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on Economics of Ageing |
| By: | Hallberg, Daniel (Swedish Social Insurance Inspectorate (ISF)); Johansson, Per (IFAU); Josephson, Malin (Swedish Social Insurance Inspectorate (ISF)) |
| Abstract: | This paper studies empirically the consequences of retirement on health. We make use of a targeted retirement offer to army employees 55 years of age or older. Before the offer was implemented in the Swedish defense, the normal retirement age was 60 years of age. Estimating the effect of the offer on individuals' health within the age range 56-70, we find support for a reduction in both mortality and in inpatient care as a consequence of the early retirement offer. Increasing the mandatory retirement age may thus not only have positive government income effects but also negative effects on increasing government health care expenditures. |
| Keywords: | health, mortality, inpatient care, retirement, health care, pensions, occupational pensions |
| JEL: | J22 J26 I18 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8260&r=age |
| By: | George Kudrna; Chung Tran; Alan Wooland |
| Abstract: | In this paper we develop a small open economy, overlapping generations (OLG) model that incorporates non-stationary demographic transition paths to study the dynamic fiscal effects of demographic shift in Australia. Our main results are summarised as follows. First, the demographic shifts towards population ageing lead to a change in the tax base from labor income to capital/asset income and consumption. The effect on income tax revenue is non-linear along the transition paths. Second, the changes in demographic structure cause substantial increases in old-age related spending programs including health, aged care and pensions. Significant adjustments in other government expenditures and taxes will be required to finance the larger old-age related benefits in the future. In particular, the government will have to either cut other expenditures by around 32 percent or increase consumption taxes by 28 percent by 2050 to finance these benefits. Third, the increase in survival rates, rather than the decline in fertility rates, is the main driving factor behind these fiscal costs. Fourth, increases in fertility and immigration are not an effective solution to such budget challenges. |
| Keywords: | Demographic Transition, Ageing, Overlapping Generations, Dynamic General Equilibrium, Fiscal Policy |
| JEL: | H2 J1 C68 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2014-616&r=age |
| By: | LaRiviere, Jacob (University of Tennessee); Wolff, Hendrik (University of Washington) |
| Abstract: | The launch of Viagra in April 1998 led to a historically unprecedented high usage of erectile dysfunction (ED) drugs. We test whether Viagra's introduction significantly influenced outcomes for its target population such as STD rates of older men, as well as its non-target populations, such as divorces, natality, the distribution of the age spread within couples, female STDs and sexual assault rates. We find causal evidence that Viagra's introduction increased Gonorrhea rates in older men by 15-28%. We find no significant evidence of any effects on other variables. We take this as evidence that this lifestyle drug causes significant changes in choices only which affect short term outcomes, while long term planned decisions are unaffected. Overall, we find that the welfare impacts of Viagra with respect to our outcomes of interest are positive and large. |
| Keywords: | prescription drugs, STD, aging population, Viagra, differences-in-differences |
| JEL: | I1 J1 O33 J31 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8261&r=age |
| By: | Loken, Katrine Vellesen (University of Bergen); Lundberg, Shelly (University of California, Santa Barbara); Riise, Julie (University of Bergen) |
| Abstract: | In this paper, we use a 1998 reform in the federal funding of local home-based care for the elderly in Norway to examine the effects of formal care expansion on the labor supply decisions and mobility of middle-aged children. Our main finding is a consistent and significant negative impact of formal care expansion on work absences longer than 2 weeks for the adult daughters of single elderly parents. This effect is particularly strong for daughters with no siblings, and this group is also more likely to exceed earnings thresholds after the reform. We find no impacts of the reform on daughter's mobility or parental health, and no effects on adult sons. Our results provide evidence of substitution between formal home-based care and informal care for the group that is most likely to respond to the parent's need for care – adult daughters with no siblings to share the burden of parental care. These results also highlight the importance of labor market institutions that provide flexibility in enabling women to balance home and work responsibilities. |
| Keywords: | formal and informal care, elderly, welfare state, women's career |
| JEL: | J14 J22 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8267&r=age |
| By: | Wong, Arlene |
| Abstract: | This paper studies the effects of monetary policy on the expenditure of households of different ages using micro data from the U.S. Consumer Expenditure Survey. I find that contractionary monetary policy shocks reduce the expenditure of young households by significantly more than older households. Households react asymmetrically in part because young households tend to have lower savings and higher labor market risk. This implies that the age composition of the population affects the setting of optimal monetary policy in response to aggregate shocks. Counter-factual analysis suggests that the projected population aging in the U.S. will dampen the pass-through of monetary policy to the economy. |
| Keywords: | Monetary policy; expenditure; age structure |
| JEL: | E24 E52 J11 |
| Date: | 2014–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57096&r=age |
| By: | Alfred Stiassny (Department of Economics, Vienna University of Economics and Business); Christina Uhl (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Does an increase of elderly employment cause a decline in youth employment? A simplified view of a demand driven economy would give a positive answer to this question. Econometric studies based on a single equation approach deliver little support for this belief. However, these studies typically suffer from identification problems to which no attention is paid in most cases. We therefore use a general equilibrium framework when trying to quantify these effects. Using yearly and quarterly Austrian labor and gdp data, we estimate two model variants by Bayesian methods: a) a standard equilibrium model where the degree of complementarity between old, young and primary labor is crucial for the sign and strength of the relevant effects and b) a simple, solely demand driven model which always leads to a crowding out of young through an increase in employment of the old. It turned out that the demand driven model is inferior in fitting the data compared to the standard model. Further, the degree of complementarity is estimated to be strong enough to lead to a small positive effect of elderly employment on youth employment. |
| Keywords: | Labor market, pension reform, equilibrium models, Bayesian estimation |
| JEL: | A10 C11 E10 J01 J26 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp178&r=age |
| By: | Senderski, Marcin |
| Abstract: | The paper features one of the most calling interrelation in today’s pension universe, namely the interplay between regulatory activity and future pensioners’ wealth. The paper attempts to explore this tradeoff, casting a closer glance solely at portfolio-related regulatory measures and investment performance of pension plans. The effort to classify and rank OECD regulatory regimes is made, which is not straightforward given the variety of unique approaches to regulation in this respect. Afterwards, a simple cross-section model is run that displays how the strictness of oversight affects the risk-return profile of pension instruments. The analysis embraces the 2001 to 2012 period, as this the period for which detailed OECD statistics are available. Conclusion and suggestions for further investigation tie up the article. |
| Keywords: | pension funds regulation, pension funds performance, portfolio-related regulation, regulatory impact |
| JEL: | G23 G28 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56610&r=age |
| By: | Paola Profeta (Università Bocconi, Milano, Italy); Simona Scabrosetti (Università di Pavia, Italy); Stanley L. Winer (Carleton University, Canada) |
| Abstract: | We present an empirical model of wealth transfer taxation in the revenue systems of the G7 countries - Canada, France, Germany, Italy, Japan, the U. K. and the U. S. - over the period from 1965 to 2009. Our model emphasizes the influences of population aging and of the stock of household wealth in an explanation of the past and likely future of this tax source. Simulations with the model using U.N.demographic projections and projections of household wealth suggest that even in France and Germany where reliance on wealth transfer taxation has been increasing for part of the period studied, wealth transfer taxes can be expected to wither away as population aging deepens over the next three decades. Our results indicate that recent tax designs that rely upon the taxation of wealth transfers to preserve equity in the face of declining taxation of capital incomes may be, in this respect, politically infeasible for the foreseeable future. We conclude by using the case of wealth tra nsfer taxation to raise the general ques tion of the extent to which the consiste ncy of a proposed reform with expected p olitical equilibria ought to play a role in the design of a normative policy blu eprint. |
| Keywords: | Revenue structure, stock of household wealth, population aging, solidarity index, fixed effects estimation |
| JEL: | H20 P16 P35 P50 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:1&r=age |
| By: | Paz Grimberg; Zeev Schuss |
| Abstract: | Structuring a viable pension plan is a problem that arises in the study of financial contracts pricing and bears special importance these days. Deterministic pension models often rely on projections that are based on several assumptions concerning the "average" long-time behavior of the stock market. Our aim here is to examine some of the popular "average" assumptions in a more realistic setting of a stochastic model. Thus, we examine the contention that investment in the stock market is similar to gambling in a casino, while purchasing companies, after due diligence, is safer under the premise that acting as a holding company that wholly owns other companies avoids some of the stock market risks. We show that the stock market index faithfully reflects its companies' profits at the time of their publication. We compare the shifted historical dynamics of the S\&P500's aggregated financial earnings to its value, and find a high degree of correlation. We conclude that there is no benefit to a pension fund in wholly owning a super trust. We verify, by examining historical data, that stock earnings follow an exponential (geometric) Brownian motion and estimate its parameters. The robustness of this model is examined by an estimate of a pensioner's accumulated assets over a saving period. We also estimate the survival probability and mean survival time of the accumulated individual fund with pension consumption over the residual life of the pensioner. |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1407.0517&r=age |
| By: | Pietro Reichlin (Department of Economics and Finance, LUISS Guido Carli University) |
| Abstract: | We construct an overlapping generations model with unemployment risk where wages, employment and severance payments are set through efficient bargaining between risk averse Unions and risk neutral firms. Assuming that a First Best cannot be achieved due to workers' shirking incentives, we characterize a Second Best allocation and show how this can be implemented in a market economy. We prove that the latter generates too little employment and consumption smoothing, an excessive young age consumption and too much saving with respect to the Second Best. This inefficiency can be reduced by increasing the intensity of a pay-as-you-go social security system even if the economy is dynamically efficient. |
| Keywords: | Social security, labor markets, unemployment. |
| JEL: | A1 H2 J5 |
| URL: | http://d.repec.org/n?u=RePEc:lui:celegw:1301&r=age |