Economics: Research Guide

The rural elderly in the People’s Republic of China spend less on medical expenditures as they age despite declining health, which raises welfare concerns. This paper investigates the role of intra-household bargaining power on health expenditures of the elderly by evaluating the impact of cash transfers from a new social pension program. The program provided windfall payments to those above age 60, making it possible to employ a regression discontinuity design based on age of eligibility to estimate causal effects. Using data from the 2011 and 2013 waves of the China Health and Retirement Longitudinal Study, we find that receiving pension payments increases both the utilization of outpati..

Using a large survey of euro area consumers, we design an experiment in which respondents report how they would change the decision to participate in the labor market, the hours worked, and their search effort (if not employed) in response to randomly assigned windfall gain scenarios. Windfall gains reduce labor supply, but only if they are significant in size. At the extensive margin, we find no effect for gains below €25, 000, and a decline in the probability of working of 3 percentage points for gains between €25, 000 and €100, 000. At the intensive margin, there is no effect for small gains, and a drop of roughly one weekly hour for gains above €50, 000. Women and workers closer ..

Using rich Finnish population level registers, we examine the impact of fusing a flexible early retirement pathway with a more stringent pathway, without changing eligibility conditions, socalled ‘relabelling’, on individual application behaviour. Our findings show that among affected cohorts the likelihood of applying for (successfully claiming) disability-related early retirement declined by 1.8 (1.5) percentage points equivalent to a relative drop of approximately 37% (39%) following the reform. Individuals with below tertiary level education and stronger lifetime labour market attachment exhibit a stronger behavioural response to the reform. We find tentative evidence of pro..

Using a continuous-time overlapping generations model with semi-endogenous growth, this study examines the impact of population aging on inequality. We characterize the stationary distribution of income and wealth among households and investigate how an increase in life expectancy and a decrease in birth rate affect the distributional profile. The numerical experiments revealed that an increase in life expectancy lowers inequality, whereas a decrease in birth rate increases inequality. We also consider extended models with exogenous productivity growth, agents' retirement from labor participation, and endogenous labor supply.

En esta nota se construyen series de las principales magnitudes económicas de la Seguridad Social Ampliada (SSA), un agregado que combina al Sistema de Seguridad Social con el de Clases Pasivas. Se ofrecen datos sobre los ingresos y gastos del sistema y su composición y sus niveles de déficit y deuda. Entre otras variables de interés, se aproxima el desglose de los ingresos por cotizaciones sociales en dos partes, una de carácter contributivo y otra que constituiría un impuesto puro. También se calculan dos indicadores del déficit de la SSA que miden los recursos adicionales que el Estado ha de inyectar para cubrir la brecha entre el gasto del sistema y sus ingresos propios. El prime..

We study the welfare implications of employment protection for older workers, exploiting recent bans on mandatory retirement across Canadian provinces. Using linked employer- employee tax data, we show that the bans cause large and similar reductions in job separation rates and retirement hazards at age 65, with further reductions at higher ages. The effects vary substantially across industries and firms, and around two-fifths of the adjustments occur between ban announcement and implementation dates. We find no evidence that the demand for older workers falls, but the welfare effects are mediated by spillovers on savings behavior, workplace injuries, and spousal retirement timing.

India is the largest democracy in the world and has recently surpassed China to be the highest-populated country, with an estimated 1.425 billion (approximately 18% of the world population). Moreover, India's elderly population is projected to increase to 138 million by 2035. Indian economy is already reeling under the pressure of exorbitant pension liabilities of the government for existing pensioners. As such, India has introduced a National Pension System (NPS), which is a Defined Contribution Scheme for employees joining government service on or after 1st January 2004, bidding adieu to the age-old, tried and tested Old Pension System (OPS) which is a Direct Benefit Scheme, in vogue in In..

This study used instrumental variable causal forests to explore the heterogeneous treatment effect of retirement on cognitive function using data from 19 countries. We found that, on average, retirees have better cognitive function than workers and that the conditional average treatment effects vary depending on individuals’ characteristics. Policymakers should provide early retirement options in the pension system to allow individuals to decide when to retire. The balance between the social benefits of raising the state pension age and the individual costs of increasing the risk of dementia by delaying retirement should be considered.

How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progre..

This paper investigates an optimal investment problem under the tail Value at Risk (tail VaR, also known as expected shortfall, conditional VaR, average VaR) and portfolio insurance constraints confronted by a defined-contribution pension member. The member's aim is to maximize the expected utility from the terminal wealth exceeding the minimum guarantee by investing his wealth in a cash bond, an inflation-linked bond and a stock. Due to the presence of the tail VaR constraint, the problem cannot be tackled by standard control tools. We apply the Lagrange method along with quantile optimization techniques to solve the problem. Through delicate analysis, the optimal investment output in close..

In some OECD countries, public debt is increasing to the point that fiscal reforms should be considered. Our paper sets a government budget constraint with the deficit of primary balance and examines how such a policy affects public debt in the long run. In the model, we consider policies of three types to reduce the deficit of primary balance: decreases in pension benefits and public education investment, and an increase in income tax. A decrease in pension benefit or an increase in tax revenues can inevitably raise the capital stock per unit of effective labor. Depending on the parametric conditions, they can also reduce the public debt per unit of effective labor and the ratio of public d..

Labor share, the fraction of economic output accrued as wages, is inexplicably declining in industrialized countries. Whilst numerous prior works attempt to explain the decline via economic factors, our novel approach links the decline to biological factors. Specifically, we propose a theoretical macroeconomic model where labor share reflects a dynamic equilibrium between the workforce automating existing outputs, and consumers demanding new output variants that require human labor. Industrialization leads to an aging population, and while cognitive performance is stable in the working years it drops sharply thereafter. Consequently, the declining cognitive performance of aging consumers red..

This article considers the argument by Tim Vlandas, in this issue, that an ageing electorate may undermine democracies’ ability to make the right economic choices. Vlandas suggests that the emergence of gerontocratic politics may give rise to ‘gerontonomia’: an economy run for the old, at the expense of younger generations and of future prosperity. However, evidence from the UK suggests a more mixed picture. Age-based voting patterns have been consequential around single issues, not least the 2016 Brexit referendum. However, voters’ interests in broad economic policy models are not easily reducible to age dynamics, and intergenerational politics are filtered through a set of normativ..

This document is the report of the Second Regional Seminar on Social Development “Social security and protracted crisis: an opportunity to combat inequality in the framework of a welfare state in Latin America and the Caribbean”. This seminar was organised by the Social Development Division of ECLAC in collaboration with the International Labour Organization (ILO) and the Pan American Health Organization (PAHO/WHO) and in partnership with the German Cooperation and the European Union’s Transitional Development Facility Project, 1 and was held on 30 and 31 August and 1 September 2022. In its second version, the Regional Seminar focused on providing a space of dialogue and reflection on ..

Madame Calment’s extraordinary longevity claim has significantly influenced current estimates of human lifespan. However, recent evidence raises doubts about the authenticity of her record. We compare two competing hypotheses: the base scenario, which assumes that Jeanne’s daughter Yvonne died in 1934, and the switch scenario, which proposes that Yvonne assumed her mother’s identity in 1933. Our analysis suggests that the available evidence supports the switch scenario and contradicts the previously accepted base scenario. This study emphasizes the need to re-evaluate the evidence and highlights the importance of DNA testing (subject to approval by the French authorities). The case of ..

Objectives: In India, globalisation is purported to have contributed to shifting family structures and changing attitudes to long-term care (LTC) facility use. We investigated the usage frequency and attitudes to LTC in India. Methods: We conducted secondary analyses of: (a) The LASI (Longitudinal Ageing Study in India) 2017-18 cross-sectional survey of a randomised probability sample of Indian adults aged 45+ living in private households; and (b) Moving Pictures India Project qualitative interviews with 19 carers for people with dementia and 25 professionals, collected in 2022, exploring attitudes to LTC. Results: Of 73, 396 LASI participants, 40 were considering moving to LTC; 18, 281 had ..

This research provides a geographic and demographic picture of low-income renters in Australia aged 50+ (LIRiA50+), as the basis to finding acceptable solutions to the challenges of population ageing and housing needs in the 21st Century. It presents changes in LIRiA50+ populations overtime in a selection of map graphics. Projections indicate increasing numbers of older people needing affordable housing, from approximately 200, 000 households to about 440, 000 households aged 55 years and over by 2031. It is unlikely that public housing will be able to meet this need. The largest projected increases in the LIRiA50+ populations in Australia are likely to be in peri-urban and outer-suburban re..

This final Inquiry brings together the findings of three research projects to address how Australia can deliver the types of housing precariously housed individuals in, or approaching, retirement need to support their life aspirations, wellbeing, participation and inclusion. Over the last 20 years, housing options for older Australians on lower incomes have been getting worse with home ownership rates falling, more people carrying their mortgage debt into retirement and reduced access to social housing. By 2031 an estimated 440, 000 older households will be unable to find or afford suitable housing. Lower income older Australians want housing that is achievable, with some factors gaining gre..

This paper uses household-level data from the New Zealand Household Economic Survey from 2006/07 to 2018/19 to examine expenditure patterns of retiree households. We find that in 2018/19 retiree households spend on average $55, 700 per annum, of which 13% is on groceries, 19% on housing, 14% on other necessities (household utilities, communications, and insurance), and the remaining 54% on discretionary expenses. Household expenditure patterns differ significantly across demographic groups and income levels. On average, singles living alone spend $30, 700 per annum whereas couple-only households spend $65, 100 per annum. As retiree households age, they spend less, especially on discretionary..

Empirical evidence suggests that individuals often evaluate options relative to a reference point, especially seeking to avoid losses. We undertake the first welfare analysis under reference-dependent preferences. We characterize the welfare impact of changes in reference points and prices, decomposing these into direct and behavioral effects. The sign of direct and behavioral effects depends on the form of reference-dependent payoffs; which of these effects matter for welfare depends on whether reference dependence reflects a bias or a normative preference. We derive sufficient statistics formulas quantifying the social welfare effects of changes in reference points and prices in terms of e..

We assess the long-term effects of managerial stress on aging and mortality. First, we show that exposure to industry distress shocks during the Great Recession produces visible signs of aging in CEOs. Applying neural-network based machine-learning techniques to pre- and post-distress pictures, we estimate an increase in so-called apparent age by one year. Second, using data on CEOs since the mid-1970s, we estimate a 1.1-year decrease in life expectancy after an industry distress shock, but a two-year increase when anti-takeover laws insulate CEOs from market discipline. The estimated health costs are significant, also relative to other known health risks.

Retirement income security refers to the ability of households to provide an adequate stream of income during the period of their retirement from the labor force. Expected retirement income is based of four components: (i) standard non-pension wealth holdings, (ii) defined contribution (DC) pension holdings, (iii) actual or expected defined benefit (DB) pension entitlements, and (iv) actual or expected Social Security benefits. The first two components are converted into an annuity. All the data (except rates of return) for these calculations are available from the Survey of Consumer Finances. Results indicate that both Black and Hispanic households made remarkable progress in terms of mean ..

In Belgium, a series of social security reforms have been implemented over the years with the overarching goal of increasing the labor force participation through better work incentives. Using individual-level administrative data, the paper studies the impact of those incentive-based reforms on observed changes in older workers’ employment patterns. We investigate how social security incentives and particularly their changes over time can explain the retirement decision. We calculate indicators of benefit entitlement and derive retirement incentive measures. Using micro-estimation techniques, we find that more generous retirement provision contribute to earlier retirement. Counterfactual r..

In the Netherlands, from 1989 to 2013, in the age group 55-63 the annual exit rate from employment to receiving social insurance benefits in the following year decreased from around 17 percent to 7 percent for men, and from 14 percent to 5 percent for women. We found that less generous social insurance benefits have had small but significant negative effects on these exit rates: The annual exit rate to social insurance benefit receipt next year (at ages 56-64) would have been about 14 percent higher for both men and women in 2013 should social insurance benefits schemes of 1989 still have been in place. This increase amounts to staying, on average, three months longer in employment from age ..

We investigate the causes and consequences of the aging of the scientific workforce. Using novel data on the population of US chemistry faculty members over fifty years, we find that the secular increase in the age of the academic workforce has been mainly driven by the slowdown in faculty hiring combined with later retirements. By contrast, changes in the age at which scientists start their careers only contribute to about 20% of aging. Hiring more new faculty members could rejuvenate the scientific workforce and boost scientific productivity.

Despite increasing cognitive demands of jobs, knowledge about the role of health in retirement has centered on its physical dimensions. This paper estimates a dynamic programming model of retirement that incorporates multiple health dimensions, allowing differential effects on labor supply across occupations. Results show that the effect of cognitive health surges exponentially after age 65, and it explains a notable share of employment declines in cognitively demanding occupations. Under pension reforms, physical constraint mainly impedes manual workers from delaying retirement, whereas cognitive constraint dampens the response of clerical and professional workers. Multidimensional health t..

Providing support to older people with disabilities will increasingly challenge care systems in all countries. Accurately gauging the unmet need is a first step in response. Disability is commonly measured by documenting people's capacity to perform Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs). This study assessed the prevalence and the extent (or severity) of ADL/IADL limitations in 31 countries from 2011 to 2018, together with the availability of support to manage them. The study identified a range of demographic, social, and policy factors that are associated with ADL/IADL limitations and the receipt of assistance among older adults. Results show s..

During the COVID-19 pandemic, Chile enacted three exceptional laws to allow withdrawals from the affiliates’ pension accounts. We analyse the impact of these withdrawals on the pension savings and projected future retirement income of the individual affiliates and their households. We document heterogeneous withdrawal behaviors among income levels, with lower income households using up a higher percentage of their retirement savings. Additionally, we simulate the workers’ contributions to retirement, showing an average reduction of 21% in their contributory pensions. However, due to the increase in non-contributory pension benefits, the average loss in the total pension income is just 8%..