scholarly journals Coping with Spain's aging: retirement rules and incentives

2009 ◽  
Vol 9 (4) ◽  
pp. 549-581 ◽  
Author(s):  
MARIO CATALÁN ◽  
JAIME GUAJARDO ◽  
ALEXANDER W. HOFFMAISTER
Keyword(s):  
Life Expectancy ◽  
Demographic Transition ◽  
Welfare Effects ◽  
Work Life ◽  
Substitution Effects ◽  
Retirement Age ◽  
Spanish Economy ◽  
Pension Reforms ◽  
Long Run ◽  
Pension Benefits

AbstractThis paper evaluates the macroeconomic and welfare effects of extending the averaging period used to calculate pension benefits in a pay-as-you-go system. It also examines the complementarities between reforms extending the averaging period and those increasing the retirement age under alternative tax policies. The analysis applies a model in the Auerbach-Kotlikoff tradition to the Spanish economy. Extending the averaging period to the entire work life maximizes long-run welfare and limits expenditure pressures at the peak of the demographic shock as much as increasing the retirement age in line with life expectancy. Moreover, during the demographic transition, pension reforms induce intertemporal labor substitution effects that engender aggregate labor cycles.

Transitioning to a higher retirement age with exponential and quasi-hyperbolic discounters in mixed economies

2020 ◽  
Author(s):  
Sarah Lynne Salvador Daway-Ducanes
Keyword(s):  
Overlapping Generations ◽  
Hyperbolic Discounting ◽  
Welfare Effects ◽  
Retirement Age ◽  
Tax Rate ◽  
Welfare Impacts ◽  
The Social ◽  
Welfare Implications ◽  
Pension Benefits ◽  
Exponential Discounting

Abstract This paper analyses the macroeconomic and welfare effects of a higher retirement age within a dynamic overlapping generations framework, wherein exponential discounting and sophisticated quasi-hyperbolic discounting agents coexist in ‘mixed economies’. The transitional dynamics of economic aggregates depend on the proportion of QHD agents, and the extent to which reducing the social security tax rate mitigates crowding-out effects on savings and enables both lower pension contributions and higher pension benefits. Welfare impacts across agent types and cohorts differ accordingly: QHD agents employ the higher retirement age as a commitment mechanism to mitigate the adverse welfare implications of present-biasedness.

Pension reform with variable retirement age: a simulation analysis for Germany

2012 ◽  
Vol 11 (3) ◽  
pp. 389-417 ◽  
Author(s):  
HANS FEHR ◽  
MANUEL KALLWEIT ◽  
FABIAN KINDERMANN
Keyword(s):  
Demographic Transition ◽  
Simulation Analysis ◽  
Pension Reform ◽  
Retirement Age ◽  
Extensive Margin ◽  
Long Run ◽  
Old Age Poverty ◽  
Simulation Results ◽  
One Year ◽  
Model Features

AbstractThe paper analyzes the recent pension reform in Germany which increases the normal retirement age by two years. The applied simulation model features a realistic demographic transition, distinguishes three skill classes with different life expectancies and allows individuals to choose their labor supply at the intensive and the extensive margin.Our simulation results indicate that under the existing pension rules long-run contribution rates and old-age poverty rates will increase considerably. The proposed rise in the normal retirement age will postpone effective retirement by about one year and redistribute towards future cohorts. A stronger delay in effective retirement may be achieved by raising the actuarial adjustment of benefits.

Mortality Reductions, Educational Attainment, and Fertility Choice

2005 ◽  
Vol 95 (3) ◽  
pp. 580-601 ◽  
Author(s):  
Rodrigo R Soares
Keyword(s):  
Human Capital ◽  
Economic Development ◽  
Life Expectancy ◽  
Demographic Transition ◽  
Capital Accumulation ◽  
Critical Level ◽  
Human Capital Accumulation ◽  
Fertility Choice ◽  
Life Expectancy At Birth ◽  
Long Run

This paper develops a model where reductions in mortality are the main force behind economic development. The model generates a pattern of changes similar to the demographic transition, where gains in life expectancy at birth are followed by reductions in fertility and increases in the rate of human capital accumulation. The onset of the transition is characterized by a critical level of life expectancy at birth, which marks the movement of the economy from a Malthusian equilibrium to an equilibrium with investments in human capital and the possibility of long-run growth.

scholarly journals THE ENDOGENOUS DETERMINATION OF RETIREMENT AGE AND SOCIAL SECURITY BENEFITS

2012 ◽  
Vol 18 (1) ◽  
pp. 93-113 ◽  
Author(s):  
Francisco Cabo ◽  
Ana García-González
Keyword(s):  
Social Security ◽  
Public Debt ◽  
Nonlinear Dependence ◽  
Retirement Age ◽  
The Public ◽  
Long Run ◽  
The Government ◽  
Pension Benefits ◽  
Social Security Benefits

An aging population in modern societies has put stress on public pension systems. To prevent social security deficits from increasing to unbounded levels of public debt we focus on two policies: reducing the generosity of pension benefits, determined by the government, and postponing the effective retirement age, chosen by employees. An atomistic employee would disregard the effect of his retirement decision on the public debt and would retire as soon as possible. Conversely, an ideal farsighted agency considering all current and future employees would postpone retirement, thereby alleviating the pressure on public debt and allowing a more generous long-run pension. The government may design a proper incentive strategy to induce myopic atomistic decision makers to act nonmyopically. This strategy is a two-part incentive with nonlinear dependence on the stock of public debt. It is credible if deceiving employees slightly adjust their retirement-age decisions to increments in the public debt.

MODELING A FLEXIBLE RETIREMENT AGE TO NARROW PENSION GAP: THE CASE OF CHINA

2019 ◽  
pp. 1-21
Author(s):  
YALI LIU ◽  
MEIYING YANG ◽  
HAITAO ZHENG ◽  
YUNYUN JIANG ◽  
DONGFANG GU
Keyword(s):  
Life Expectancy ◽  
Empirical Studies ◽  
Closed Form Solution ◽  
Form Solution ◽  
Retirement Age ◽  
Retirement Benefits ◽  
Flexible Retirement ◽  
The Future ◽  
Incentive Strategies ◽  
Pension Benefits

With the relatively fixed retirement age, the dramatic increase in life expectancy and the sharp decline in fertility have caused a serious aging problem and an unsustainable pension crisis. It is therefore necessary to design flexible retirement benefits rules that consider life expectancy. By introducing the lifetime utility optimization model, the closed-form solution for the flexible retirement age is obtained. Pension benefits incentive strategies are constructed to encourage contributors to choose a retirement age that is beneficial toward narrowing the pension gap. The empirical studies show that China will face a serious pension gap in the future if the current statutory retirement age is not adjusted. If the retirement age is delayed according to life expectancy, the future pension gap will be greatly reduced.

Welfare effects of alternative pension reforms: Assessing the transition costs for French socio-occupational groups

2005 ◽  
Vol 4 (3) ◽  
pp. 249-271 ◽  
Author(s):  
P. Y. HENIN ◽  
Th. WEITZENBLUM
Keyword(s):  
Life Expectancy ◽  
Low Income ◽  
Considerable Increase ◽  
Pension System ◽  
Retirement Age ◽  
Cycle Model ◽  
Occupational Groups ◽  
Pension Reforms ◽  
Transition Costs ◽  
Legal Retirement Age

In this paper, we assess the welfare costs and gains of different scenarios of pension reforms in France, using a life-cycle model including various sources of heterogeneity and distinguishing between socio-occupational groups. The pension reforms considered combine features regarding the generosity of the pension system as well as features regarding the financing schemes: PAYG, the build-up of a temporary fund and that of a permanent one. We focus on both macro and distributional issues. It appears that (i) a considerable increase in savings is to be expected, even in the case where pensions remain generous, (ii) a considerable crowding-out effect would occur in the case of the constitution of a fund trust, (iii) reducing the generosity of pension seems relatively more beneficial to low-income low-life expectancy agents, while (iv) postponing the legal retirement age benefits relatively more high-income high-life expectancy agents.

scholarly journals Actuarial deductions for early retirement

2021 ◽  
pp. 1-27
Author(s):  
Markus Knell
Keyword(s):  
Early Retirement ◽  
Pension System ◽  
Budget Constraint ◽  
Retirement Age ◽  
Single Individual ◽  
Internal Rate Of Return ◽  
Market Interest Rate ◽  
Long Run ◽  
Retirement Behavior ◽  
The Right

Abstract This paper studies how the rates of deduction for early retirement have to be determined in pay-as-you-go (PAYG) systems in order to keep their budget stable. The derivation of these deductions requires the use of a multiperiod intertemporal budget constraint that involves assumptions about the retirement behavior of past, present, and future cohorts. In general, it is not possible to calculate budget-neutral deductions from the budget constraint of a single individual who retires before the target retirement age—an approach that dominates the related literature. Only for specific cases one can use this second approach but then one has to adjust the discount rate to the assumption about collective retirement. If there is only one deviating individual, then the right choice is the market interest rate while for a stationary retirement distribution it is the internal rate of return of the PAYG system. In this case, the necessary deductions are lower than under the standard approach. This is also true for retirement ages that fluctuate randomly around a stationary distribution. Various long-run developments (e.g., increases in life expectancy or permanent changes in the average retirement age) might cause challenges for the sustainability of the pension system. These developments, however, can only be dealt with by adequate adjustments to the basic pension formulas and not by the use of deduction rates.

scholarly journals Disaggregation of official demographic projections in sub-groups by education level: the neglected “composition effect” in the future path of life expectancy

Genus ◽  
2021 ◽  
Vol 77 (1) ◽  
Author(s):  
Sergio Ginebri ◽  
Carlo Lallo
Keyword(s):  
High Education ◽  
Life Expectancy ◽  
Education Level ◽  
Retirement Age ◽  
Composition Effect ◽  
Education Group ◽  
Population Forecasts ◽  
Low Education ◽  
Mortality Differential ◽  
Education Groups

AbstractWe developed an innovative method to break down official population forecasts by educational level. The mortality rates of the high education group and low education group were projected using an iterative procedure, whose starting point was the life tables by education level for Italy, based on the year 2012. We provide a set of different scenarios on the convergence/divergence of the mortality differential between the high and low education groups. In each scenario, the demographic size and the life expectancy of the two sub-groups were projected annually over the period 2018–2065. We compared the life expectancy paths in the whole population and in the sub-groups. We found that in all of our projections, population life expectancy converges to the life expectancy of the high education group. We call this feature of our outcomes the “composition effect”, and we show how highly persistent it is, even in scenarios where the mortality differential between social groups is assumed to decrease over time. In a midway scenario, where the mortality differential is assumed to follow an intermediate path between complete disappearance in year 2065 and stability at the 2012 level, and in all the scenarios with a milder convergence hypothesis, our “composition effect” prevails over the effect of convergence for men and women. For instance, assuming stability in the mortality differential, we estimated a life expectancy increase at age 65 of 2.9 and 2.6 years for men, and 3.2 and 3.1 for women, in the low and high education groups, respectively, over the whole projection period. Over the same period, Italian official projections estimate an increase of 3.7 years in life expectancy at age 65 for the whole population. Our results have relevant implications for retirement and ageing policies, in particular for those European countries that have linked statutory retirement age to variations in population life expectancies. In all the scenarios where the composition effect is not offset by a strong convergence of mortality differentials, we show that the statutory retirement age increases faster than the group-specific life expectancies, and this finding implies that the expected time spent in retirement will shrink for the whole population. This potential future outcome seems to be an unintended consequence of the indexation rule.

Does Grit Matter to Employees’ Quality of Work Life and Quality of Life? The Case of the Korean Public Sector

2021 ◽  
pp. 009102602110127
Author(s):  
Min Young Kim ◽  
Hyo Joo Lee
Keyword(s):  
Quality Of Life ◽  
Public Sector ◽  
Work Motivation ◽  
Well Being ◽  
Employee Motivation ◽  
Work Life ◽  
Quality Of Work Life ◽  
Quality Of Work ◽  
Long Run

To ensure the quality of the work done in the Korean career civil service system (which is characterized by stability, such as lifelong job security), the public sector must use methods to motivate their employees and improve their performance in the long run. In this study, we propose that grit, as a type of work motivation, can boost employee well-being (i.e., job satisfaction, job stress) and organizational outcomes (i.e., organizational commitment, performance). Therefore, the main objective of this study is to assess the validity of grit among public employees from a collectivist culture; to this end, we use the 2016 survey of Korean public officials ( N = 2,070). The results are as follows: (a) grit has a direct positive effect on quality of work life (QWL), (b) QWL can increase employee’s quality of life (QOL), and (c) professionalism and goal-oriented culture negatively and positively regulate grit and QWL. We also examined how employee motivation (e.g., grit) can enrich their QWL and QOL. Altogether, this study supports the argument that human resource (HR) managers should pay attention to grit. To achieve success, one needs not only some level of ability but also the zeal and capacity for hard labor, the latter two of which are considered to constitute grit. Given that, this research targeted grit in the Korean context—not the Western one—and examined its effects in the Korean public sector, where conscientiousness is emphasized.

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