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on Economics of Ageing |
| By: | Dhiren Patki |
| Abstract: | This paper studies the elimination of traditional pensions and subsequent adoption of 401(k) plans by U.S. employers. Using thousands of firm-level natural experiments, it shows that unexpected losses in future compensation engendered by pension plan transitions induce premature retirement for some workers and delayed retirement for others. Observed heterogeneity in retirement behavior is indicative of differences in wealth and in preferences for leisure. Using credibly identified treatment effects as estimation targets, it fits a structural model of retirement and uses the model to evaluate the effect of a counterfactual reform that eliminates Social Security payroll taxes for older workers. |
| Keywords: | labor supply; pensions; retirement savings; Social Security payroll tax |
| JEL: | J26 J32 J41 M52 D15 H24 |
| Date: | 2021–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:92873&r= |
| By: | Esteban García-Miralles; Jonathan M. Leganza |
| Abstract: | We study how social security influences the retirement behavior of couples. First, we exploit over two decades of full-population data and a discontinuity design to document sizable retirement spillovers to spouses when individuals reach pension eligibility age. Next, we explore underlying mechanisms. We find age differences within couples to be a fundamental determinant of joint retirement, which is driven by older spouses working longer. Accounting for these age differences reveals a strong gender gap, which prevails after controlling for relative earnings. Finally, in a complementary analysis we show that a reform increasing eligibility ages induces similar spillovers to spouses. |
| Keywords: | joint retirement, pension eligibility age, couples labor supply |
| JEL: | J14 J26 D10 H55 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9191&r= |
| By: | Volker Grossmann; Johannes Schünemann; Holger Strulik |
| Abstract: | We discuss public pension systems in a multi-period overlapping generations model with gerontologically founded human aging and a special focus on occupation-specific morbidity and mortality. We examine how distinct replacement rates for white-collar and blue-collar workers and early retirement policies could be designed to provide a fair and aggregate welfare-enhancing public pension system. Calibrating the model to Germany, we find that a pension system that equalizes relative pension contributions and the relative present-discounted value of expected benefits across occupational groups calls for a significant increase in replacement rates of blue-collar workers. If the statutory retirement age is sufficiently high or the life expectancy gap across occupations is sufficiently large, fair pensions raise aggregate welfare and should feature early retirement incentives. |
| Keywords: | fair pensions, early retirement, occupation, health gradient, life expectancy, replacement rate |
| JEL: | H55 I14 I24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9180&r= |
| By: | Fabian Kindermann (University of Regensburg); Veronika Püschel (University of Regensburg) |
| Abstract: | In this paper, we challenge the conventional idea that an increase in the progressivity of old-age pensions unanimously distorts the labor supply decision of households. So far, the literature has argued that higher pension progressivity leads to more redistribution and insurance provision on the one hand, but increases implicit taxes and therefore distorts labor supply choices on the other. In contrast, we show that a well-designed reform of the pension system has the potential to encourage labor force participation. We propose a progressive pension component linked to the employment decision of households, which implicitly subsidizes employment of the productivity poor. A simulation analysis in a quantitative stochastic overlapping generations model with productivity and longevity risk indicates that this positive employment effect can be sizable and welfare enhancing. |
| Keywords: | progressive pensions, Labor Supply, employment incentives |
| JEL: | D15 H31 H55 J21 J22 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2021-038&r= |
| By: | Salas, J.M. Ian S.; Herrin, Alejandro N.; Abrigo, Michael R.M.; Racelis, Rachel H.; Ortiz, Danica A.P.; Tam, Zhandra C. |
| Abstract: | The Philippines is slowly ageing. In a little over a decade, the country’s elderly will comprise at least 7 percent of the total population. This rising tide may pose some substantial burden on the country’s resources. Nonetheless, the same economic and demographic forces that will eventually lead to population ageing may also provide potentials for economic growth. This paper documents the country’s historical experience of the demographic dividend using new National Transfer Account time-series estimates for the Philippines. These estimates also reflect how the interaction between public policy and population ageing may affect household welfare and fiscal balance in the foreseeable future. |
| Keywords: | National Transfer Accounts, demographic dividend, Philippines, population, ageing population |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:phd:rpseri:rps_2020-02&r= |
| By: | Matthew S. Rutledge (Boston College; Center for Retirement Research at Boston College); Geoffrey Sanzenbacher (Boston College); Francis M. Vitagliano (Center for Retirement Research at Boston College) |
| Abstract: | This paper examines the relationship between student loans and retirement saving by 30-year-old workers. Total outstanding student loan debt in the United States has quintupled since 2004. Rising student debt levels mean that young workers must reduce either their consumption or their saving. To what extent do these workers cut back on retirement saving? Existing studies have lacked adequate data or controls for studying this issue, especially for younger workers. This study uses the National Longitudinal Survey of Youth 1997 Cohort, and thus includes a large sample of young workers, and includes detailed controls including school quality, parental background, and the underlying ability of the college attendee. While the estimated relationship between student debt and participation in a retirement plan is small, bachelor’s degree-holders who have student loans do have significantly lower retirement assets at age 30 than those without loans. Interestingly, the actual size of the student loan does not seem to matter – those with student loans have lower retirement savings, but retirement wealth accumulation is similar for those with small loans and large loans. |
| Keywords: | student debt, saving |
| JEL: | G5 J32 |
| Date: | 2021–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:1037&r= |
| By: | Bo E. Honoré (Institute for Fiscal Studies and Princeton); Thomas Jorgensen (Institute for Fiscal Studies and University of Copenhagen); Áureo de Paula (Institute for Fiscal Studies and University College London) |
| Abstract: | This paper introduces measures for how each moment contributes to the precision of parameter estimates in GMM settings. For example, one of the measures asks what would happen to the variance of the parameter estimates if a particular moment was dropped from the estimation. The measures are all easy to compute. We illustrate the usefulness of the measures through two simple examples as well as an application to a model of joint retirement planning of couples. We estimate the model using the UK-BHPS, and we ?nd evidence of complementarities in leisure. Our sensitivity measures illustrate that the estimate of the complementarity is primarily informed by the distribution of di?erences in planned retirement dates. The estimated econometric model can be interpreted as a bivariate ordered choice model that allows for simultaneity. This makes the model potentially useful in other applications. |
| Date: | 2020–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:3/20&r= |
| By: | Bergeot, Julien; Tenand, Marianne |
| Abstract: | We assess whether informal care receipt affects the probability of transitioning to a nursing home. Available evidence points towards informal care decreasing the chance of admission but it only derives from the US, where nursing home stays are often temporary. Exploiting linked survey and administrative data on the 65+ in the Netherlands, we use the gender mix of children to retrieve plausibly exogenous variation in informal care receipt. Our results suggest that nursing home admissions within a three-year period are reduced with informal care for individuals with mild limitations, while they are increased for individuals with severe limitations. For the latter, although informal care increases formal care costs, it also results in lower post-acute care use and mortality. Therefore, policy makers should not expect that promoting informal care systematically results in lower institutionalization rate and care costs. Still, informal support can well be welfare-enhancing: a timely admission may come along with benefits in terms of well-being and survival that may outweigh additional costs. |
| Keywords: | Long-term care, nursing home care, informal care, instrumental variables, bivariate probit |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:2105&r= |
| By: | Walter Beckert (Institute for Fiscal Studies and Birkbeck, University of London); Daniel Kaliski (Institute for Fiscal Studies and Birkbeck) |
| Abstract: | We investigate the consequences of discreteness in the assignment variable in regression-discontinuity designs for cases where the outcome variable is itself discrete. We find that constructing confidence intervals that have the correct level of coverage in these cases is sensitive to the assumed distribution of unobserved heterogeneity. Since local linear estimators are improperly centered, a smaller variance for unobserved heterogeneity in discrete outcomes actually requires larger confidence intervals, since standard confidence intervals become narrower around a biased estimator, leading to a higher-than-nominal false positive rate. We provide a method for mapping structural assumptions regarding the distribution and variance of unobserved heterogeneity to the construction of "honest" confidence intervals that have the correct level of coverage. An application to retirement behavior reveals that the spike in retirement at age 62 in the United States can be reconciled with a wider range of values for the variance of unobserved heterogeneity (due to reservation wages or offers) than the spike at age 65. |
| Date: | 2019–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:67/19&r= |
| By: | Paul Allanson; Dennis Petrie |
| Abstract: | The life course literature on the social gradient in health has been dominated by the cumulative advantage and age-as-leveller hypotheses, with selective mortality also recognised as a potentially important confounder in older cohorts. The main contribution of this paper is to establish a unified framework to fully account for the changing social gradient in terms of a sufficient set of mobility indices characterising the co-evolution of the joint distribution of socioeconomic status and health within any particular cohort. The main innovation is to identify selective mortality effects using a counterfactual health distribution for the start of the study period in the absence of those who are known to die before the end, rather than for the end of the period if there had been no deaths since the start which requires the imputation of the ‘would be’ health of non-survivors. Using longitudinal data for Great Britain, selective mortality is found to be an important driver of social gradient changes within older cohorts, contrary to the findings of a number of previous studies. We explain this contrast by demonstrating how estimates of selective mortality effects are affected by the choice of counterfactual health distribution and socioeconomic status measure. |
| Keywords: | life course, social gradient, mobility analysis, selective mortality, longitudinal data |
| JEL: | D39 D63 I18 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:dun:dpaper:301&r= |
| By: | Alex Garivaltis |
| Abstract: | This paper formulates and solves the optimal stopping problem for a loan made to one's self from a tax-advantaged retirement account such as a 401(k), 403(b), or 457(b) plan. If the plan participant has access to an external asset with a higher expected rate of return than the investment funds and indices that are available within the retirement account, then he must decide how long to wait before exercising the loan option. On the one hand, taking the loan quickly will result in many years of exponential capital growth at the higher (external) rate; on the other hand, if we wait to accumulate more funds in the 457(b), then we can make a larger deposit into the external asset (albeit for a shorter period of time). I derive a variety of cutoff rules for optimal loan control; in general, the investor must wait until he accumulates a certain amount of money (measured in contribution-years) that depends on the disparate yields, the loan parameters, and the date certain at which he will liquidate the retirement account. Letting the horizon tend to infinity, the optimal (horizon-free) policy gains in elegance, simplicity, and practical robustness to different life outcomes. When asset prices and returns are stochastic, the (continuous time) cutoff rule turns into a "wait region," whereby the mean of terminal wealth is rising and the variance of terminal wealth is falling. After his sojourn through the wait region is over, the participant finds himself on the mean-variance frontier, at which point his subsequent behavior is a matter of personal risk preference. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.04698&r= |
| By: | Pasqualini, Marta; di Gessa, Giorgio; Tomassini, Cecilia |
| Abstract: | Levels of coresidence, residential proximity, face-to-face contacts and intergenerational support exchanges remain overall high and stable across European countries. However, to date, few studies have focused on trends in grandparent-grandchild relations. Therefore, this study aims to investigate whether and to what extent grandparent-grandchild exchanges have changed over time. We used data from the Italian Surveys on Family, covering the years 1998-2016, and considered three different currencies of exchanges between grandparents and their grandchildren (coresidence, face-to-face contacts, and grandchild care provision). Our results showed an astonishing stability over time in these indicators of grandparent-grandchild exchanges, with only a small reduction in daily contacts. Also, we found little changes in the associations between such indicators of intergenerational exchanges and the demographic and socio-economic determinants usually used to explain them. Despite changes among Italian grandparents such as increases in their age profile, in education, and in marital disruption, the relations between grandparents and their grandchildren remain stable over time with generally high levels of intergenerational exchanges. |
| Date: | 2021–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:8wgux&r= |
| By: | Francesca Zanasi (Department of Political Science, University of Bari Aldo Moro, Italy); Bruno Arpino (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Elena Pirani (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Valeria Bordone (Department of Sociology, University of Vienna, Austria) |
| Abstract: | While the literature has widely shown that the provision of childcare by grandparents is often crucial for young mothers’ participation in the labour market, this work investigates the link between grandmothers’ participation in the labour market during adult life (between ages 18-49) and their provision of grandparental childcare later in life. Two contrasting theoretical arguments are plausible in this respect. On the one hand, lifelong homemakers could be more family-oriented and more likely to provide grandchild care in later life. On the other hand, ever-employed grandmothers could be more likely to have employed daughters, and provide grandchild care to support their working careers. With data from the Multipurpose surveys on Families and Social Subjects (2003, 2009, 2016), we estimate logistic regression models, considering various specifications of grandparental childcare, and measuring labour market attachment in three different ways (having ever worked, length of working career, employment interruptions for family reasons). Results show a positive association between grandmothers’ labor market attachment and grandparental childcare provision. A strong dualism emerges between grandmothers who ever worked and those who never did, with the former more likely to provide grandparental childcare, especially when parents are at work. Grandmothers who worked only a few years are more similar, in terms of grandchild care provision, to those who worked throughout their life, than to lifelong homemakers. Comparing Italian macro-areas strengthens our conclusions: differences between ever- and never-employed grandmothers are present in whole the country, but this holds especially in Northern regions, where the higher female participation to the labour market amplifies the need for grandparental childcare. Overall, we showed that intergenerational family solidarity is activated throughout the country, but it is evident that in a context of growing female labour force participation, couples cannot continue to count only on grandmothers to juggle family and work. |
| Keywords: | grandparents; childcare; female labour force participation; work histories |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:fir:econom:wp2021_13&r= |