Competition, Ageing and Lack of Investment

Abstract This report discusses factors that have caused a decrease in tangible investments in machinery and equipment, and intangible assets in Finland. A decline in the R&D investments of the electronics industry practically entirely explains a decrease in investments in Finland, which has prolonged the recovery from the collapse of productivity growth during the financial crisis. The corporate sector, which accounts for most investments, also contracted so much during the financial crisis relative to the rest of the economy that the aggregate productive investments remained lower than before. Companies’ investments in relation to their value added did not decrease, however. The main reas..

Economics of Ageing

Altruistic Care for the Elderly: A Gender Perspective

Ageing society poses an increasing need for elderly care and the essential role of unpaid family care. Using time-use data of Thailand 2014/2015, we found significant gender gaps in providing eldercare across heterogenous groups. The novelty of this study is a measurement of altruism proxy, its gender bias to examine the effects of caregiver’s altruistic behavior on care provision and to explain the caregiving burden on women. Our analysis reveals that education has different effects on care among male and female caregivers, but not the employment status. The instrumental variable modelling reveals that reducing men’s paid work is unlikely to raise their time spent on eldercare..

Economics of Ageing

Population Aging and Small Business Exits

Japan has been experiencing substantial growth in the proportion of their elderly population due to historically low fertility. Aging has strong adverse impacts on economic growth, productivity, entrepreneurship, and technology adoption. In this study, we investigate the effect of population aging as well as the effect of macro factors on corporate exits of small businesses. Economically inefficient small firms are more likely to exit the market via business closures or bankruptcies, larger insolvent firms attempt to survive by filing for rehabilitation, and larger underperforming firms seek acquisitions as a flight from loss strategy to avoid a worst-case scenario such as bankruptcy or reha..

Economics of Ageing

The impact of co-payments for nursing home care on use, health, and welfare

In 2013, a reform (the vermogensinkomensbijtelling) increased co-payments for long-term care for people with financial wealth. A shown in a new empirical study, it induced older people to postpone nursing home use, but only by a few days on average. The reform reduced the financial pressure on the long-term care system, but at the cost of raising the financial risk of older adults. In 2013, a reform (the vermogensinkomensbijtelling) increased co-payments for long-term care for people with financial wealth. A shown in a new empirical study, it induced older people to postpone nursing home use, but only by a few days on average. The reform reduced the financial pressure on the long-term care s..

Economics of Ageing

The impact of supply-driven variation in time to death on the demand for health care

Many high-income countries have successfully reduced hospital mortality in several acute health conditions. We test the hypothesis that variation in the supply of care directed to saving the life of individuals with a health shock may result in increasing the demand for health care as individuals are likely to contribute to the demand after surviving the health shock. We examined repeated cross-sections of individuals exposed to an AMI or a stroke over a time window of ten years in Denmark. Hospital survival probabilities in the interval 0- 30 days from the shock are used as an indicator of the supply, while individual health care expenditure in the interval 31-365 days is used as an indicat..

Economics of Ageing

The Veterans Community Care Program: Background and Early Effects

The Veterans Health Administration (VHA), part of the Department of Veterans Affairs, provides health care to eligible veterans using a combination of VHA and non-VHA providers and facilities. In recent years, major changes to VHA’s policies—particularly the creation of the Veterans Community Care Program in 2018—have increased opportunities for veterans to seek community care at VHA’s expense. Since 2014, the number of veterans using community care has increased and average wait times in VHA facilities have declined and generally remained below those in the private sector.

Economics of Ageing

COVID-19 in long-term care: Impact, policy responses and challenges

The COVID-19 crisis has hit the long-term care (LTC) sector particularly hard, with large numbers of people dependent on care and particularly vulnerable to COVID-19 have fallen ill, and a disproportionate rate of LTC workers both exposed to, and infected by, COVID-19. The analysis presented in this report describes the effects of COVID-19 on LTC in OECD countries, mainly showing infection rates and mortality of LTC recipients. It takes stock of the wide range of policy responses that countries have implemented, detailing the changes over time on testing strategies, reduction of interactions and isolation measures, digitalisation of services, and workforce. The report also assesses emergency..

Economics of Ageing

Why Do Couples and Singles Save During Retirement?

While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and highincome singles and generate transfers to nonspousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives.

Economics of Ageing

Teacher Pension Enhancements and Staffing in an Urban School District

Many states enhanced benefits in teacher retirement plans during the 1990s. This paper examines the school staffing effects of one such enhancement in a major urban school district with mostly high poverty schools. Pension rule changes in 1999 for St. Louis public school teachers resulted in large increases in pension wealth for active teachers, as well as a powerful increase in “push” incentives for earlier retirement. Simple descriptive statistics on retirement patterns before and after the enhancements suggest much earlier retirement resulted. Shorter teaching spells imply a steady state with more teacher turnover and a larger share of novice teachers in classrooms. To better understa..

Economics of Ageing

The long game: Fiscal outlooks to 2060 underline need for structural reform

This paper updates the long-term scenarios to 2060 last published in July 2018, with a special focus on fiscal sustainability and risks. In a baseline economic and fiscal scenario, trend real GDP growth for the OECD + G20 area declines from around 3% post-COVID to 1½ per cent in 2060, mainly due to a deceleration of large emerging-market economies. Meanwhile, secular trends such as population ageing and the rising relative price of services will keep adding pressure on government budgets. Without policy changes, maintaining current public service standards and benefits while keeping public debt ratios stable at current levels would increase fiscal pressure in the median OECD country by near..

Economics of Ageing

Teachers’ Willingness to Pay for Retirement Benefits: A National Stated Preferences Experiment

Many states have recently made or are considering changes to their teacher retirement systems. However, little is known about how teachers value various elements of their retirement benefits versus other aspects of their jobs and compensation. To help alleviate this gap, we use a discrete choice stated preferences experiment embedded in a nationally representative survey of teachers to estimate their willingness-to-pay for various retirement plan characteristics and other non-salary job components. We find that teachers would be indifferent between a traditional pension and alternative retirement plan designs if the alternatives were paired with 2 to 3 percent salary increases. Our results i..

Economics of Ageing

The heterogeneous effects of the Great Recession on informal care to the elderly

This paper studies the role of unobserved factors to measure the impact of the economic downturn on informal care availability to the elderly in Europe. We use the Survey of Health, Ageing and Retirement in Europe (SHARE), which allows controlling for socio-demographic variables. Our results show that the impact of the Great Recession on care receipt depends not only on observed, but also on unobserved characteristics. For 21 percent of the sample, the effect is three to four times larger than the average effect for the entire sample. For 57 percent of the sample, there is no effect of the economic crisis, and this is due to unobservable factors. In our estimation process, we are able to cha..

Economics of Ageing

Elderly Care and Informal Family Care

Informal family care presents important difficulties for the entire economy. Because of short supplies of formal elderly care, some family members are compelled to leave work to provide care for elderly relatives. Therefore, the overall loss of added value caused by informal family care is not negligible. After developing a model to assess how households determine allocation of formal and informal elderly care, we analyze subsidy effects for elderly care in the economy. Results show that subsidies for formal care that is bought by people of the younger generation are more effective for decreasing losses attributable to informal elderly care.

Economics of Ageing

Health, an ageing labour force, and the economy: does health moderate the relationship between population age-structure and economic growth?

Research often suggests that population ageing will be detrimental for the economy due to increased labour market exits and lost productivity, however the role of population health and disability at older ages is not well established. We estimate the relationship between the size of the older working age population and economic growth across 180 countries from 1990 to 2017 to explore whether a healthy older working age population, as measured by age-specific Years Lived with Disability (YLDs), can moderate the relationship between an ageing labour force and real per capita GDP growth. Using country and year fixed effects models, we find that although an increase in the 55–69 year old share..

Economics of Ageing

How Expanding EITC Will Benefit 1.5 Million Low-Income Older Workers

A popular cash transfer program credited with lifting millions out of poverty, the Earned Income Tax Credit (EITC) also reduces wages for non-college educated workers, particularly older workers. Meanwhile, eligibility rules have long prevented most older workers from receiving EITC benefits at the same rate as their younger counterparts. Expanding EITC benefits permanently would offset some of these lost earnings and help stabilize older workers’ earnings. In 2021, Congress enacted a temporary EITC expansion—and our research shows that a permanently expanded EITC would benefit millions of older low-income workers.

Economics of Ageing

The Causal Effects of Place on Health and Longevity

Life expectancy varies substantially across local regions within a country, raising conjectures that place of residence affects health. However, population sorting and other confounders make it difficult to disentangle the effects of place on health from other geographic differences in life expectancy. Recent studies have overcome such challenges to demonstrate that place of residence substantially influences health and mortality. Whether policies that encourage people to move to places that are better for their health or that improve areas that are detrimental to health are desirable depends on the mechanisms behind place effects, yet these mechanisms remain poorly understood.

Economics of Ageing

Fear of COVID-19 Contagion: The Idiosyncratic Effects of an Aggregate Pandemic Shock

We examine how the fear of COVID-19 contagion influences consumer expenditure patterns. We show that the consumption expenditure responses to the spread of the COVID-19 pandemic are significantly heterogeneous across generations. We find that the elderly spend less than the younger generation by at least 5% as COVID-19 spread. In fact, those aged above 60 significantly decreased their spending even on food and drink products by 13%. We also find that the elderly forgo shopping in favor of the younger generation. These heterogeneous responses are likely to be due to the fear of the COVID-19 infection.

Economics of Ageing

Juggling Paid Work and Elderly Care Provision in Japan: Does a Flexible Work Environment Help Family Caregivers Cope?

Using unique data from a Japanese survey, this paper examines whether flexible work arrangements targeted specifically at workers with caregiving responsibilities under the Child Care and Family Care Leave Act help family caregivers reconcile paid work with care provision. The regression results suggest that access to caregiver leave, which allows family caregivers to take a continuous leave of up to 93 days, is negatively and significantly associated with the probability of leaving one’s job within one year of the onset of demand for parental care. This alleviating effect of access to caregiver leave remains robust even in the longer term and in a specification where we take into account ..

Economics of Ageing

Demographic change, secular stagnation and inequality: automation as a blessing?

We construct and calibrate an overlapping generations model incorporating demographic change and the possibility to automate the production process to test the hypothesis put forward by Acemoglu and Restrepo (2017). In line with their hypothesis, we find that ageing is a powerful force stimulating the adoption of automation technologies in OECD economies. Ageing-induced automation is found to soften the negative effects of labour scarcity and rising old-age dependency rates on per capita growth, but the compensation is incomplete. One important reason is that automated tasks are far from perfect substitutes for tasks executed by human labour. A second reason is that ageing-induced automation..

Economics of Ageing

The Economic Burden of Pension Shortfalls: Evidence from House Prices

U.S. state pensions are underfunded by trillions of dollars, but their economic burden is unclear. In a model of inefficient taxation, real estate fully reflects the cost of pension shortfalls when it is the only form of immobile capital. We study the effect of pension shortfalls on real estate values at state borders, where labor and physical capital could more easily relocate to a state with a smaller shortfall. Using plausibly exogenous variation driven by pension asset returns, we find that one dollar of pension underfunding reduces house prices near state borders by approximately two dollars. Our estimates imply a deadweight loss associated with addressing pension shortfalls that is con..

Economics of Ageing

Ageing and expenditure of Italian households

This work proposes a reconstruction of survey data that makes it possible to analyse the mechanical effect of ageing on the consumption of Italian households. Ageing has limited the increase in the propensity to spend recorded in the period between 2005 and 2017, and it has had a negative - but small - impact on the dynamics of average, per capita and equivalized household expenditure. The decline in household expenditure in the period considered is almost entirely attributable to the reduction of consumption within the age groups, determined by the negative income dynamics.

Economics of Ageing

Population Growth and Automation Density: Theory and CrossCountry Evidence

We analyse the effects of declining population growth on automation. Theoretical considerations imply that countries with lower population growth introduce automation technologies faster than those with higher population growth. We test the theoretical implication on panel data for 60 countries over the time span 1993-2013. Regression estimates support the theoretical implication, suggesting that a one percent increase in population growth is associated with an approximately two percent reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, different estimation methods, dynamic specifications, and changes with respect measuring r..

Economics of Ageing

The Geography of Retirement

As Americans work longer in response to a changing retirement landscape, it is important to ask whether there are groups being left out of this trend. Geography is a natural lens through which to examine this question, given regional disparities in the employment of prime-age individuals. In this study, we explore the geography of retirement using data from the U.S. Census/American Community Survey and other sources. We find large differences across U.S. commuting zones in employment rates at older ages, with a gap of about 20 percentage points between areas at the 90th and 10th percentiles of employment. Low-employment areas are systematically different, with a less educated and more divers..

Economics of Ageing

Wealth heterogeneity in a closed pooled annuity fund

The income stability of a closed pooled annuity fund is studied. The focus is on quantifying the impact of inhomogeneous initial savings amounts on idiosyncratic longevity risk. Besides wealth inhomogeneity, the members of the pool are independent and identical copies of each other. We ignore systematic investment risk or mortality risk and define income stability as keeping the income within a specified tolerance of each member's initial income payment in a fixed proportion of future scenarios. For a given group of people with different savings amounts, we find an analytical expression that closely approximates the time for which the fund provides a stable income. Our main result uses this ..

Economics of Ageing

The Dynamics of the Gender Gap at Retirement in Italy: Evidence from SHARE

We investigate the dynamics of the gender gap at retirement in Italy -- by cohort and year of retirement -- for individuals retiring from 1980 to 2027 using data from SHARELIFE (Wave 7). Most importantly, we disentangle the opposite effects on the gender gap originating respectively from (i) improving labor market conditions for women from the sixties, and (ii) increasing actuarial fairness of the pension plan due to the progressive transition from a defined-benefit to a notional defined-contribution scheme. To capture the impact of these two driving forces, we implement a counterfactual analysis by which the gender gap at retirement -- in terms of gender gap in pension (GGP) and between-gro..

Economics of Ageing

Heterogeneity in Longevity, Redistribution, and Pension Reform

The gap in the life expectancy of the elderly across educational groups is high, and this will probably increase over the coming decades. In this article, we use a computable overlapping generations model economy to show that the long-term link between heterogeneity in longevity and education could translate into an implicit tax/subsidy on the expected lifetime benefits to lifetime payroll taxes ratio, with rates around 10 percent, and that such rates pervert redistributive objectives of pension systems. We then analyze some parametric changes aimed at restoring the progressiveness of these systems in the long run, and find that a higher minimum pension or changes in the pension benefit form..

Economics of Ageing

Impact of Later Retirement on Mortality: Evidence from France

This paper investigates the impact of delaying retirement on mortality amongthe French population. We take advantage of the 1993 pension reform in the private sector to identify the causal effect of an increase in claiming age on mortality. We use administrative data which provide detailed information on career characteristics, dates of birth and death. Our results, precisely estimated, show that an exogenous increase of one year in the claiming age has no significant impact on the probability to die, measured between age 61 and 79. To test the power of our sample to detect statistically significant effects for rare events like death, we compute minimum detectable effects (MDE). Our MDE esti..

Economics of Ageing

Impact of Later Retirement on Mortality: Evidence from France

This paper investigates the impact of delaying retirement on mortality amongthe French population. We take advantage of the 1993 pension reform in the private sector to identify the causal effect of an increase in claiming age on mortality. We use administrative data which provide detailed information on career characteristics, dates of birth and death. Our results, precisely estimated, show that an exogenous increase of one year in the claiming age has no significant impact on the probability to die, measured between age 61 and 79. To test the power of our sample to detect statistically significant effects for rare events like death, we compute minimum detectable effects (MDE). Our MDE esti..

Economics of Ageing

Long Term Care Insurance with State-Dependent Preferences

We study the demand for actuarially fair Long Term Care (LTC hereafter) insurance in a setting where autonomous agents only care for daily life consumption while dependent agents also care for LTC expenditures. We assume that dependency decreases the marginal utility of daily life consumption. We rst obtain that some agents optimally choose not to insure themselves, while no agent wishes to buy complete insurance. We then show that the comparison of marginal utility of income (as opposed to consumption) across health states depends on (i) whether agents do buy LTC insurance at equilibrium or not, (ii) the comparison of the degree of risk aversion for consumption and for LTC expenditures, and..

Economics of Ageing

Assessing Chile's Pension System: Challenges and Reform Options

Chile’s pension system came under close scrutiny in recent years. This paper takes stock of the adequacy of the system and highlights its challenges. Chile’s defined contribution system was quite influential when introduced, and was taken as an example by other countries. However, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics and global returns, while informality persists in the labor market. In the absence of reforms, the system’s inability to deliver adequate outcomes for a large share of participants will continue to magnify, as demographic trends and low global interest rates will continue to re..

Economics of Ageing