Showing papers in "The journal of the economics of ageing in 2018"

A cross-country analysis of population aging and financial security

Abstract: Throughout the world, policy makers are concerned about the impact that population aging will have on households’ financial security, especially those groups most likely to be vulnerable—women, the less educated, and the poor. We use data from the 2014 World Bank Global Findex and supplement it with macroeconomic indicators of old-age security to investigate the financial security of households across both developed (OECD) and developing (non-OECD) countries with various aging populations. Five fundamental indicators of financial security are examined. Results show an aging effect for all measures. The aging effects are largest for those who report saving for old age. Older age groups living in countries with larger aging populations are more likely to save, regardless of OECD status. Also, those who are female, have less education, and lower incomes are particularly vulnerable, especially those living in developing countries. Further, the financial security of those living in non-OECD countries is significantly more likely to be affected by public pension spending and other key indicators of old-age security. Financial inclusion and technological usage also have a significant and positive impact on financial security. These factors could play a key role in promoting savings and improving financial security in aging populations worldwide. The findings from this study have important policy implications given the pressures that some countries’ social support and public transfer systems will face in the coming years.

The return to education in terms of wealth and health

Abstract: This study presents a new view on the association between education and longevity. In contrast to the earlier literature, which focused on inefficient health behavior of the less educated, we investigate the extent to which the education gradient can be explained by fully rational and efficient behavior of all social strata. Specifically, we consider a life-cycle model in which the loss of body functionality, which eventually leads to death, can be accelerated by unhealthy behavior and delayed through health expenditure. Individuals are heterogeneous with respect to their return to education. The proposed theory rationalizes why individuals equipped with a higher return to education chose more education as well as a healthier lifestyle. When calibrated for the average male US citizen, the model motivates about 50% percent of the observable education gradient by idiosyncratic returns to education, with causality running from education to longevity. The theory also explains why compulsory schooling has comparatively small effects on longevity and why the gradient gets larger over time through improvements in medical technology.

The aggregate implications of gender and marriage

Abstract: Wages, labor market participation, hours worked, and savings differ by gender and marital status. In addition, women and married people make up a large fraction of the population and of labor market participants, total hours worked, and total earnings. For the most part, macroeconomists have been ignoring women and marriage in setting up structural models and in calibrating them using data on males only. In this paper, we ask whether ignoring gender and marriage in both models and data implies that the resulting calibration matches well the key economic aggregates. We find that it does not and we ask whether there are other calibration strategies or relatively simple models of marriage that can improve the fit of the model to aggregate data.

The effect of the New Rural Social Pension Insurance program on the retirement and labor supply decision in China

Abstract: In 2009, the Chinese government introduced the New Rural Social Pension Insurance (NRSPI) program; it was expanded nationwide in 2012. This paper investigates the effects of the NRSPI program on retirement and old-age labor supply patterns in China, using two-wave nationwide survey data. After controlling for endogenous bias by using instrumental variables, we found that receiving pension benefits from the NRSPI program can substantially increase the likelihood of retirement and reduce the number of working hours among women, even though the amount of NRSPI pension benefits is far below the minimum cost of living. Furthermore, we broke down the labor supply into agricultural and nonagricultural labor supply, and found that most of the decrease in labor supply stems from the agricultural labor supply. We also found that people from different income brackets, contribution levels, education backgrounds, age groups, and household registration statuses behave differently in their retirement and in terms of labor supply decision-making.

Why older workers become entrepreneurs? International evidence using fuzzy set methods

Abstract: In this paper, we empirically analyze the individual characteristics that drive older workers to become entrepreneurs, providing evidence of the differences between developed and developing countries. While OLS models provide limited conclusions, Qualitative Comparative Analysis and fuzzy set logic, at the country level, using GEM 2014 Adult Population Survey micro-data, show the importance of the various combinations of high and/or low presence of skills, opportunities, entrepreneurial perceptions, peer effects, and satisfaction with life and income. This indicates how entrepreneurship may be a potential source of income for older workers, in a range of contexts. Further, we find that all the possible combinations of higher proportions of individuals with the latter features are necessary conditions. Our results contribute by identifying certain aspects of the entrepreneurial behavior of older workers, highlighting certain causal patterns of the complex phenomenon that is entrepreneurship.

An active lifestyle and cognitive function: Evidence from China

Abstract: How does an active lifestyle at baseline relate to cognitive functioning in later periods? To answer this question, we draw unique panel data from the China Health and Retirement Longitudinal Study (CHARLS). The analysis reveals that greater overall activity is associated with higher levels of memory and numeracy. The beneficial effects of being active vary across different activity types and aspects of cognition, but not so with respect to gender. Overall, these findings provide new empirical evidence on the relationship between an active lifestyle and cognitive functioning of older people in China.

Impact of volunteering on cognitive decline of the elderly

Abstract: Cognitive decline among the elderly imposes a large welfare and health care cost on the individual as well as society. Little however is known about factors that can mitigate cognitive decline. Using seven waves of the Health and Retirement Study and a fixed effects – instrumental variable methodology, this study estimates the effects of volunteering on old age cognitive decline. Although cognitive decline is an inevitable aspect of aging, our results suggest that volunteering participation significantly forestalls its progress among individuals aged 60 years and older.

Decomposition of Demographic Effects on the German Pension System

Abstract: The paper analyses the impact of demographic developments on the German pension system until the year 2060. The projections are simulated for a range of assumptions on the latest demographic trends and on the labour market and comprise the latest pension legislation. As a central innovation, we present a decomposition approach which allows identifying the isolated effects of mortality, fertility and migration developments on the dynamics of the German pension system. We show that the past population structure – driven by past fertility changes – and future mortality improvements will be the most important factors shaping the development of the German pension system. The results have a number of implications for effective and sustainable pension reforms.

Long-term care partnerships: Are they fit for purpose?

Abstract: Long-term care partnership (LTCP) programs were designed to both encourage middle-income individuals to purchase private long-term care insurance, and defer the time when an individual would become eligible for Medicaid to pay her long term care services and supports (LTSS). This paper exploits the timing of state Partnership implementation (including four pilot states) to evaluate the program’s effects on new yearly insurance applications and contract uptake. We draw upon data from the National Association of Insurance Commissioners (NAIC) on new long term care insurance (LTCI) purchases (traditional and Partnership) by US state (weighted by the population over age 65 to make the data comparable). We use a difference-in-differences strategy to obtain estimates of the program effect of the LTCP on the overall uptake of private LTCI, and specifically of LTCP contracts and applications for a subsample of states. Findings suggest no significant effect of LTCP on insurance uptake and an increase in insurance applications. This result points towards a substitution between traditional and partnership contracts.

Gender differentiation in intergenerational care-giving and migration choices

Abstract: We weave together care-giving, gender, and migration. We hypothesize that daughters who are mothers have a stronger incentive than sons who are fathers to demonstrate to their children the appropriate way of caring for one's parents. The reason underlying this hypothesis is that women on average live longer than men, they tend to marry men who are older than they are and, thus, they are more likely than men to spend their last years without a spouse. Because it is more effective and less costly to care for parents if they live nearby, daughters with children do not move as far away from the parental home as sons with children or childless offspring. Data on the distance between the children's location and the parents' location extracted from the Survey of Health, Ageing and Retirement in Europe (SHARE), in conjunction with data on selected demographic characteristics and institutional indicators taken from Eurostat, the OECD, and the World Bank, lend support to our hypothesis: compared to childless daughters, childless sons, and sons who are fathers, daughters who are mothers choose to live closer to their parents' home.

Who supports intergenerational redistribution policy? Evidence from old-age allowance system in Thailand

Abstract: Thailand has become an ageing society, and currently there are continuing policy debates regarding the pension system. This paper investigates the determinants of preferences over an intergenerational redistribution policy in Thailand, namely the old-age allowance system. Since 2009 the old-age allowance system has been a non-contributory social pension scheme for all older persons except retired national and local government officials who receive pension monthly and older persons in public residential care facilities. The paper uses nationally representative data collected in 2011 under the project to investigate people’s knowledge of, and attitudes towards, the elderly. Employing logistic regression analysis, the paper looks into the factors correlated with: (1) whether an individual prefers the old-age allowance system to be universal or targeted, and (2) whether an individual is willing to pay more tax so that the elderly can receive more monthly allowance. The paper further divides the individuals into four groups based on the above two types of preferences, and uses multinomial logistic regression analysis to analyze the factors correlated with the likelihood of being in each group. The findings suggest that education, income, expectations regarding one’s own need for the old-age allowance in the future, together with knowledge, understanding, and attitudes towards older persons are key determinants of individuals’ preferences regarding the old-age allowance system.

Preparation for old age in France: The roles of preferences and expectations

Abstract: This study takes a unified approach to assess the roles of preferences and expectations on preparation for old age in France. Our sample is representative of the customers of a large notfor-profit insurance company (“mutuelle”) and contains 1231 individuals aged 50 year and above. We use information on the general feeling to prepare for old age, specific preparation activities in various domains (e.g. the purchase of long-term care insurance or home adaptation), risk and time attitudes, family and social altruism, and expected disability and longevity. Half of the sample reports preparing for old age. Time preference emerges as an important predictor of preparation: indeed, making plans in general increases preparation for old age by 8.5 percentage points. Family altruism is positively associated with preparation in the finances and housing domains, whereas social altruism is not. While risk attitudes and altruism matter for preparation for old age, their effect may be less systematic across outcomes than that of time preference. Individuals who expect to become disabled or to live longer are more likely to prepare for old age. Policies promoting healthy aging should include messages targeting present-oriented individuals and try to make people more future-oriented.

Specific measures for older employees and late career employment

Abstract: We analyse the relationship between the application of specific measures for older employees (SMOE) and job duration of workers aged 40 and above. Using longitudinal employer-employee data for German establishments, we account for worker and establishment heterogeneity and correct for stock-sampling. We find a positive relation of mixed-aged team work to job duration and a negative relation of specific part-time addressed at older workers. Job duration does not appear to be related to other SMOE, such as training and specific equipment of workplaces. Our findings suggest that only certain specific measures for older employees alter employee retention.

Pension decrement rates across Europe – Are they too low?

Abstract: In light of an ageing population, many European countries are aiming to increase the effective retirement age. Pension decrement rates play a key role in this as they determine the financial incentives for early retirement. In the following, a model is developed to calculate decrement rates which lead to financial neutrality of the decision on when to retire. The model is applied to 19 European countries. Results show that in most countries, official decrement rates tend to be lower than neutral rates. A sensitivity analysis and several alternative model variants underscore that, for the majority of countries, this result seems to be robust to the assumptions taken.

An introduction to the macroeconomics of aging

Abstract: This special issue contains six articles that develop macroeconomic models that analyze the impact of population aging—and the impact of government policies related to pensions and health care in response to aging—on aggregate employment, investment, wages, and interest rates. Increased spending on pensions and public health care programs is projected to impose a major fiscal burden not only on the developed world but also on much of the less developed world. The articles in this special issue point to the directions that economists need to take in analyzing the impact of aging on the macroeconomy.

Intra-household allocation of non-mandatory retirement savings

Abstract: Traditionally, households have been regarded as single units when it comes to savings. Although this might be correct for some kinds of household savings, we question the accuracy of this unitary model with respect to non-mandatory retirement savings. To do so, we analyze the intra-household allocation of retirement savings between partners in Germany through an individualistic approach. First, the decision to save at all is analyzed using a seemingly unrelated bivariate probit model, showing that the possession of retirement saving accounts among spouses is positively correlated, hinting at a “crowding-in” of saving accounts. However, this could only be due to certain tax-related reasons. Thus, we further analyze the interaction of savings between spouses using three-stage least squares, allowing for endogeneity between the spouses’ savings. These results additionally show a crowding-in of the total amount of retirement savings between spouses, probably due to some “peer effect”. We therefore conclude that the unitary model of household decision-making is not applicable with respect to retirement savings.

A Structural Analysis of the Effects of the Great Recession on Retirement and Working Longer by Members of Two-Earner Households

Abstract: This paper uses data from the Health and Retirement Study to estimate a structural model of household retirement and saving. It applies that model to analyze the effects of the Great Recession on the work and retirement of older couples who were both employed full-time at the beginning of the recession. We analyze the effects of job loss, changes in wealth and changes in expectations. The largest overall effects of the Great Recession are observed for 2009 and 2010. In 2009, an additional 2.5 percent of all 55 to 59 year old husbands were not working full-time as result of the Great Recession, amounting to a reduction of 3.2 percent in full-time work. In 2010, 2.8 percent of 55 to 59 year old husbands were not working full-time as a result of the Great Recession, amounting to a 3.8 percent reduction in full-time work. For wives the reductions in full-time work due to the Great Recession were 1.7 percent and 2.2 percent of those who initially held a job, or reductions of full-time work of 2.3 and 3.0 percent respectively. For those 60 to 64, the reductions were 1.2 percent of men and 0.9 percent of women. Having been laid off in the last three years reduces full-time work by 30 percent. There also are lingering effects of layoff on the probability of working longer. Having been laid off three or more years in the past reduces full-time employment in the current year by about 12 percent. This reflects the reduced work incentives for full-time work arising from lower earnings due to the loss of job tenure with a layoff as well as the additional earnings penalty from a layoff. The effect on own work of a spouse having been laid off is much smaller. The reason is that, as found in the estimation of our structural model, having one spouse not working increases the value of leisure for the other. In contrast, when one member of the household loses their job, the value of consumption increases relative to leisure. For recent layoffs, these effects are roughly offsetting. All told, the effects of the Great Recession on retirement seem relatively modest. These findings are consistent with our earlier descriptive analyses.