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on Economics of Ageing |
| By: | Nikolov, Plamen (State University of New York); Adelman, Alan (State University of New York) |
| Abstract: | Higher life expectancy and rapidly aging populations have led to the introduction of pension programs in developing countries in the last two decades. Using the introduction of a new public policy in China, we estimate the effects of pension benefits on individual cognition, measured by episodic memory and intact mental status, among individuals ages 60 and above. We find large and significant negative effects of the provision of pension benefits on cognitive functioning among the elderly. We find the largest effect of the program on delayed recall, a measure implicated in neurobiological research as an important predictor of the onset of dementia. We show that the program leads to more negative impacts among the female sample. Our findings support the mental retirement hypothesis that decreased mental activity results in atrophy of cognitive skills. We show that retirement plays a significant role in explaining cognitive decline at older ages. |
| Keywords: | life-cycle, cognitive functioning, cognition, aging, health, mental retirement, middle-income countries, developing countries, China |
| JEL: | J14 H55 H75 J26 J24 D91 O12 N35 O10 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12524&r=all |
| By: | Plamen Nikolov; Alan Adelman |
| Abstract: | Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents’ income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries. |
| Keywords: | life cycle, retirement, pensions, inter vivos transfers, middle-income countries, developing countries, China, crowd-out effect, aging |
| JEL: | D64 O15 O16 J14 J22 H55 R20 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2019-053&r=all |
| By: | Emerson, Patrick M. (Oregon State University); Knabb, Shawn D. (Western Washington University); Sirbu, Anca-Ioana (Western Washington University) |
| Abstract: | Will an aging population lower economic growth? Economists are generally concerned that the increase in life expectancy could lower economic growth, however, theory does not make a prediction. As life expectancy increases, so should household savings, which results in more physical capital per worker. This will stimulate economic growth. However, as the retired population share increases, this may reduce spending on children as more resources are transferred to the elderly. This will likely reduce human capital accumulation and lower growth. The net effect of these competing influences is an empirical question. This paper constructs a stylized endogenous growth model that includes both human capital and government transfers to the elderly. The model is mapped into a linear statistical framework that allows us to estimate each of these potential responses using panel data for a set of OECD countries during the period 1975-2014. We find evidence that households do in fact increase savings in response to a longer retirement period and this effect is associated with a higher realized rate of growth per worker. However, we also find evidence that an aging population reduces spending on children (or other productive investments) placing a drag on growth. These results suggest it is the institutional response to population aging that will determine whether or not an aging population will place a drag on future growth, not population aging itself. |
| Keywords: | population aging, educational crowding-out, slow secular growth, cross-country panel data |
| JEL: | J11 J18 I21 I28 E66 E37 O43 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12561&r=all |
| By: | Tomasz Jedynak (Cracow University of Economics) |
| Abstract: | To restore the long term sustainability of pension schemes and improve pension benefits adequacy in recent years many countries have raised the statutory retirement age. According to official reports, however, there is a significant difference between statutory and actual (effective) retirement age. While in some countries the former is considerably higher than the latter, in other it is quite the opposite. Thus a question which underlays this research appears: what determines the effective retirement age? To answer these questions the study objectives are 1) to identify and discuss potential factors affecting retirement decisions; 2) to estimate the impact of the identified factors on the decision to retire. The empirical analysis in the study is based on the cross-country analysis of 34 OECD countries. To assess the impact of different variables on the effective retirement age we use a multivariate regression model. The model considers variables related to general economic conditions, health, and pension system architecture. Moreover, we also add to a model a dummy variable which informs whether a country is a European one or not. To fit the model and eliminate the highly correlated independent variables we apply the stepwise regression with forward selection. Taking into account the persistent gender differences, we calculate two separate models for men and women. The results of our regression model show that the most significant influence on the retirement age has: perceived health status, life expectancy and the employment rate of people aged 60 to 64. Furthermore, we observe a noticeable impact of ?being a European country? variable - simply being the European country leads to 3,76 lower retirement age for men and 2,78 for women. We also find that effective retirement age is positively and statistically significantly correlated with the relative poverty of the elderly, and negatively with old-age dependency ratio and replacement rate. There is also a strong, negative correlation between a dummy ?being a European country? variable and effective retirement age. Interestingly, we find no evidence that variables related to pensioners? income (the level of GDP per capita or disposable incomes of people aged over 65 and average wages) affect the effective retirement age.As our model is not capable to fully explain the differences in effective retirement age in analysed countries, we believe that apart from the quantitative parameters regarding economic conditions; financial incentives and pension system architecture; and health and demographic that are considered in the model, also other, rather qualitative factors, influence retirement decisions. We suppose that among these factors are mainly attitudinal and behavioural |
| Keywords: | retirement age, statutory retirement age, effective retirement age, professional activity |
| JEL: | J26 H55 J14 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:8911262&r=all |
| By: | Dorothée Rouzet; Aida Caldera Sánchez; Theodore Renault; Oliver Roehn |
| Abstract: | This paper was prepared in support of Japan’s G20 Presidency. It takes stock of ongoing and projected population ageing across G20 economies and its far-reaching implications for economic growth, productivity, inequality within and between generations and the sustainability of public finances. Rising old-age dependency ratios will put the financing of adequate pensions, health and long-term care under high pressure. The paper provides recommendations on policy responses to address ageing-related challenges and highlights good practices. A comprehensive approach is needed, tailored to each country’s institutional and policy settings and social preferences, and may span many areas of public policy: improving the design of public pensions, incentivising private savings, enhancing the efficiency of health care provision, expanding the coverage of social security systems, promoting employability and skills of older workers, and striving for a better labour market inclusion of women, youth and migrants. |
| Keywords: | ageing, employment, fiscal sustainability, health, inequality, long-term care, pensions, skills |
| JEL: | E24 H51 H55 J11 J26 |
| Date: | 2019–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaab:27-en&r=all |
| By: | Yumurtaci, Aynur; Bagis, Bilal |
| Abstract: | University students represent nearly more than half of the youth population (age group of 15-24) in Turkey. Meanwhile, the latest demographic data shows that they will constitute a majority of the elder generation in the context of the recent rapid aging trend in the near future. That said, and although the number of studies related to the students’ perceptions of old ages are increasing in recent years, there is still room to extend our understanding of the influence of demographics, social and economic patterns on students’ self perceptions of old age. To investigate the Turkish students’ views towards their own 65+ ages, a questionary is applied to 450 students from two different universities located in different regions in Turkey. Survey analysis shows that, almost 85 percent of “engineering” and “economics and administrative science” faculty students describe health and elderly care as the two major concerns in their old ages. On the contrary, answers of the two faculties differentiated clearly in terms of happiness, ability to save more and living with someone else in their old ages. Also, students accept retirement period as a reflection of aging and most of the students claim they had never thought about the aging process before. Yet, female and male students describe the meaning of retirement as the most comfortable period and a period that makes no sense, respectively. |
| Keywords: | University Students,Turkey,Aging,Perceptions |
| JEL: | J0 J1 I3 Z19 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:391&r=all |
| By: | Schünemann, Johannes (Faculty of Economics and Social Sciences); Strulik, Holger; Trimborn, Timo |
| Abstract: | For the population over 65, nursery care expenditures constitute on average the largest share in total health expenditures. In this paper, we distinguish between medical care, intended to improve one›s state of health, and personal care required for daily routine. Personal care can be either carried out autonomously or by a third party. In the course of aging, autonomous personal care is eventually substituted by nursery care. We set up a life-cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and analyze the interplay between medical and nursery care. We replicate health behavior and life expectancy of individuals and in particular the empirically observed patterns of medical and nursery care expenditure. We then analyze the impact of better health and rising life expectancy, triggered by rising income and medical progress, on the expected cost of nursery care in the future. We predict an elasticity of nursery care expenditure with respect to life expectancy of 1/3. In terms of present value at age 20, life-time nursery care expenditure is predicted to decline with rising life expectancy. |
| JEL: | D11 D91 I12 J11 |
| Date: | 2019–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:fri:fribow:fribow00505&r=all |
| By: | Amin, Vikesh; Flores, Carlos A.; Flores-Lagunes, Alfonso |
| Abstract: | We examine the relationship between BMI and mental health for young adults and elderly individuals using data from the National Longitudinal Study of Adolescent Health and the Health & Retirement Study. While OLS estimates show that BMI is significantly associated with worse mental health in both young adulthood and old age, they are likely to be confounded by (i) unobserved factors that affect both BMI and mental health and (ii) reverse causality. To tackle confounding, we take two complementary approaches. First, we use a polygenic score for BMI as an IV and adjust for polygenic scores for other factors that may invalidate this IV. The IV estimates indicate that there is no statistically significant relationship between BMI and mental health for young adults, whereas there is a positive and statistically significant relationship for the elderly. Moreover, we show that IV estimates likely have to be interpreted as identifying a weighted average of effects of BMI on mental health mostly for individuals on the upper quantiles of the BMI distribution. Given potential remaining concerns about the validity of the IV, our second approach is to consider it an “imperfect” IV and estimate an upper bound on the average treatment effect for the corresponding population following Nevo & Rosen (2012). The estimated upper bounds reinforce the conclusions from the IV estimates: they show little evidence of a detrimental effect of BMI on mental health for young adults while being consistent with an economically meaningful effect for elderly individuals. Lastly, we explore some of the potential channels through which BMI may affect mental health for the elderly. |
| Keywords: | obesity,mental health,depression,polygenic scores |
| JEL: | I10 I12 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:385&r=all |
| By: | Compton, Janice (University of Manitoba); Pollak, Robert (Washington University, St. Louis) |
| Abstract: | Comparisons of individual life expectancies over time and across demographic groups provide information for individuals making retirement decisions and for policy makers. For couples, analogous measures are the expected years both spouses will be alive (joint life expectancy) and the expected years the surviving spouse will be a widow or widower (survivor life expectancy). Using individual life expectancies to calculate summary measures for couples is intuitively appealing but yields misleading results because the mortality distribution of husbands and wives overlap substantially. To illustrate, consider a wife aged 60 whose husband is 62. In 2010, her life expectancy was 24.4 years and his 20.2 years. The intuitions that the spouses will die at about the same time (e.g., within 5 years of each other) and that she will not live for a long time after his death are incorrect. The probability that the wife will outlive her husband is 0.63 and, if she does, her survivor life expectancy is 12.5 years. Using 2010 data, we investigate differences in joint and survivor life expectancy by race and ethnicity and by education. We then calculate trends and patterns in joint and survivor life expectancy in each census year from 1930 to 2010. |
| Keywords: | life expectancy |
| JEL: | J1 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12571&r=all |
| By: | Arthur Seibold |
| Abstract: | This paper documents and analyzes an important and puzzling stylized fact about retirement behavior: the large concentration of job exits at specific ages. In Germany, almost 30% of workers retire precisely in the month when they reach one of three statutory retirement ages, although there is often no incentive or even a disincentive to retire at these thresholds. To study what can explain the concentration of retirements around statutory ages, I use novel administrative data covering the universe of German retirees, and I exploit unique variation in financial retirement incentives as well as statutory ages across individuals in the German pension system. Measuring retirement bunching responses to 644 different discontinuities in pension benefit profiles, I first document that financial incentives alone fail to explain retirement patterns in the data. Second, I show that there is a large direct effect of “presenting” a threshold as a statutory retirement age. Further evidence on mechanisms suggests the framing of statutory ages as reference points for retirement as a potential explanation. A number of alternative channels including firm responses are also discussed but they do not seem to drive the results. Finally, structural bunching estimation is employed to estimate reference point effects. Counterfactual simulations highlight that shifting statutory ages via pension reforms can be an effective policy to increase actual retirement ages with a positive fiscal impact. |
| Keywords: | retirement, reference points |
| JEL: | D03 H55 J26 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7799&r=all |
| By: | French, Eric Baird; Jones, John Bailey; Kelly, Elaine; McCauley, Jeremy |
| Abstract: | In this review, we document end-of-life medical spending: its level, composition, funding and contribution to aggregate medical spending, both for the US and abroad. We discuss how end-of-life expenses affects household savings and other financial behaviour such as insurance choices. Lastly, we review economic evidence on the efficacy of medical spending at the end of life, assessing the value of palliative and other care for both longevity and patient satisfaction. |
| Keywords: | End of Life; Insurance; medical spending; Savings |
| JEL: | I12 I13 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13913&r=all |
| By: | André Masson; Vincent Touze (Observatoire français des conjonctures économiques) |
| Abstract: | Cet article s’intéresse à l’accumulation de patrimoine des ménages et à sa transformation en capital productif dans un contexte de population vieillissante. S’appuyant sur des constats négatifs réalisés à deux niveaux, d’abord microéconomique puis macroéconomique, il propose enfin un ensemble de remèdes. D’un point de vue microéconomique, la forte accumulation et concentration de patrimoine par les seniors, associée à une faible détention d’actions, s’expliquerait pour l’essentiel par de forts comportements de précaution. Pour pallier l’incertitude financière induite par l’allongement de la durée de vie (baisse du pouvoir d’achat de la pension, dépenses nouvelles en cas de dépendance, etc.), les seniors averses au risque et à l’ambiguïté adopteraient des stratégies de sur-épargne et d’investissement dans des actifs peu risqués (assurance-vie, immobilier). Le constat macroéconomique confirme la hausse historique du poids du patrimoine dans le PIB et sa faible contrepartie en actifs productifs. Il révèle aussi la baisse inquiétante du taux d’investissement net, qui apparaît corrélée à la baisse de la productivité par tête, et la dépendance accrue du financement de l’économie nationale aux investisseurs étrangers. Une série de remèdes sociaux, fiscaux, financiers et institutionnels sont avancés. Combinés les uns aux autres, ils pourraient réduire les incertitudes financières posées par l’allongement de la durée de vie, favoriser une meilleure circulation du patrimoine entre les générations et encourager l’orientation de l’épargne vers des actifs investis à long terme dans le secteur productif national. |
| Keywords: | Vieillissement; Cycle de vie; Epargne; Politique économique |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1q1sbar0rd8efqce77iq7gff0c&r=all |
| By: | Andreas Lichtenstern; Pavel V. Shevchenko; Rudi Zagst |
| Abstract: | In this article we solve the problem of maximizing the expected utility of future consumption and terminal wealth to determine the optimal pension or life-cycle fund strategy for a cohort of pension fund investors. The setup is strongly related to a DC pension plan where additionally (individual) consumption is taken into account. The consumption rate is subject to a time-varying minimum level and terminal wealth is subject to a terminal floor. Moreover, the preference between consumption and terminal wealth as well as the intertemporal coefficient of risk aversion are time-varying and therefore depend on the age of the considered pension cohort. The optimal consumption and investment policies are calculated in the case of a Black-Scholes financial market framework and hyperbolic absolute risk aversion (HARA) utility functions. We generalize Ye (2008) (2008 American Control Conference, 356-362) by adding an age-dependent coefficient of risk aversion and extend Steffensen (2011) (Journal of Economic Dynamics and Control, 35(5), 659-667), Hentschel (2016) (Doctoral dissertation, Ulm University) and Aase (2017) (Stochastics, 89(1), 115-141) by considering consumption in combination with terminal wealth and allowing for consumption and terminal wealth floors via an application of HARA utility functions. A case study on fitting several models to realistic, time-dependent life-cycle consumption and relative investment profiles shows that only our extended model with time-varying preference parameters provides sufficient flexibility for an adequate fit. This is of particular interest to life-cycle products for (private) pension investments or pension insurance in general. |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1908.09976&r=all |
| By: | Boyer, Martin; De Donder, Philippe; Fluet, Claude; Leroux, Marie-Louise; Michaud, Pierre-Carl |
| Abstract: | We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. We find that information frictions are pervasive. We measure the welfare losses associated with these three causes in a framework that also allows for selection. We show that information frictions reduce equilibrium take-up and lead to large welfare loss while selection plays little role. |
| Keywords: | Long-term care insurance; adverse selection; stated-preference; health; insurance |
| Date: | 2019–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:123346&r=all |