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Università degli Studi di Salerno |
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Economics
of Ageing in Europe (AGE)
RTN
European
Program HPRN-CT-2002-00235
The Fourth Workshop of the RTN on the Economics of Aging in Europe was held in Edesheim on May 6-8 2004 and was hosted by the University of Mannheim, the Mannheim Research Institute for the Economics of Aging and the Sonderforschungsbereich 504.
The first day of the workshop, Thursday May 6th, was devoted to training lectures for the young researchers of the AGE Network. The first lecture was given by Arthur van Soest on “International Comparisons of Work Disability” [coauthored with James Banks, Arie Kapteyn and James P. Smith]. They compared rates of disability across countries and found substantial differences in self-reported health and disability indices. They then tried to correct for these differences using the method of vignettes (evaluations of work limitations of hypothetical persons) and found that this method explains a substantial percentage of the differences in disability reporting. Comments by workshop participants focused on the difference between evaluating one’s own versus others’ health problems.
The second presentation was on “Financial Education and Saving” and given by Annamaria Lusardi, who showed that people arrive at retirement very often with little wealth and relatively simple portfolios and documented that participation in financial education and retirement seminars increase net worth, especially for people with relatively low wealth. The discussant, Joachim Winter, pointed out that item-non response could be a potential problem and that seminars could affect not only education but also preferences.
The third lecture was given by Axel Börsch-Supan on “Pension Reform: DB, FDC, NDC, QDC and WDC”. He examined notional defined contribution pension schemes, which are pay-as-you-go systems where the link between contributions and benefits is individualized using an accounting rate of return and discussed how these systems can create a sense of actuarial fairness, offer transparent rules, reduce the work disincentives of conventional pay-as-you-go systems and provide a link with the macroeconomic environment. In his discussion, Richard Disney pointed out that such a system is sustainable only as far as the demographic projections are accurate and that parametric reforms tend to be unpopular and thus likely to be reversed.
On the 2nd day of the workshop, May 7th, the first paper was on “Health Care Quality and Economic Inequality” and was authored by Tullio Jappelli (who presented it), Luigi Pistaferri and Guglielmo Weber. The authors document wide regional disparities in health care quality in Italy, and using micro data show that households in lower health care quality regions experience higher income dispersion and engage in higher precautionary saving. The discussant, Dimitris Georgarakos, suggested that the authors should take into account the different distribution of occupational characteristics in lower income regions.
In the next paper, titled “Health and Wealth of Elderly Couples: causality using dynamic panel data models”, Pierre-Carl Michaud (who presented it) and Arthur Van Soest, discussed the causal links between health and wealth of elderly couples and found that once unobserved heterogeneity is taken into account, there is a strong effect of health on wealth and a much weaker one in the other direction. They also found an effect of the health of the husband on that of the wife. The discussant, Michalis Haliassos, suggested that the effects of wealth on health might take place early in life and that survivorship bias due to wealth might attenuate them further.
The third paper of the day, authored by Hoyt Bleakley and Fabian Lange (who presented it) and titled “Chronic Disease Burden and the Interaction of Education, Fertility and Growth”, discussed the effect of the eradication of hookworm disease in the American South. The authors found that lower infection rates led to a substantial decline in fertility and an increase in schooling, consistent with the theory that costly investment in the human capital of children results in a decision to have fewer of them. Michael Hurd, in his discussion of the paper pointed out some alternative causal links between disease on the one hand and fertility and schooling on the other.
Next, Carolina Fugazza presented a paper titled “An Empirical Assessment of the Italian Leaving Indemnity (TFR)”, co-authored with Federica Teppa, in which the authors discuss the twin role of the TFR in Italy, which can operate both as a lifecycle and a precautionary saving vehicle. They find that the majority of workers use it in its first capacity and that the young are the more likely to exploit it as a measure to counter liquidity problems. Tullio Jappelli, in his discussion, pointed out that there are contractual differences with respect to TFR across sectors and between large and small firms and that early liquidation is not always the choice of the worker.
The fifth paper of the day, titled “Redistributive effects of social security reforms across Europe: the case of France and Italy”, by Raquel Fonseca (who presented it) and Thepthida Sopraseuth, dealt with the impact of reforms of the French social security system, which were found not to alter drastically the choice of retirement age but also to slow down the fall of the internal rate of return of the system for low skilled workers. In his discussion, Luc Arrondel pointed out that wealth inequality seems to have no impact on the results and that the assumption of altruistic preferences seems unrealistic for France.
Next, Maria Marika Santoro presented a paper on “Public Pension Reforms and
Announcement Effects: the Italian experience in 1992”, in which she found that early announcements of pension system reforms accelerated the early exit from the labor force of older workers and thus partly negated the effect of raising the retirement age. In her discussion, Elsa Fornero disputed the notion that Italian workers actually had a choice of early retirement in 1992 and questioned whether the steady state assumption was a valid one.
The final paper of the day, “The Effect of Lifetime Resources on Intervivos Transfers and Bequests: evidence from West Germany” was presented by Ernesto Villanueva and co-authored with Gueorgui Kolev. The authors examined the impact on gifts to children of an increase in the lifetime resources of parents and found that while low income parents did not increase their gifts, those at the middle and top of the income distribution increased them moderately. Comments centered on the appropriateness of permanent income as an explanation of wealth, on the need of inclusion of in-kind transfers and the usefulness of looking at the intergenerational transmission of consumption.
The third day, May 8th, started with a paper by Pierre-Carl Michaud and Frederic Vermaulen with the title “Labor supply of elderly couples: a collective approach”. The authors tested the empirical relevance of the collective household model to the retirement decisions of married couples and found that the model’s predictions were corroborated by data on American households. In his discussion, DIMITRIS Christelis pointed out the restrictiveness of the zero savings assumption and the low magnitude of some of the estimated coefficients.
The next paper, titled “From wage-risk tradeoffs to the value of longevity gains: How serious is the simplicity bias?”, presented by Antoine Bommier with Bertrand Villeneuve as a co-author, discussed the statistical value of human value and how its calculation is affected by the choice of an additive lifecycle model. They introduced risk aversion with respect to life and found that the modified model provides a much better data fit than the simple one.
Next, Christos Koulovatianos presented a paper titled “On the Income Dependence of Equivalence Scales” (co-authored with Carsten Schröder and Ulrich Schmidt). The authors, using survey evidence from France and Germany, found that equivalence scales depend negatively on reference income and suggested empirical strategies to incorporate this fact into existing econometric methodology.
The fourth paper of the day, titled “Equity Culture and the Distribution of Wealth”, was presented by Dimitris Georgarakos (and co-authored with Yannis Bilias and Michalis Haliassos). The authors, using several inequality decomposition methods, found that increased stock market participation contributed positively to the rise of wealth inequality in the US in the 1990s. They then used a simulations from a calibrated model to show that inequality within some stock-holding population groups can be greater than with non-stock holding ones.
The next paper was presented by Annamaria Lusardi (and co-authored with Eric Hurst) and was titled “Liquidity Constraints, Wealth Accumulation and Entrepreneurship”. The authors examined the reasons behind the positive correlation between wealth and becoming an entrepreneur and found that it can’t by explained by liquidity constraints, personal or family wealth or high start-up costs. Instead they show that this correlation is driven mainly by a very small sample of very wealthy families.
Next, DIMITRIS Christelis presented a paper titled “The Drop in the U.S. Household Saving Rate between 1985 and 2000: an inquiry using the Consumer Expenditure Survey”, co-authored with Albert Ando and Jung Hyun Kim. The paper showed that there are large discrepancies between saving as measured in the National Accounts and in micro data and that, after correcting for them, almost all population groups reduced their saving. The discussant, James Banks, pointed out that one should look at other components of national saving as well and that there were probable endogeneity problems in the estimation.
The final paper of the conference was presented by Susan Rohwedder (and co-authored with Michael Hurd) and was on “Changes in Consumption and Activities at Retirement”. The authors examined the issue of reduced consumption after retirement using a survey of U.S. households. They estimated the actual change in consumption at retirement and compared it to the predicted one and collected information on time spent on non-market activities that is a possible substitute to time spent on market goods.