|
on Economics of Ageing |
| By: | Larsson,Bo; Leyaro,Vincent; Palmer,Edward |
| Abstract: | About one-half of Africa?s population will remain below age 30 well past 2050,with relatively few aged 60 and older. Using Tanzania?s projected demographics and presenteconomic point of departure, this paper demonstrates how the implicit ?double?demographic dividend can be harnessed to create inclusive growth. A Swedish-style non financial defined contribution (NDC) system is launched where the government can borrow funds from the future through NDC ?consol? bonds to transform individual savings into human and physical capital to promote inclusive economic growth. The consol bonds constitute a reserve to cover pensions of the retiring ?demographic bubble? in the future as the dependency ratio gradually glides into demographic equilibrium. Minimum transfers tothe current elderly are also introduced with the phase-in. |
| Keywords: | Educational Sciences,Demographics,Labor&Employment Law,Pensions&Retirement Systems,Labor Markets,Rural Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136544&r=all |
| By: | van Praag, Bernard M. S. (University of Amsterdam); Hop, J. Peter (University of Amsterdam) |
| Abstract: | Pensions may be provided for in a modern society by a mix of several methods, namely by voluntary individual savings, mandatory fully-funded occupational pension systems, mandatory social security financed by pay-as-you-go, and old-fashioned hoarding in cash. Here, we call the specific mixture of the four systems the pension composition. We assume that individual workers decide on their own individual savings, that the fully-funded occupational system is decided upon by the age cohort of the median worker (MW), and that the social security is decided upon by the median voter (MV). In this behavioral approach we distinguish between several social groups, where individuals belong to several groups simultaneously and where the interests of the different groups are only partly coinciding. For a given demography and interest rate, the joint result of the decisions of the different age cohorts is a Pareto equilibrium. For ease of exposition we assume that individual and collective pension savings are the only sources of capital supply. When capital supply equals demand from industry there is equilibrium in the capital market with a corresponding equilibrium interest rate. In this paper we assume a demography with one hundred age brackets and we investigate how changes in the birth rates, survival rates, and the retirement age affect the pension composition and the capital market equilibrium. Our conclusion is that the demographic effects are considerable not only for the resulting pension composition but also for macro-economic variables such as the wage rate, the interest rate, and the capital-income ratio. It follows that the pension composition in general and social security in particular is determined by the demography and cannot be modified at will as a long-term political instrument. We find that this is relevant for the present century, where birth and mortality rates in most western countries are steeply declining. |
| Keywords: | demography, funded pensions, unfunded pensions, social security, interest rate, overlapping generations, individual savings |
| JEL: | H55 H75 J1 J26 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12909&r=all |
| By: | Lu,Bei; Piggott,John; Zheng,Bingwen |
| Abstract: | This paper discusses the potential expansion of the role of the notional defined contribution (NDC) paradigm in the ongoing reforms of retirement provision in China. It finds that mature age life expectancy is remarkably uniform among formal sector workers at the time of retirement, although greater heterogeneity does exist for Rural and Urban Residents Pension Scheme members. The implications of a stylized NDC structure are examined covering China?s major pension systems, calibrated to be actuarially neutral. Each system has a different contribution rate and retirement age, consistent with different life expectancies. A complementary social pension is also proposed. The paper concludes that an increased presence of the NDC paradigm has the potential to raise aggregate welfare. |
| Keywords: | Population&Development,Pensions&Retirement Systems,Social Protections&Assistance,Adolescent Health,Law and Justice Institutions |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136542&r=all |
| By: | Góra,Marek; Palmer,Edward |
| Abstract: | This paper defines a universal public pension scheme (UPPS) as a government mandated lifecycle longevity insurance scheme that transfers individual consumption from the working years to retirement. It discusses the differences in four UPPS designs designated as either defined contribution (DC) or defined benefit (DB), and financial or nonfinancial. With individual DC accounts, the ball is in the individual?s court. The transparent link between contributions and retirement income is the enabler of efficiency that through marginal decisions to choose formal work over informal work or leisure and to postpone retirement marginally toward the end of the working life, supports affordability and sustainability for a chosen level of adequacy. Hence, UPPS-DC designs are found superior to UPPS-DB designs. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136551&r=all |
| By: | Buchholtz, Sonia; Ch?on-Domincza, Agnieszka; Góra, Marek |
| Abstract: | Poland?s pension system faces multiple challenges, including accelerating population aging. Early retirement policy aimed at mitigating mass exit from the labor market led to the rise of pension system economic dependency. Transition to a nonfinancial and financial defined contribution (NDC plus FDC) system in 1999 mitigated the fiscal risk and an unfair balance of interest between the working and retired generations. The new system separated the income allocation and redistribution. The retirement age was raised. However, the implementation of the new system is a case study of misuse for current political goals, ad hoc tweaks, and unfinished topics. Yet the 1999 pension reform met its goals. |
| Keywords: | Social Development&Poverty,Pensions&Retirement Systems,Labor Markets,Rural Labor Markets,Disability |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136550&r=all |
| By: | Lee,Ron; Sanchez-Romero,Miguel |
| Abstract: | Differences in life expectancy between high and low socioeconomic groups are often large and have widened in recent decades. In the United States, the differences may now be as large as ten to fourteen years. These longevity gaps strongly affect the actuarial fairness and progressivity of many public pension systems, raising the question of possible policy reforms to address this issue. This paper reviews the empirical literature on the longevity differences across socioeconomic groups and their impacts on lifetime benefits, considers how these impacts depend on four different pay-as-you-go pension structures (calibrated on the US case), and discusses some policy options. |
| Keywords: | Law and Justice Institutions,Population&Development,Pensions&Retirement Systems,Educational Sciences |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136560&r=all |
| By: | Kuhn, Michael; Prettner, Klaus |
| Abstract: | We assess the long-run growth effects of rising longevity and increasing the retirement age when growth is driven by purposeful research and development. In contrast to economies in which growth depends on learning-by-doing spillovers, raising the retirement age fosters economic growth. How economic growth changes in response to rising life expectancy depends on the retirement response. Employing numerical analysis we find that the requirement for experiencing a growth stimulus from rising longevity is fulfilled for the United States, nearly met for the average OECD economy, but missed by the EU and by Japan. |
| Keywords: | Demographic Change,Rising Life Expectancy,Pension Reforms,Long-Run Economic Growth,R&D,Innovation |
| JEL: | J10 J26 O30 O41 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:462&r=all |
| By: | Palmer, Edward; Könberg, Bo |
| Abstract: | Sweden?s reform began with a published sketch in 1992 and developed into nonfinancial defined contribution (NDC) legislation in 1994. This paper discusses the underpinnings of the Swedish NDC scheme?s financial stability, factors influencing the adequacy of benefits, and its interplay with other components of the pension system: the public financial defined contribution scheme, the minimum pension guarantee, and the occupational schemes. The paper also includes information on the December 2017 broad six-party political agreement on forthcoming legislation. It concludes with recommendations for additional improvements in the overall old-age pension system, based on the analysis of financial stability, adequacy, and differences in outcomes, and the interaction of the NDC scheme with the guarantee benefits and the occupational schemes. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Demographics,Economic Growth,Disability |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136539&r=all |
| By: | Boado-Penas,María del Carmen; Settergren,Ole; Ekheden,Erland; Naka,Poontavika |
| Abstract: | It is desirable that pension reforms and legislated rules have the backing of thepopulation or at least are accepted by voters. With the objective of achieving ?acceptance,?the Swedish Pensions Agency publishes an annual actuarial balance of the solvency of the whole public pension system and distributes to each participant information on his or her individual accumulated notional balance and funded accounts, movements during the year,and estimates of the projected individual future pension amount. This paper describes the Swedish pension experience in communication with pension participants over the last decade, together with the main changes in information delivered to improve individuals? pension knowledge and help them make more informed, better decisions on work, savings,and retirement. |
| Keywords: | Pensions&Retirement Systems,Social Protections&Assistance,Population&Development,Financial Literacy,Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136553&r=all |
| By: | Andersen, Asbjørn Goul (Ragnar Frisch Centre for Economic Research); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research) |
| Abstract: | We provide empirical evidence that the removal of work disincentives embedded in retirement earnings tests can increase old-age labor supply considerably, but it does so at the cost of more income inequality. Causal effects are identified based on a reform of the Norwegian early retirement program, which entailed that adjacent birth cohorts were exposed to completely different work incentives from age 62. The reform removed a strict retirement earnings test such that pension wealth was redistributed from early to late retirees. Given the pre-existing employment and earnings patterns, this implied a considerable rise in old-age income inequality. In principle, this could have been offset by changes in the labor supply. We estimate that the reform triggered a 42% increase in hours worked during the ages covered by early retirement options. However, as the labor supply responses were of similar magnitudes across the earnings distribution, they did little to offset the rise in inequality. As measured by the Gini coefficient, inequality in overall old-age income rose by approximately 0.03 (17%). |
| Keywords: | pension reform, inequality, labor supply |
| JEL: | H55 D31 J22 J26 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12918&r=all |
| By: | Holzmann,Robert |
| Abstract: | Nonfinancial defined contribution (NDC) pension schemes have been successfully implemented since the mid-1990s in a number of European countries. The NDC approach features the lifelong contribution?benefit link of a financial defined contribution scheme, but is based on the pay-as-you-go format. An NDC approach implemented by the rulebook can manage the economic and demographic risks inherent to a pension scheme and by design creates financial sustainability. This paper offers a nontechnical introduction to NDC schemes, their basic elements and advantages over nonfinancial defined benefit schemes, the key technical frontiers of the approach, and the experiences of countries with NDC schemes. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Rural Labor Markets,Labor Markets,Public Sector Economics,Public Finance Decentralization and Poverty Reduction,Macro-Fiscal Policy,Taxation&Subsidies,Economic Adjustment and Lending |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136555&r=all |
| By: | Stølen, Nils Martin; Fredriksen, Dennis; Hernæs, Erik; Holmøy, Erling |
| Abstract: | The main goals of reforming the Norwegian old-age pension system toward nonfinancial defined contributions (NDC) in 2011 were to improve long-run fiscal sustainability and labor supply incentives. Maintaining much of the redistributive effects of the former public pension system was also an important concern. Econometric analyses reveal the 2011 reform?s significant effects on postponing retirement. Results from a dynamic microsimulation model show that the reform is expected to have substantial effects on old-age pension expenditures in the long run without any large negative distributional effects. Macroeconomic analyses indicate that the reform is likely to make a great fiscal impact in the long run, and higher employment plays an important role in this aspect. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Access of Poor to Social Services,Economic Assistance,Services&Transfers to Poor,Disability,Rural Labor Markets,Labor Markets,Macro-Fiscal Policy,Economic Adjustment and Lending,Public Finance Decentralization and Poverty Reduction,Public Sector Economics |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136552&r=all |
| By: | Wenliang Hou; Geoffrey T. Sanzenbacher |
| Abstract: | As the U.S. population becomes more diverse, it will be increasingly important for policymakers addressing Social Security’s solvency to understand how reliant various racial and ethnic groups will be on the program versus other sources of retirement wealth. Yet, to date, studies on retirement wealth have tended not to focus on race and ethnicity, have largely ignored the role of Social Security, or have excluded the most recent cohort approaching retirement – the Late Boomers. This project uses data from the Health and Retirement Study (HRS) to document the retirement resources of white, black, and Hispanic households at various points in the wealth distribution for five HRS cohorts of 51-56 year olds between 1992 and 2016. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2020-2&r=all |
| By: | Barr,Nicholas |
| Abstract: | This paper starts from the fact that women receive lower pensions than men on average, and considers policies to address that fact. Women typically have lower wages than men, a greater likelihood of part-time work and more career breaks, and thus generally a less complete contribution record. In addition, pension age may be lower for women and annuities may be priced using separate life tables for women. The paper looks at three strategic ameliorative policy directions: policies intended to increase the size and duration of women?s earnings and hence improve their contribution records; policies to redirect resources within the pension system, including for survivors and after divorce; and ways of boosting women?s pensions with resources from outside the pension system. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Gender and Development,Inequality,Labor Markets,Rural Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136568&r=all |
| By: | Oxana Sinyavskaya (National Research University Higher School of Economics); Anna Cherviakova (National Research University Higher School of Economics); Elizaveta Gorvat (National Research University Higher School of Economics) |
| Abstract: | This research explores the relation between labor mobility in pre-retirement and retirement ages and further employment in old age in Russia. Older workers often face the challenge of keeping their job due to impaired health, age discrimination, and other factors. Job change can be a potential strategy to maintain employment in old age. Our study uses panel data of the Russian Longitudinal Monitoring Survey of Higher School of Economics (RLMS-HSE) for 2010–2017. Logistic regression models show that labor mobility can be an effective strategy to maintain employment in old age but only for men. Older workers are more likely to change their job if they do not have stable employment relationships and are not satisfied with their current job. |
| Keywords: | older people, pensioners, employment in old age, labor mobility |
| JEL: | Z |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:25/psp/2020&r=all |
| By: | Palmer,Edward; Gosson de Varennes,Yuwei Zhao de |
| Abstract: | This paper identifies and discusses four issues in creating annuities in (nonfinancial) defined contribution (NDC) schemes that are essential for systems? financial stability and fair inter or intragenerational redistribution. The first issue is the choice between incorporating the rate of return into the annuity or into the exogenous indexation. The second issue is in choosing a projection method for life expectancy that produces systematically unbiased estimates. The third issue is at what age the projection of life expectancy is to be fixed over the remaining lifetime of the annuity. The final issue is the prevalence of socioeconomic heterogeneity within the insurance pool. |
| Keywords: | Population&Development,Law and Justice Institutions,Pensions&Retirement Systems,Gender and Development,Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136562&r=all |
| By: | Guven,Melis U. |
| Abstract: | The coverage of pension systems in the Africa region is limited to the small segment of the population in the formal sector. Coverage is thin partly because traditional contributory pension schemes are not responding to the needs of the informal sector. As a result, a large share of the region?s adult population has no access to contributory pension schemes during their working lives. This means they will not be eligible for a pension. It also means the elderly coverage gap will persist in most countries. Expanding coverage to a larger group of workers is especially important because the elderly is now often cared for by their children. As the children move to cities, their ties to the elderly and home villages weaken. As a result, the elderly may be left behind with fewer resources. |
| Keywords: | Labor Markets,Social Protections&Assistance,Inequality,Health Care Services Industry |
| Date: | 2019–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:139582&r=all |
| By: | Price,William Joseph |
| Abstract: | This paper reviews the design of private pensions alongside a notional defined contribution (NDC) ? or public ? component. A mix of public and private pensions is the bestway to deliver a strong combination of five core outcomes: coverage, adequacy,sustainability, efficiency, and security. Choices for market structure, benefit type,contributions, and investment strategy can be guided by their impact on these outcomes.The clarity of an NDC formula allows the joint distribution of public and private pensions tobe modeled which can be crucial for optimal investment strategies given, for example, thenegative correlation between real per capita gross domestic product growth and equity markets over long periods. NDC payout formulas have broad applications where annuity markets are weak. |
| Keywords: | Pensions&Retirement Systems,Labor Markets,Rural Labor Markets,Social Funds and Pensions,Capital Markets and Capital Flows,Capital Flows,Non Bank Financial Institutions,Population&Development,Gender and Development |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136538&r=all |
| By: | Klerby,Anna; Larsson,Bo; Palmer,Edward |
| Abstract: | Sweden?s gender pension gap is about 33 percent at retirement, reflecting the gender earnings gap ? itself a reflection of a structural gender difference in low-pay jobs for women and men and career advancement opportunities. The individual nonfinancial defined contribution (NDC) account data examined show that the allocation of time to informal care work in the home versus formal market work is the main determinant of the gaps. A case is presented for sharing accounts as the default, making the cost of women?s time in home care explicit and negotiable, reducing the minimum guarantee pension?s role as an implicit tax-financed spousal subsidy. The paper also analyzes the likelihood of needing a guarantee and the effect of sharing under various circumstances. |
| Keywords: | Educational Sciences,Social Development&Poverty,Pensions&Retirement Systems,Gender and Development,Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136541&r=all |
| By: | Nektarios,Milton; Tinios,Platon |
| Abstract: | Greece?s current pension system relies almost exclusively on the state and remains staunchly pay-as-you-go (PAYG) and defined benefit (DB). This paper offers a radical proposal for change: (i) a new multi-pillar notional and financial defined contribution (NDC and FDC) pension system for all generations first insured after 1993, with contribution rates for primary pensions reduced by 50 percent; and (ii) a transitional system for those first insured before 1993. The proposal?s robustness is tested actuarially for the period up to 2060. Though financing the legacy cost would be challenging, the quantitative exercise indicates that a radical pension reform, especially if implemented as a part of an overall recovery package, could set the country on a more favorable growth trajectory. |
| Keywords: | Social Development&Poverty,Labor Markets,Pensions&Retirement Systems,Adolescent Health,Social Analysis,Government Policies,Quality of Life&Leisure,National Governance,Youth and Governance |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136547&r=all |
| By: | Gronchi, Sandro; Nisticò, Sergio; Bevilacqua, Mirko |
| Abstract: | Starting from a reconstruction of the political context in which the Italian 1995 pension reform took shape, this paper reviews the essential features of the 1995 and post-1995 legislation and assesses its fundamental shortcomings. A straightforward theoretical discussion highlights both the targets and the instruments representing the hallmark of the nonfinancial defined contribution (NDC) model. The contrast of such theoretical premises with the Italian legislation points out the persistent original mistakes together with the necessary remedies. |
| Keywords: | Pensions&Retirement Systems,Population&Development,Disability,Social Protections&Assistance |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136548&r=all |
| By: | María J. Prados (University of Southern California); Arie Kapteyn (University of Southern California) |
| Abstract: | Americans face the challenges of retirement with varying degrees of preparation. Evidence indicates that that many individuals may not be making the best possible choices with respect to their Social Security and retirement savings. We assess the subjective expectations of non-retirees and find that they have sizable biases and uncertainty about future retirement benefits. This uncertainty and the level of subjective expectations can affect workers’ wealth accumulation and retirement readiness. We build on these observations and combine unique survey data with a life-cycle optimization model to measure the role of Social Security literacy, subjective expectations about retirement benefits, and behavioral traits as determinants of life-cycle savings decisions and welfare. The goal of this project is to better understand the role of retirement expectations as determinants of savings decisions and retirement income. We forecast future benefits and measure the bias in expectations. We find heterogeneity in the direction of the expectation bias: Men and those with low levels of uncertainty about retirement benefits are less likely to overestimate their future retirement benefits, hence are more likely to save more and reach retirement better prepared. We find that these biases in subjective expectations translate into suboptimal asset accumulation and welfare losses. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp405&r=all |
| By: | Gal,Robert I.; Radó,Márta |
| Abstract: | This paper shows that as the educational composition in the fifty-five to sixty-four year-old age bracket improved between the mid-1990s and the mid-2010s, the effective retirement age rose rapidly in the Central and Eastern European region. This increase was fast enough to keep life expectancies at the effective retirement age practically unchanged. In effect, the labor market absorbed all improvements in life expectancies in older working ages. The paper also shows that maintaining the current life expectancies at retirement over the next thirty years requires less effort in terms of further raising the effective retirement age than what the region achieved in this respect in the last fifteen years. |
| Keywords: | Pensions&Retirement Systems,Educational Sciences,Rural Labor Markets,Labor Markets,Law and Justice Institutions,Population&Development |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136567&r=all |
| By: | Nelson,Kenneth; Nieuwenhuis,Rense; Alm,Susanne |
| Abstract: | This paper analyzes old-age incomes in Sweden from a pension policy perspective, focusing on both the economic position of elderly citizens and the redistributive effects of the pension system?s different parts. The empirical analyses show that each subsequent cohort that reaches retirement age faces higher relative poverty risks than previous cohorts. The relative decline in the value of the guaranteed minimum pension vis-à-vis the real income growth of wage earners brings to the forefront the issues of indexation of the guarantee and the ceiling on the means-tested housing benefits like the basic safety net for pensioners. |
| Keywords: | Inequality,Municipal Management and Reform,Urban Housing and Land Settlements,Urban Governance and Management,Urban Housing,Economic Assistance,Disability,Access of Poor to Social Services,Services&Transfers to Poor,Poverty Reduction Strategies,Labor&Employment Law |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136557&r=all |
| By: | Guardiancich,Igor; Weaver,R. Kent; Demarco,Gustavo C.; Dorfman,Mark Charles |
| Abstract: | Nonfinancial defined contribution (NDC) schemes offer governments desirable properties in terms of efficiency, fairness, and financial sustainability and an opportunity to deflect the blame for pension cuts. Yet adoptions of NDC schemes largely ground to a halt and several countries retreated from NDC implementation after legislation. Lack of support from powerful international actors is partly to blame, as is the perceived rigidity of NDC in reducing room for policy maneuver. Correct implementation requires substantial administrative capacity. Less demanding automatic stabilizing mechanisms undercut the appeal of NDC in the European Union. Thus, while being an important option for policy makers and a benchmark against which to measure alternative reforms, NDC is unlikely to become the dominant pension design choice anytime soon. |
| Keywords: | Pensions&Retirement Systems,Social Development&Poverty,Population&Development,Labor Standards,Trade Unions,Rural Labor Markets,Labor Markets,Armed Conflict |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136556&r=all |
| By: | Knaack,Peter; Miller,Margaret J.; Stewart,Fiona Elizabeth |
| Abstract: | This paper examines the state of reverse mortgage markets in selected countries around the world and considers the potential benefits and risks of these products from a financial inclusion and economic benefit standpoint. Despite potentially increasing demand from aging societies -- combined with limited pension income -- a series of market failures constrain supply and demand. The paper discusses a series of market failures on the supply side, such as adverse selection, moral hazard, and the costly regulation established to address these problems, leading to only a small number of providers, even in developed markets. Demand-side constraints are equally relevant, in particular high non-interest costs, abuse concerns, and the inability of reverse mortgages to cover key risks facing the elderly, particularly health and elder care. In developing countries, constraints are likely to be even higher than in advanced economies, due to high transaction costs and lack of consumer knowledge and protection. The enabling conditions for such markets to develop are outlined, along with examples of regulatory oversight. The paper concludes that these still seem to be largely products of last resort rather than well-considered purchases as part of good retirement planning. |
| Date: | 2020–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9134&r=all |
| By: | Boeri,Tito; Cozzolino,Maria; Di Porto,Edoardo |
| Abstract: | In the last 30 years the Italian pension system was repeatedly reformed and counter-reformed, increasing uncertainty about future pensions. A low level of financial literacy exacerbated this problem. In 2015, the Italian Social Security Institute (INPS) launched a project to allow all insured workers to have more precise information about their future benefits. This paper analyzes the results of a survey carried out to evaluate the project?s performance. The findings are encouraging ? around 80 percent of respondents rate the INPS service as at least ?very helpful.? Even if 42 percent of the sample overestimates their future pension, 16 to 29 percent reveal a willingness to change their expectation on retirement income after receiving new information. |
| Keywords: | Pensions&Retirement Systems,Financial Literacy,Educational Sciences,Social Protections&Assistance,Labor Markets |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136554&r=all |
| By: | Alexander M. Gelber (Wharton School, University of Pennsylvania; National Bureau of Economic Research); Damon Jones (University of Chicago - Harris School of Public Policy); Daniel W. Sacks (Indiana University - Kelley School of Business - Department of Business Economics & Public Policy); Jae Song (U.S. Social Security Administration) |
| Abstract: | We investigate the impact of the Social Security Annual Earnings Test (AET) on the employment decisions of older Americans. The AET reduces Social Security benefits by one dollar for every two dollars earned above the exempt amount. Using a differences-in-differences design, we find that the employment rate of those predicted to become subject to the AET decreases substantially relative to those not predicted to become subject to it. The point estimates suggest that the AET reduces the employment rate of Americans aged 63-64 by at least 1.2 percentage points. |
| JEL: | H55 J22 J26 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2020-05&r=all |
| By: | Holzmann,Robert; Alonso-García,Jennifer; Labit-Hardy,Heloise; Villegas,Andrés M. |
| Abstract: | A positive relationship between lifetime income and life expectancy leads to a redistribution mechanism when the average cohort life expectancy is applied for annuity calculation. Such a distortion puts into doubt the main features of the NDC (nonfinancial defined contribution) scheme and calls for alternative designs to compensate for the heterogeneity. This paper explores five key mechanisms of compensation: individualized annuities; individualized contribution rates; a two-tier contribution structure with socialized and individual rates; and two supplementary two-tier approaches to deal with the income distribution tails. Using unique American and British data, the analysis indicates that both individualized annuities and two-tier contribution schemes are feasible and effective and thus promising policy options. A de-pooling by gender will be required, however. |
| Keywords: | Gender and Development,Pensions&Retirement Systems,Law and Justice Institutions,Population&Development |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136564&r=all |
| By: | Amal Harrati; David Rehkopf |
| Abstract: | In this paper, we characterized health trajectories over an 18-year period for a cohort of American workers. We used administrative data to track monthly, health-related events for six chronic diseases (asthma, arthritis, diabetes, depression, ischemic heart disease, and hypertension) including the diagnoses of new disease, hospitalizations, and outpatient visits. Using these data, we first used sequence and cluster analysis to characterize long-term trajectories of health and to group workers according to their patterns of work experience. We then modeled the relationship of these health trajectories to retirement age, accounting for baseline underlying health, as well as a number of demographic and job-related characteristics. Finally, we consider the role of physical and psychosocial job demand in retirement age. Our analysis produces a number of findings that should be of interest to those studying retirement policy. In our data, workers can be categorized into a small number of distinct work trajectories. While the majority of workers in this sample remain relatively healthy for much of the observation window, others exhibit patterns of health-related events that are often marked by hypertension and/or arthritis. We find that clusters characterized with health events related to hypertension and arthritis are likely to retire later, not earlier. We offer a possible interpretation that these numerous health-related events are signaling the proper management of these chronic diseases, allowing workers to extend their working life. Moreover, we find an association with job demands and retirement, even after controlling for health. Specifically, we find that increases in exposure to heat are associated with lower retirement age, as is less decision-making autonomy. The limitations of this paper include the lack of a representative sample, a relatively small sample size, and the strong incentives of retirement pensions in this cohort that may overwhelm other factors related to retirement decisions. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2020-1&r=all |
| By: | Alicia H. Munnell; Abigail N. Walters; Anek Belbase; Wenliang Hou |
| Abstract: | As retirees live longer, spend more on medical care, and get less income replaced by Social Security, many may need to tap their home equity to be comfortable in retirement. The most direct way to access home equity is downsizing, but few choose this option because they generally prefer to stay in their house. The alternative is withdrawing equity through a reverse mortgage or a property tax deferral, but few households use these options either. A potential reason that homeowners are reluctant to borrow against their house is that, if they do decide to move, they have to pay back the loan with interest, which could leave them with inadequate resources at a vulnerable time in their life. This paper assesses how likely households are to move as they age to see if borrowing against one’s home is a viable financial strategy. The analysis uses the Health and Retirement Study (HRS) to analyze three cohorts: the HRS cohort (ages 50-54 in 1992), the AHEAD cohort (ages 70-74 in 1993), and a synthetic cohort covering the whole lifespan from age 50 to death. The analysis identifies typical housing trajectories in retirement and explores how often, and for whom, tapping home equity would be a viable strategy. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2020-7&r=all |
| By: | Fajnzylber,Eduardo |
| Abstract: | In 2008, Chile introduced a New Solidarity Pillar (NSP) designed to eliminate the incidence of poverty among elderly adults by setting a floor at around forty percent of the minimum monthly income for the poorest sixty percent of the population. This paper describes the NSP?s main characteristics and the main results achieved during its first seven years of operations: coverage, fiscal cost, poverty reduction, and the system?s role in reducing the significant gender gap in pensions. Its effects on incentives to contribute are discussed, as well as the literature that has attempted to measure these effects. Finally, the main challenges facing the NSP and the implications for other countries under defined contribution pension schemes are summarized. |
| Keywords: | Inequality,Labor Markets,Rural Labor Markets,Gender and Development,Pensions&Retirement Systems,Social Protections&Assistance |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136558&r=all |
| By: | Gohl, Niklas (DIW Berlin); Haan, Peter (DIW Berlin); Kurz, Elisabeth (Frontier Economics); Weinhardt, Felix (DIW Berlin) |
| Abstract: | This paper presents a life-cycle model with human capital investment during working life through training and provides a novel empirical test of human capital theory. We exploit a sizable pension reform across adjacent cohorts in a regression discontinuity setting and find that an increase in working life increases training. We discuss and test further predictions regarding the relation between initial schooling, training, and the reform effect, showing that only individuals with a college degree increase human capital investment. Our results speak to a large class of human capital models as well as policies extending or shortening working life. |
| Keywords: | human capital, retirement policies, RDD |
| JEL: | J24 J26 H21 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12891&r=all |
| By: | Villa, Sebastián. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:995058093302676&r=all |
| By: | Palmer, Edward; Stabina,Sandra |
| Abstract: | Latvia introduced a nonfinancial defined contribution (NDC) scheme in 1996 as it transitioned to a market economy. Despite a 20 percent decline in the working-age population from 1994?2016, the ratio of contributors to old-age pensioners rose from 1.6 to 2.1 given a steady increase in formal labor force participation and 5-6 percent real per capita wage growth. Projections show that long-term financial balance will be maintained through 2070, despite the threat of a projected 50 percent decline in the working-age population. Budgeted reserves will cushion the continued transition into a two-pillar public pension scheme. Latvia?s most important long-term policy challenge is to create the domestic investments and economic growth to reward younger workers for remaining in the country. |
| Keywords: | Social Development&Poverty,Labor&Employment Law,Adolescent Health,Labor Markets,Demographics |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136546&r=all |
| By: | Holzmann,Robert; Robalino,David A.; Winkler,Hernan Jorge |
| Abstract: | Defined contribution (DC) schemes whether unfunded or funded are often considered superior to defined benefit (DB) schemes in their ability to address labor market issues, particularly in encouraging formal employment and delayed retirement. Conceptually, the assessment is based on superior incentives to work and save. Yet economic and social realities are more complex. This paper explores design and labor market conditions that potentially constrain DC schemes. The paper concludes that to achieve their conceptual potential, DC schemes require design innovations, including a better integration of basic provisions and complementary labor policies that promote job creation inthe formal sector and expand job opportunities during old age. |
| Keywords: | Rural Labor Markets,Pensions&Retirement Systems,Labor Markets,Population&Development |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136565&r=all |
| By: | Lis,Maciej; Bonthuis,Boele |
| Abstract: | This paper explores trends and drivers behind the gender gap in pensions (GGP) in Europe, focusing on countries with notionally defined contribution (NDC) schemes: Italy, Latvia, Norway, Poland, and Sweden. Based on current gender gaps on the labor market, the paper relates the progressivity of pension systems and the coverage of child care related spells to the GGP. It shows that NDC countries do not stand out as a group compared to other European countries in terms of pension outcomes for women. Nevertheless, NDC countries differ significantly from one another. Choices of indexation of pensions in payment and survivors? pension options have a strong impact on genderinequalities. Still, labor market differences are the most important driver of the GGP. |
| Keywords: | Gender and Development,Rural Labor Markets,Labor Markets,Inequality |
| Date: | 2019–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136540&r=all |
| By: | Sandbrook,Will; Ravi-Burslem,Ranila |
| Abstract: | All UK employers now offer a pension scheme including the use of automatic enrollment. More than 9 million people have started saving into a workplace pension as a consequence. NEST is a pension scheme that any employer can use to meet its auto enrollment obligations. It was set up to serve those traditionally poorly served by commercial pension provision. NEST is built around features tested and seen as important and motivating for potential members and employers, underpinned by extensive research with future members and analysis of feedback from existing customers. The communications approach had a major focus on providing reassurance that saving is a ?good? thing and NEST will look after one?s money. |
| Keywords: | Pensions&Retirement Systems,Financial Sector Policy,Labor Markets,Gender and Development,Inequality |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136549&r=all |
| By: | Ch?on-Dominczak,Agnieszka; Góra,Marek; Kotowska,Irena E.; Magda,Iga; Ruzik-Sierdzinska,Anna; Strzelecki,Pawe? |
| Abstract: | The paper focuses on the interrupted careers in four countries where pensions are based on lifetime labor income, but they have different labor market patterns. High levels of employment in Germany and Sweden are in contrast with low levels of employment, particularly for women, in Italy and Poland. Career interruptions of women in Italy mean early withdrawal from the labor market, while in Sweden women choose part-time employment. Lower employment rates and gender pay gaps are important causes of differences in expected pension levels. The pension system design and demographics are also different. Prolonging working lives and reducing gender gaps in employment and pay, particularly for those at risk of interrupted careers, is key to ensure decent old-age pensions |
| Keywords: | Gender and Development,Rural Labor Markets,Labor Markets,Employment and Unemployment,Inequality |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:hdnspu:136869&r=all |
| By: | Chen, Simiao; Jin, Zhangfeng; Prettner, Klaus |
| Abstract: | We examine whether and how retirement affects migration decisions in China. Using a regression discontinuity (RD) design approach combined with a nationally representative sample of 228,855 adults aged between 40 and 75, we find that retirement increases the probability of migration by 12.9 percentage points. Approximately 38% of the total migration effects can be attributed to inter-temporal substitution (delayed migration). Retirement-induced migrants are lower-educated and have restricted access to social security. Household-level migration decisions can reconcile different migration responses across gender. Retirees migrate for risk sharing and family protection mechnisms, reducing market production of their families in the receiving households. |
| Keywords: | Retirement,Migration decision,Regression discontinuity design |
| JEL: | J14 J26 J61 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:463&r=all |
| By: | Elsa Perdrix (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Quitterie Roquebert (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique) |
| Keywords: | Long term care,Informal,Formal care |
| Date: | 2019–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02370689&r=all |
| By: | Simon Jager; Benjamin Schoefer; Josef Zweimuller |
| Abstract: | This paper examines the labor market effects of unemployment insurance extensions. It uses administrative Social Security matched employer-employee data from Austria. Critical components of the analysis are effects on wages as well as retirement/job separation effects. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2020-3&r=all |