keywords: | Pensions, pension benefits, projections, defined contribution pension plans, financial education, communication, uncertainty |
| JEL: | D14 D18 G23 G28 I28 J26 O16 O19 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:sdp:sdpwps:55&r=age |
| By: | Ola Lotherington Vestad (Statistics Norway) |
| Abstract: | The main objective of this paper is to estimate labour supply effects of an early retirement programme in Norway. Detailed administrative data are employed in order to characterize full paths towards retirement and account for substitution from other exit routes, such as unemployment and disability insurance. By exploiting a reduction in the lower age limit for early retirement as a source of exogenous variation in individual eligibility I obtain robust difference-in-differences and triple differences estimates indicating that more than two out of three pensioners would still be working at the age of 63 had the age limit been 64 rather than 62. Hence, although successful in creating a more dignified exit route for early leavers, the programme also generated substantial costs in terms of inducing others to retire earlier. |
| Keywords: | Induced retirement; Pension reform; Matched employer-employee register data; Difference-in-differences. |
| JEL: | H55 I38 J26 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:717&r=age |
| By: | Nguyen, Trong-Ha (University of Queensland); Liu, Amy Y.C. (Australian National University); Booth, Alison L. (Australian National University) |
| Abstract: | In the absence of a broad-based pension scheme, the elderly in developing countries may rely on monetary transfers made by their children and on their own labour supply. This paper examines whether monetary transfers from children help to reduce elderly parents' need to work. Taking the possible endogeneity of children's transfers in the parents' labour supply into account and using maximum likelihood methods and Vietnamese data, we find that monetary transfers help the elderly cope with risks associated with old age or illness. At the same time, however, monetary transfers are not sufficient to fully substitute for parents' labour supply. |
| Keywords: | old-age support, labour supply, inter-generational transfers, endogenous variable, maximum likelihood |
| JEL: | J14 J22 J26 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6974&r=age |
| By: | Thomas J. Fitzpatrick; Amy B. Monahan |
| Abstract: | Much attention has been paid to the significant underfunding of many state and local employee pension plans, as well as efforts by states and cities to alleviate that underfunding by modifying the benefits provided to workers. Yet relatively little attention has been paid to the systemic causes of such financial distress—such as chronic underfunding that shifts financial burdens to future taxpayers, and governance rules that may reduce the likelihood that a plan’s trustees will make optimal investment decisions. This article presents the results of a qualitative study of the funding and governance provisions of twelve public pension plans that are a mix of state and local plans of various funding levels. We find that none of the plans in our study satisfy the best practices that have been established by expert panels, but also that the strength of a plan’s governance provisions does not appear correlated with a plan’s financial health. Our most important finding is that, regardless of the content of a plan’s governance provisions, such provisions are almost never effectively enforced. This lack of enforcement, we theorize, has a significant, detrimental impact on plan funding and governance. If neither plan participants nor state taxpayers are able to effectively monitor and challenge a state’s inadequate funding or improper investment decisions, public plans are very likely to remain underfunded. We conclude by offering several possible reform options to address the monitoring and enforcement problems made clear by our study: automatic benefi t haircuts, automatic tax increases, a low-risk investment requirement, and market monitoring through the use of modified pension obligation bonds. |
| Keywords: | State finance ; Social security ; Public policy |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:12-23&r=age |
| By: | Jürgen Faik (FaMa – Neue Frankfurter Sozialforschung) |
| Abstract: | This paper is concerned with the interplay between demography and macroeconomics on one hand and macroeconomics and income inequality on the other hand. For this purpose, several estimation equations are derived by econometric methods (on the empirical basis of the 1984-2010 German Socio-Economic Panel (SOEP) waves). In concrete terms, the macroeconomic variables inflation, economic growth, and unemployment are at first connected with the German demographic ageing; afterwards, these connections are used to produce a nexus between German income inequality and the stated macroeconomic variables (additionally to the exogenous effects of ageing). For the empirical periods examined (1983-2009), there have been a) a (slightly) negative influence of demographic ageing on the inflation rate, b) a (weak) positive effect of ageing on the level – not on the increases (reductions) – of economic growth rates, and c) a somewhat stronger positive impact of demographic ageing on unemployment rates. While the measured income inequality is upwards directly (exogenously) driven by demographic ageing, the mechanisms through the different macroeconomic channels are more difficile: inflation is positively and unemployment negatively correlated with income inequality, and regarding economic growth a (slightly) concave effect upon income inequality has been observed. All these findings imply that demographic ageing, ceteris paribus and by tendency, diminishes income inequality via inflation and unemployment rate, which is also valid for economic growth (within the empirically relevant value range for the German demographic ageing). But on balance, there is an overcompensating direct, exogenous impact of demographic ageing on inequality in the model used in this paper, and this causes tendencies towards a remarkable increase of German income inequality until 2060. These tendencies are more pronounced in the forecast variant in which a strongly ageing population is assumed. |
| Keywords: | Demographic ageing, macroeconomics, personal income distribution, inequality. |
| JEL: | D30 D31 D60 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2012-272&r=age |
| By: | Rembrandt D. Scholz (Max Planck Institute for Demographic Research, Rostock, Germany); Sebastian Klüsener (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | In their contributions to the debate on exceptional longevity, several scholars have noted the existence of spatial hot spots, or areas with a high concentration of individuals who have survived to very high ages (e.g. Sardinia in Italy or Okinawa in Japan). However, most of these studies were based on a small number of cases. This study investigates the spatial pattern of exceptional longevity in Germany by place of birth and place of death. We used a large dataset of exceptional longevity that covered all recorded individuals who reached the age of 105 in Germany in the period 1991 to 2002 (N: 1,339). Our research results show that, even in Germany, with its troubled 20th-century past, most of the semi-supercentenarians reached the age of exceptional longevity in the same region in which they were born. The discovery of this highly localised pattern supports the view that an investigation of regional variation in exceptional longevity can produce meaningful results. In our analysis of spatial variation, we were able to detect hot spots of exceptional longevity in Berlin and in north-western Germany. These findings are remarkable, as life expectancy in Germany is currently characterised by a south-north gradient, with the areas of highest life expectancy at birth being located in the south. The observed pattern of exceptional longevity instead reflects the life expectancy at birth pattern in Germany in the early 20th century and to some degree also the current life expectancy at age 80 pattern. Our findings might be interpreted as support to the argument that early and late life conditions might play an important role in explaining spatial variation of exceptional longevity in Germany. |
| Keywords: | Germany, longevity, spatial analysis, spatial distance |
| JEL: | J1 Z0 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2012-028&r=age |