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on Economics of Ageing |
| By: | Bovenberg, A Lans; Nijman, Theo E |
| Abstract: | Private pension provision faces the challenging task of providing stable income streams during retirement. The challenge has increased markedly in the last decades due to volatile financial markets, falling interest rates and the withdrawal of employers and external insurers as risk bearers of systematic financial and longevity risks. Partly because of these developments, policyholders desire pensions tailored to their individual needs. This paper proposes a new type of pension: the Personal Pension with Risk sharing (PPR). By unbundling and valuing the investment, (dis)saving, insurance and risk-sharing functions of pensions, PPRs allow risk management and (dis)saving to be customized to the specific features of heterogeneous individuals. Moreover, unlike variable annuities, PPRs allow investment risks to be combined with longevity insurance without giving rise to high year-on-year volatility in consumption streams or opaque and rigid valuation and smoothing rules. The unbundling of functions in the PPR also deepens the internal markets for financial and insurance products while at the same time accommodating the diverse traditions of countries in terms of occupational pension provision. Finally, the PPR reconciles financial, fiscal and macroeconomic stability with growth by increasing the supply of long-term risk-bearing and illiquid capital, complementing public retirement provision, reducing the interest-rate sensitivity of pensions and smoothing shocks. |
| Keywords: | decumulation phase; defined benefit; defined contribution; longevity insurance; private pensions; risk management; risk sharing; variable annuities |
| JEL: | D14 D91 E21 E62 G11 G22 G23 G28 H31 H55 J14 J18 J26 J62 P43 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10538&r=age |
| By: | Anna Zabkowicz (Uniwersytet Jagielloñski) |
| Abstract: | Recent years see intense reforming of funded pensions sub-system in Poland. Actually, what are policy objectives like at which change in design introduced in 2013 (mandatory funding) and projected in 2014 (voluntary funding) is oriented? The article briefly reports what was contemporary re-designing of the pension system at different stages about and reconstructs objectives of reforming at each stage. It finds that interlocking streams of change aimed at two goals in fact which are i) relief to public finance ii) expanding pension funding by financial intermediaries. It argues that the two are in contradiction to each other, and this makes a paradox of pension reforming. The review of 2013- and 2014- design, unexpectedly enough, results in conclusion that at present reforming is focused on pension funding revitalization which may cause a recurring distress to public finance. Thus, the article identifies one of dilemmas of institutional-order development in Poland which can be probably also experienced in other countries where pension funding has been introduced. |
| Keywords: | funded pensions;pension reform;public finance |
| JEL: | P16 B52 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no118&r=age |
| By: | Slawomir Czech (University of Economics in Katowice) |
| Abstract: | In this paper we focus on an adverse effect of extensive choice widely known as ‘choice overload’. We draw on the case of Swedish funded pensions for illustration and analyze consequences of the design that allowed for maximizing the choice set. The analysis shows limitations of employing the rational choice approach to the real choice decisions biased with common psychological factors and demonstrates that government’s responsibility for the privatized pension system does not end with the design. We also emphasize the need for a decent default option, which would mitigate socially harmful results of adverse behavior effects like procrastination, status quo bias or abstaining from choice. After all, privatized pension systems still belong to a sphere of public policy. |
| Keywords: | extensive choice, cognitive limitations, market failure, choice architecture, funded pensions |
| JEL: | D19 H44 H55 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no44&r=age |
| By: | Calista Cheung; Dmitry Granovsky; Gabriella Velasco |
| Abstract: | This paper discusses broad trends in labour force participation and part-time employment across different age groups since the Great Recession and uses provincial data to identify changes related to population aging, cyclical effects and other factors. The main population age groups examined are youth (aged 15–24), prime age (25–54) and older (55 and above). Six main findings are reported. First, aging has been the most important driver of reduced participation. On their own, aging effects would have depressed participation rates by more than they fell between 2007 and 2014, and have been partly offset by rising participation rates of older workers. Second, shifting age composition has had the largest impact on the Atlantic provinces, owing primarily to their shrinking prime-age populations as some workers have migrated west. Third, a considerable part of the overall participation rate decline since 2007 reflects a greater share of prime-age and youth populations that are out of the labour force for various reasons including school, illness, and family responsibilities. These changes appear to be driven by both structural and cyclical forces, although the relative importance of each is unclear. Fourth, effects associated with “discouraged workers” have been negligible. Fifth, youth participation rates have fallen the most, by 2.8 percentage points since 2007, with 9 per cent of the decline reflecting purely higher school enrolment rates. Sixth, weak business conditions appear to be the main driver behind the shift toward part-time employment since the Great Recession, with involuntary part-time work explaining almost the entire increase since 2007. |
| Keywords: | Labour markets, Recent economic and financial developments, Regional economic developments |
| JEL: | E E2 E24 E3 E32 J J1 J2 J21 J6 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:15-2&r=age |
| By: | Kyle Carlson; Joshua Kim; Annamaria Lusardi; Colin F. Camerer |
| Abstract: | One of the central predictions of the life cycle hypothesis is that individuals smooth consumption over their economic life cycle; thus, they save when income is high, in order to provide for when income is likely to be low, such as after retirement. We test this prediction in a group of people—players in the National Football League (NFL)—whose income profile does not just gradually rise then fall, as it does for most workers, but rather has a very large spike lasting only a few years. We collected data on all players drafted by NFL teams from 1996 to 2003. Given the difficulty of directly measuring consumption of NFL players, we test whether they have adequate savings by counting how many retired NFL players file for bankruptcy. Contrary to the life-cycle model predictions, we find that initial bankruptcy filings begin very soon after retirement and continue at a substantial rate through at least the first 12 years of retirement. Moreover, bankruptcy rates are not affected by a player’s total earnings or career length. Having played for a long time and been well-paid does not provide much protection against the risk of going bankrupt. |
| JEL: | D91 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21085&r=age |
| By: | Ehing, Daniel; Hagist, Christian |
| Abstract: | This paper analyzes prevalence and incidence rates as well as survival times for people above the age of 60 years with a dementia disorder and/or a long-term care status. Using claim data from a social sickness funds in Germany (AOK-Plus), we show that there exists a with age increasing gap between the prevalence of women and men for both fields of study. This discrepancy cannot be explained completely by our estimated incidence rates and is caused by different survival times in long-term care and dementia. In long-term care 50 percent of all women (men) are dead after 44 (25) months, whereas about 57 (49) percent of all women (men) with dementia are alive after the end of our 48 month long observation period. The lower mortality of people with dementia is mainly explained by a large share of people who are not eligible for the German long-term care system. Estimating several cox models shows that the hazard of dying in long-term care increases with age and care level. However younger people with a dementia disorder show lower mortality rates in long-term care than their respective peer group without dementia. Looking at the present value of all long-term care costs for people with and without a dementia diagnosis, we find total average costs of 68,600 (44,857) Euro for women (men) without dementia. Due to their extended stay in nursing home care, women (men) with dementia are more expensive (80,201 (49,793) Euro). |
| Keywords: | dementia,long-term care,incidence rate,prevalence rate,survival analysis,costs of long-term care |
| JEL: | I19 H55 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fzgdps:56&r=age |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper examines social spending reform and fiscal savings in Slovenia. Rising expenditure has been at the root of Slovenia’s fiscal deterioration since the onset of the crisis. The paper explores reform options to reduce Slovenia’s social spending over the medium and long term. It discusses key features of the pension system, and analyzes the evolution of pension spending in the absence of reforms. The paper also examines the health and education spending and provides a framework to assess their efficiency relative to other countries. |
| Keywords: | Fiscal reforms;Government expenditures;Pension reforms;Health care;Education;Corporate governance;Selected Issues Papers;Slovenia; |
| Date: | 2015–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/42&r=age |
| By: | Ravi Balakrishnan; Mai Dao; Juan Sole; Jeremy Zook |
| Abstract: | The U.S. labor force participation rate (LFPR) fell dramatically following the Great Recession and has yet to start recovering. A key question is how much of the post-2007 decline is reversible, something which is central to the policy debate. The key finding of this paper is that while around ¼–? of the post-2007 decline is reversible, the LFPR will continue to decline given population aging. This paper’s measure of the “employment gap†also suggests that labor market slack remains and will only decline gradually, pointing to a still important role for stimulative macro-economic policies to help reach full employment. In addition, given the continued downward pressure on the LFPR, labor supply measures will be an essential component of the strategy to boost potential growth. Finally, stimulative macroeconomic and labor supply policies should also help reduce the scope for further hysteresis effects to develop (e.g., loss of skills, discouragement). |
| Keywords: | Labor force participation;United States;Aging;Unemployment;Older people;labor force participation; unemployment; employment gap; macro-economic policy. |
| Date: | 2015–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/76&r=age |
| By: | Alexander van Deursen; Ellen Helsper |
| JEL: | L91 L96 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:59995&r=age |
| By: | Annamaria Lusardi; Pierre-Carl Michaud; Olivia S. Mitchell |
| Abstract: | Prior studies disagree regarding the effectiveness of financial literacy programs, especially those offered in the workplace. To explain such measurement differences in evaluation and outcomes, we employ a stochastic life cycle model with endogenous financial knowledge accumulation to investigate how financial education programs optimally shape key economic outcomes. This approach permits us to measure how such programs shape wealth accumulation, financial knowledge, and participation in sophisticated assets (e.g. stocks) across heterogeneous consumers. We then apply conventional program evaluation econometric techniques to simulated data, distinguishing selection and treatment effects. We show that the more effective programs provide follow-up in order to sustain the knowledge acquired by employees via the program; in such an instance, financial education delivered to employees around the age of 40 can raise savings at retirement by close to 10%. By contrast, one-time education programs do produce short-term but few long-term effects. We also measure how accounting for selection affects estimates of program effectiveness on those who participate. Comparisons of participants and non-participants can be misleading, even using a difference-in-difference strategy. Random program assignment is needed to evaluate program effects on those who participate. |
| Keywords: | Life cycle model, financial literacy, financial decision-making, financial education, program evaluation, difference-in-difference, |
| JEL: | D91 |
| Date: | 2015–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-14&r=age |
| By: | Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute) |
| Abstract: | Japan has suffered from sluggish economic growth and recession since the 1990s, a phenomenon dubbed "Japan's Lost Decade." The People's Republic of China, many countries in the eurozone, and the United States may face similar problems in future and they have been concerned by Japan's long-term recession. This paper will address why Japan's economy has stagnated since the bursting of its economic bubble. Our empirical analysis challenges the beliefs of some western economists, such as Paul Krugman, that the Japanese economy is in a liquidity trap. We argue that Japan's economic stagnation stems from a vertical IS curve rather than a liquidity trap. The impact of fiscal policy has declined drastically, and the Japanese economy faces structural problems rather than a temporary downturn. These structural problems have many causes: an aging demographic (a problem that is frequently overlooked), an over-reliance by local governments on transfers from the central government, and Basel capital requirements that have made Japanese banks reluctant to lend money to startup businesses and small and medium-sized enterprises. This latter issue has discouraged Japanese innovation and technological progress. The paper will address all these issues empirically and theoretically and will provide some remedies for Japan's long-lasting recession. |
| Keywords: | japans lost decade; liquidity trap; japanese economy; economic stagnation; japanese innovation and technical progress |
| JEL: | E12 E62 |
| Date: | 2015–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0521&r=age |
| By: | Maria Bachelet (Università di Roma "Tor Vergata"); Leonardo Becchetti (DEDI and CEIS, Università di Roma "Tor Vergata"); Fabiola Ricciardini (ISTAT) |
| Abstract: | A desirable property of subjective wellbeing indicators is their capacity to predict future objective outcomes. In our paper we provide novel cross-country original evidence documenting that lagged health (un)satisfaction is a leading health indicator, that is, a significant predictor of future changes in health conditions on a large sample of Europeans aged above 50. We find that, after controlling for attrition bias, lagged (un)satisfaction with health is significantly and positively correlated with changes in the number of chronic diseases, net of the concurring impact of levels and changes in socio-demographic factors and health styles, country and regional health system effects and declared symptoms. Our findings are robust in age, gender, education and income class splits and are significant when separately estimated in the 13 countries of our sample. We further test the ordinal predictive properties of the health (un)satisfaction indicator in magnitude and statistical significance. Illness specific estimates document that the impact of lagged health (un)satisfaction is significant on ulcer, hypertension, arthritis and cholesterol (and weakly so on cataracts, hip or femoral fracture and lung diseases), while having a robust and significant effect on the probability of contracting cancer. |
| Keywords: | health outcomes, health satisfaction |
| JEL: | I12 I31 |
| Date: | 2015–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:336&r=age |
| By: | Hisahiro Naito |
| Abstract: | The eect of accepting more immigrants on welfare in the presence of a pay-asyou-go social security system is analyzed theoretically and quantitatively in this study. First, it is shown that if intergenerational government transfers initially exist from the young to the old, the government can lead an economy to the (modied) golden rule level within a nite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, by using the computational overlapping generation model, I calculate both the welfare gain of increasing the PITN from 15.5 percent to 25.5 percent in 80 years and the years needed to reach the (modied) golden rule level in a Pareto-improving way in a model economy. The simulation results show that the present discounted value of the Pareto-improving welfare gain of increasing the PITN is 23 percent of initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:tsu:tewpjp:2015-002&r=age |
| By: | Gilles Pison (Ined) |
| Abstract: | La France était quatre fois plus peuplée que le Royaume-Uni au milieu du XVIIIe siècle (autour de 25 millions d’habitants contre 6). La croissance démographique a été nettement plus faible en France dans la deuxième moitié du XVIIIe siècle et au XIXe siècle, et la population du Royaume-Uni a rattrapé celle de la France, pour atteindre le même effectif en 1918 (près de 40 millions d’habitants). La population du Royaume-Uni a ensuite continué de croître, creusant un écart de 10 millions d’habitants en 1944 avec celle de la France (49 millions contre 39). Après la deuxième guerre mondiale, la population de la France a progressivement rattrapé son retard. Depuis le milieu des années 1990, les deux pays ont des populations de taille similaire et qui augmentent au même rythme. Mais la croissance démographique est plus régulière en France qu’au Royaume-Uni, et vient principalement de l’excédent naturel (les naissances moins les décès) dans le premier pays, et de l’excédent migratoire (différence entre les entrées et les sorties de migrants) dans le second. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:idg:posocf:520&r=age |