“Retiree Health Insurance for Public School Employees: Does it Affect Retirement?” by Maria D. Fitzpatrick (CESifo Working Paper No. 4415, October 2013, .pdf format, 38p.). Note: Links to the abstract and full-text can be found at:
www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19096941
“Demography and Low Frequency Capital Flows,” by David Backus, Thomas Cooley, and Espen Henriksen (w19465, September 2013, .pdf format, 38p.).
Abstract:
We consider the causes of international capital flows. Since capital flows are extremely persistent, we argue that their drivers must be persistent, too. We think the most compelling candidates are demographic trends, tfp differences and financial frictions. In this paper we focus primarily on the role of demography in a multi-country overlapping generations model in which saving decisions are tied to agents’ life expectancy. Capital flows reflect differences between saving and investment across countries. Demographic changes affect the aggregate accumulation of assets in two ways: by changing life expectancy which changes individual household saving behavior, and by changing the age distribution of the population by which individual household decisions are aggregated. The most important drivers turn out to be increases in life expectancy caused by decreases in adult mortality.We use a quantitative version of the model to illustrate the impact of demography on capital flows and net foreign assets in China, Germany, Japan, and the United States.
“Are Gender Differences Emerging in the Retirement Patterns of the Early Boomers?” by Kevin E. Cahill, Michael D. Giandrea, and Joseph F. Quinn (WP-468, September 2013, .pdf format, 27p.). Note: Links to the abstract and full-text can be found at:
Note: PRC requires free registration before providing working papers
A. “Evaluating Pension Insurance Pricing,” by avid F. Babbel (WP2013-17, September 2013, .pdf format, 33p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1144
B. “Joint Risk of DB Pension Underfunding and Sponsor Termination: Incorporating Options-Based Projections and Valuations into PIMS,” by Deborah Lucas (WP2013-16, September 2013, .pdf format, 28p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1143
C. “Measuring and Explaining Pension System Risk,” by Frank J. Fabozzi (WP2013-15, September 2013, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1142
D. “Modeling Risk-based Pension Insurance Premiums,” by Martin G. Clarke (WP2013-14, September 2013, .pdf format, 32p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1141
E. “An Actuarial Perspective on Pension Plan Funding,” by Donald J. Segal (WP2013-13, September 2013, .pdf format, 14p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1140
F. “Actuarial Perspectives on Defined Benefit Pension Risk – Modeling Emerging Issues,” by Christopher M. Bone (WP2013-12, September 2013, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1139
G. “Observations on Actuarial Assumptions and Models for Defined Benefit Pension Plans,” by Donald E. Fuerst (WP2013-11, September 2013, .pdf format, 14p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1138
H. “Integrated Risk Management for Defined Benefit Pensions: Models and Metrics,” by Raimond Maurer (WP2013-10, September 2013, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1137
I. “Economic and Financial Approaches to Valuing Pension Liabilities,” by Robert Novy-Marx (WP2013-09, September 2013, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1136
J. “Financial Market Assumptions & Models for Pension Plans: A Technical Comment on the PIMS Model Assumptions for Asset Markets,” by Christopher C. Geczy (WP2013-08, September 2013, .pdf format, 27p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1135
K. “Technical Review Panel for the PIMS Model: Final Report,” by Olivia S. Mitchell (WP2013-07, September 2013, .pdf format, 17p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1134
A. “Spousal Health Effects – the Role of Selection,” by James Banks, Elaine Kelly, and James P. Smith (w19438, September 2013, .pdf format, 37p.).
Abstract:
In this paper, we investigate the issue of partner selection in the health of individuals who are at least fifty years old in England and the United States. We find a strong and positive association in family background variables including education of partners and their parents. Adult health behaviors such as smoking, drinking, and exercise are more positively associated in England compared to the United States. Childhood health indicators are also positively associated across partners.
We also investigated pre and post partnership smoking behavior of couples. There exists strong positive assortative mating in smoking in that smokers are much more likely to partner with smokers and non-smokers with non-smokers. This relationship is far stronger in England compared to the United States. In the United States, we find evidence of asymmetric partner influence in smoking in that men’s pre marriage smoking behavior influences his female partner’s post marriage smoking behavior but there does not appear to be a parallel influence of women’s pre-marriage smoking on their male partner’s post-marital smoking. These relationships are much more parallel across genders in England.
B. “Wages, Pensions, and Public-Private Sector Compensation Differentials for Older Workers,” by Philipp Bewerunge and Harvey S. Rosen (w19454, September 2013, .pdf format, 41p.).
Abstract:
We use a sample of full-time workers over 50 years of age from the 2004 and 2006 waves of the Health and Retirement Study to investigate whether workers in federal, state, and local government receive more generous wage and pension compensation than private sector workers, ceteris paribus. With respect to hourly remuneration (wages plus employer contributions to defined contribution plans), federal workers earn a premium of about 28 log points, taking differences in employee characteristics into account. However, there are no statistically discernible differences between state and local workers and their private sector counterparts, ceteris paribus. These findings are about the same whether or not indicators of occupation are included in the model. On the other hand, pension wealth accumulation is greater for employees in all three government sectors than for private sector workers, even after taking worker characteristics into account. As a proportion of the hourly private-sector wage, the hourly equivalent public-private differentials are about 17.2 percent, 13.4 percent, and 12.6 percent for federal, state, and local workers, respectively. We find no evidence that highly-educated individuals are penalized by taking jobs in the public sector, either with respect to wages or pension wealth.
“The Longevity of Academicians: Evidence from the Saxonian Academy of Sciences and Humanities in Leipzig,” by Maria Winkler-Dworak and Heiner Kaden (VID Working Paper 03/2013, 2013, .pdf format, 17p.).
Abstract:
This study addresses the mortality of the members of the Saxonian Academy of Sciences and Humanities in Leipzig. In fact, learned societies have been shown to present vanguard groups in the achievement of longevity. We use biographical records from the members of the Saxonian Academy of Sciences from 1846 to 2010 and compare their mortality to German life table estimates, where particularly attention is paid to the mortality differentials between eastern and western Germany. The Saxonian academicians show indeed a higher life expectancy at age 60 than the general German male population, where the gap has been widening since the 1950s. Comparing the life expectancy values for the Saxonian academicians to available estimates of various European learned societies yields a similar longevity, suggesting that the survival of the academicians is less determined by national mortality conditions but that academicians rather share a common health advantage.
“Longevity Insurance Annuities: Lessons from the United Kingdom,” David Blake and John A. Turner (PI13-05, July 2013, .pdf format, 12p.).
Abstract:
Recent U.S. Treasury Department proposals have focused attention on longevity insurance annuities. These are deferred annuities that began payment at advanced older ages, such as at age 82. While the United Kingdom has by far the world’s largest annuity market, and some insurance companies used to provide longevity insurance annuities, currently no companies provide these annuities. The main reason this change has occurred is that proposed European Union regulations will require insurance companies to increase their reserves for these annuities in recognition that there is no asset available to effectively hedge the risk of unexpectedly large improvements in life expectancy.
“(Lack of) Pension Knowledge,” by Alan Barrett, Irene Mosca, and Brendan J. Whelan (Discussion Paper No. 7596, August 2013, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7596
“Peer Groups, Employment Status and Mental Well-being among Older Adults in Ireland,” by Eibhlin Hudson and Alan Barrett (Discussion Paper No. 7586, September 2013, .pdf format, 19p.). Note: Links to the abstract and full-text can be found at:
www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7586
“Why Has Growth in Spending for Fee-for-Service Medicare Slowed?” by Michael Levine and Melinda Buntin (Working Paper 2013-06, August 2013, .pdf format, 56p.). Note: Links to the abstract and full-text can be found at:
“Immigrants, Household Production and Women’s Retirement,” by Giovanni Peri, Agnese Romiti, and Mariacristina Rossi (Discussion Paper No. 7449, August 2013, .pdf format, 43p.). Note: Links to the abstract and full-text can be found at:
www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7549
“The Economic Impact of Non-Communicable Disease in China and India: Estimates, Projections, and Comparisons,” by David E. Bloom, Elizabeth T. Cafiero, Mark E. McGovern, Klaus Prettner, Anderson Stanciole, Jonathan Weiss, Samuel Bakkila, and Larry Rosenberg (w19335, August 2013, .pdf format, 38p.).
Abstract:
This paper provides estimates of the economic impact of non-communicable diseases (NCDs) in China and India for the period 2012-2030. Our estimates are derived using WHO’s EPIC model of economic growth, which focuses on the negative effects of NCDs on labor supply and capital accumulation. We present results for the five main NCDs (cardiovascular disease, cancer, chronic respiratory disease, diabetes, and mental health). Our undiscounted estimates indicate that the cost of the five main NCDs will total USD 27.8 trillion for China and USD 6.2 trillion for India (in 2010 USD). For both countries, the most costly domains are cardiovascular disease and mental health, followed by respiratory disease. Our analyses also reveal that the costs are much larger in China than in India mainly because of China’s higher income and older population. Rough calculations also indicate that WHO’s Best Buys for addressing the challenge of NCDs are highly cost-beneficial.
“Older Workers and Working Time,” by David N.F. Bell, Alasdair C. Rutherford (Discussion Paper No. 7546, August 2013, .pdf format, 26p.). Note: Links to the abstract and full-text can be found at:
www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7546
“Estimates of the Potential Insurance Value of Disability Insurance for Individuals with Mental Health Impairments,” by John Bound, Kyle J. Caswell and Timothy A. Waidmann (WP 2013-283, August 2013, .pdf format, 19p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=911
A. “If My Blood Pressure Is High, Do I Take It To Heart? Behavioral Impacts of Biomarker Collection in the Health and Retirement Study,” by Ryan D. Edwards (w19311, August 2013, .pdf format, 42p.).
Abstract:
Starting in 2006, respondents in the U.S. Health and Retirement Study were asked to submit biomarkers and were notified of certain results. Respondents with very high blood pressure were given a card during the interview; all respondents were notified by mail of their BP, hemoglobin A1c, and total and HDL cholesterol readings alongside recommended thresholds. About 5.8 percent received the high blood pressure card, and 5.4 percent had high A1c levels, an indicator of diabetes. Rates of undiagnosed high BP and diabetes according to these biomarkers were 1.5 and 0.7 percent. Average treatment effects of biomarker collection on the panel overall were effectively zero, but notification of rare and dangerous readings triggered new diagnoses, increased pharmaceutical usage, and altered health behaviors among small subsamples of respondents and their spouses. Very high BP or A1c readings raised new diagnosis and medication usage by 20 to 40 percentage points. Uncontrolled high BP triggered reductions in own smoking and own and spouse’s drinking. High A1c was associated with a 2.2 percent drop in weight and an increase in exercise among respondents without a previous diagnosis of diabetes, but with no changes among those already diagnosed, whose self-reported health and disability worsened.
B. “Early Retirement Incentives and Student Achievement,” by Maria D. Fitzpatrick and Michael F. Lovenheim (w19281, August 2013, .pdf format, 56p.).
Abstract:
Early retirement incentives (ERIs) are increasingly prevalent in education as districts seek to close budget gaps by replacing expensive experienced teachers with lower-cost newer teachers. Combined with the aging of the teacher workforce, these ERIs are likely to change the composition of teachers dramatically in the coming years. We use exogenous variation from an ERI program in Illinois in the mid-1990s to provide the first evidence in the literature of the effects of large-scale teacher retirements on student achievement. We find the program did not reduce test scores; likely, it increased them, with positive effects most pronounced in lower-SES schools.
“Can Benefits and Work Incentives Counseling be a Path to Future Economic Self-Sufficiency for SSI/SSDI Beneficiaries?” by Zafar E. Nazarov (WP2013-17, August 2013, .pdf format, 40p.). Note: Links to the abstract and full-text can be found at:
“Does Food Consumption Away From Home Make You Happier? An Empirical Investigation of the Elderly in Taiwan,” by Hung-Hao Chang (August 2013, .pdf format, 28p.). Note: Links to the abstract and full-text can be found at:
“Disease Incidence and Mortality Among Older Americans and Europeans,” by Aida Sole-Auro, Pierre-Carl Michaud, Michael D. Hurd, and Eileen Crimmins (WR1006, July 2013, .pdf format, 36p.). Note: Links to the abstract and full-text can be found at:
A. “Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection,” by Vanya Horneff, Raimond H. Maurer, Olivia S. Mitchell and Ralph Rogalla (WP 2013-286, June 2013, .pdf format, 30p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=902
B. “Representativeness of the Low-Income Population in the Health and Retirement Study,” by Erik Meijer and Lynn Karoly (WP 2013-273, July 2013, .pdf format, 33p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=904
A. “Evidence for Significant Compression of Morbidity In the Elderly U.S. Population,” by David M. Cutler, Kaushik Ghosh, and Mary Beth Landrum (w19268, July 2013, .pdf format, 51p.).
Abstract:
The question of whether morbidity is being compressed into the period just before death has been at the center of health debates in the United States for some time. Compression of morbidity would lead to longer life but less rapid medical spending increases than if life extension were accompanied by expanding morbidity. Using nearly 20 years of data from the Medicare Current Beneficiary Survey, we examine how health is changing by time period until death. We show that functional measures of health are improving, and more so the farther away from death the person is surveyed. Disease rates are relatively constant at all times until death. On net, there is strong evidence for compression of morbidity based on measured disability, but less clear evidence based on disease-free survival.
B. “Physician Agency and Competition: Evidence from a Major Change to Medicare Chemotherapy Reimbursement Policy,” by Mireille Jacobson, Tom Y. Chang, Joseph P. Newhouse, and Craig C. Earle, M.D. (w19247, July 2013, .pdf format, 71p.).
Abstract:
We investigate the role of physician agency and competition in determining health care supply and patient outcomes. A 2005 change to Medicare fees had a large, negative impact on physician profit margins for providing chemotherapy treatment. In response to these cuts, physicians increased their provision of chemotherapy and changed the mix of chemotherapy drugs they administered. The increase in treatment improved patient survival. These changes were larger in states that experienced larger decreases in physician profit margins. Finally while physician response was larger in more competitive markets, survival improvements were larger in less competitive markets.
“Private, Social and Self-Insurance for Long-Term Care in the Presence of Family Help – A Political Economy Analysis,” by Philippe De Donder and Pierre Pestieau (CESifo Working Paper No. 4352, July 2013, .pdf format, 28p.). Note: Links to the abstract and full-text can be found at:
www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19093219
“Employment Trends by Age in the United States: Why Are Older Workers Different?” by Sudipto Banerjee and David Blau (WP 2013-285, June 2013, .pdf format, 53p.). Note: Links to the abstract and full-text can be found at:
www.mrrc.isr.umich.edu/publications/index_abstract.cfm?ptid=1&pid=898
“Dementia Risk and Financial Decision Making by Older Households: The Impact of Information,” by Joanne W. Hsu and Robert J. Willis (2013-45, July 2013, .pdf format, 43p.). Note: Links to the abstract and full-text can be found at:
Note: PRC requires free registration before providing working papers.
“Retirement in Japan and the United States: Cross-national Comparisons using the Japanese Study of Aging and Retirement (JSTAR) and the U.S. Health and Retirement Study (HRS),” by Olivia S. Mitchell and John W. R. Phillips (WP 2013-05, July 2013, .pdf format, 48p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1108
A. “Early Retirement Incentives and Student Achievement,” by Maria D. Fitzpatrick and Michael Lovenheim (CESifo Working Paper No. 4347, July 2013, .pdf format, p.). Note: Links to the abstract and full-text can be found at:
www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19093144
B. “The Effect of Firms’ Partial Retirement Policies on the Labour Market Outcomes of their Employees,” by Martin Huber, Michael Lechner and Conny Wunsch (CESifo Working Paper No. 4343, July 2013, .pdf format, 34p.). Note: Links to the abstract and full-text can be found at:
www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19093136
“Golden Years or Financial Fears? Decision Making After Retirement Seminars,” by Steven G. Allen, Robert L. Clark, Jennifer Maki, and Melinda Sandler Morrill (w19231, July 2013, .pdf format, 44p.).
Abstract:
Many organizations provide retirement planning seminars to their employees as a benefit to help them make better informed retirement decisions. This study examines the participants in 85 seminars conducted by five companies in 2008 and 2009 to determine how much learning takes place and whether employees adjust retirement plans. Using surveys conducted before and after the seminars, we find that financial literacy and knowledge of retirement program parameters are significantly higher after the seminar. Employees with the largest increases in knowledge were most likely to change their planned retirement age and planned age of claiming Social Security benefits.
“Pension Fund Investment in Infrastructure: A Comparison between Australia and Canada,” by Georg Inderst and Raffaele Della Croce (OECD Working Papers on Finance, Insurance and Private Pensions, No. 32, July 2013, .pdf format, 54p.). Note: Links to the abstract and full-text can be found at:
A. “The Distributional Impact of Population Ageing,” by Omar A. Aziz, Christopher Ball, John Creedy and Jesse Eedrah (WP13/13, July 2013, .pdf format, 28p.). Note: Links to the abstract and full-text can be found at:
www.treasury.govt.nz/publications/research-policy/wp/2013/13-13/
B. “Population Ageing and the Growth of Income and Consumption Tax Revenue,” by Christopher Ball and John Creedy (WP 13/09, July 2013, .pdf format, 27p.). Note: Links to the abstract and full-text can be found at:
www.treasury.govt.nz/publications/research-policy/wp/2013/13-09/
A. “Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection,” by Vanya Horneff, Raimond Maurer, Olivia S. Mitchell, and Ralph Rogalla (w19206, July 2013, .pdf format, 39p.).
Abstract:
We evaluate lifecycle consumption and portfolio allocation patterns resulting from access to Guaranteed Minimum Withdrawal Benefit (GMWB) variable annuities, one of the most rapidly-growing financial innovations over the last two decades. A key feature of these products is that they offer access to equity investments with downside protection, hedging of longevity risk, and partially-refundable premiums. Welfare rises since policyholders exercise the product’s flexibility by taking withdrawals and dynamically adjusting their portfolios and consumption streams. Consistent with observed behavior, differences across individuals’ cash out and annuitization patterns result from variations in realized equity market returns and labor income trajectories.
B. “Optimal Annuitization with Stochastic Mortality Probabilities,” by Felix Reichling and Kent Smetters (w19211, July 2013, .pdf format, 39p.).
Abstract:
The conventional wisdom dating back to Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous market frictions do not break this sharp result. We modify the Yaari framework by allowing a household’s mortality risk itself to be stochastic. Annuities still help to hedge longevity risk, but they are now subject to valuation risk. Valuation risk is a powerful gateway mechanism for numerous frictions to reduce annuity demand, even without ad hoc ‘liquidity constraints.’ We find that most households should not annuitize any wealth. The optimal level of aggregate net annuity holdings is likely even negative.
C. “Did Age Discrimination Protections Help Older Workers Weather the Great Recession?” by David Neumark and Patrick Button (w19216, July 2013, .pdf format, 22p.).
Abstract:
We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their prime-age counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because stronger age discrimination laws protect older workers in normal times, but during an experience like the Great Recession severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections.
“Forecasting Effects of Smoking in Latin American Mortality,” by Alberto Palloni, Beatriz Novak, and Guido Pinto (Working Paper No. 2013-07, July 2013, .pdf format, 49p.). Note: There is no abstract for this paper.
“Who Uses the Roth 401(k), and How Do They Use It?” by John Beshears, James J. Choi, David Laibson, and Brigitte C. Madrian (w19193, July 2013, .pdf format, 17p.).
Abstract:
Using administrative data from twelve companies that added a Roth 401(k) option between 2006 and 2010, we describe the characteristics of Roth contributions. Approximately one year after the Roth is introduced, 9% of 401(k) participants have positive Roth balances. Roth participation is more than twice as high among 401(k) participants who were hired after the Roth introduction than among 401(k) participants who were hired before the Roth introduction. In essence, once an employee joins a 401(k) she becomes passive/inattentive, thereby reducing the likelihood of reacting to the introduction of a new Roth option. Conditional on contributing to the Roth, 66% of employee contributions go to the Roth, and half of employees contribute to both the Roth and another 401(k) account, consistent with a tax diversification motive. Roth usage is decreasing in age, less likely among women, and only weakly correlated with salary and tenure once we control for other employee characteristics.
“Pension Fund Investment in Infrastructure: A Comparison between Australia and Canada,” by Georg Inderst and Raffaele Della Croce (OECD Working Papers On Finance, Insurance And Private Pensions No. 32, July 2013, .pdf format, 54p.).
Abstract:
Australian and Canadian pension funds have been pioneers in infrastructure investing since the early 1990s. They also have the highest asset allocation to infrastructure around the globe today. This paper compares and contrasts the experience of institutional investors in the two countries looking at factors such as infrastructure policies, the pension system, investment strategies and governance of pension funds. The ‘Canadian model’ and the ‘(new) Australian model’ of infrastructure pose a challenge to the ‘private equity model’, dominant in Europe and the USA. Important lessons can be learnt by both policy makers and investors.
A. “Decision Complexity as a Barrier to Annuitization,” by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, and Olivia S. Mitchell (w19168, June 2013, .pdf format, 37p.).
Abstract:
We show that people have difficulty valuing annuities, and this, instead of a preference for lumpsums, helps explain observed low annuity demand. Although the median price at which people are willing to sell an annuity stream is close to the actuarial value, many responses diverge greatly from optimizing behavior. Moreover, people will pay substantially less to buy than to sell annuities. We conclude that boundedly rational consumers adopt “buy low, sell high” heuristics when confronting a complex trade-off. This suggests that many consumers do not make optimizing decisions, underscoring the difficulty of explaining cross-sectional annuity valuation differences using standard models.
B. “Evolving Choice Inconsistencies in Choice of Prescription Drug Insurance,” by Jason Abaluck and Jonathan Gruber (w19163, June 2013, .pdf format, 47p.).
Abstract:
We explore choice inconsistency over time within the Medicare Part D Prescription Drug Program. Using the full universe of Part D claims data, we revisit our earlier work on partial data to replicate our results showing large “foregone savings” among Part D enrollees. We also document that this foregone savings increases over time during the first four years of the Part D program. We then develop a rich dynamic structural framework that allows us to mathematically decompose the “foregone welfare” from inconsistent plan choices into components due to demand side factors, supply side factors, and changes in preferences over time. We find that the welfare cost of choice inconsistencies increases over time. Most importantly, we find that there is little improvement in the ability of consumers to choose plans over time; we identify and estimate little learning at either the individual or cohort level over the years of our analysis. Inertia does reduce welfare, but even in a world with no inertia we estimate that substantial welfare losses would remain. We conclude that the increased choice inconsistencies over time are driven by changes on the supply side that are not offset both because of inertia and because non-inertial consumers still make inconsistent choices.
Note: PRC requires free registration before providing working papers.
“Optimal Life Cycle Portfolio Choice with Variable Annuities Offering Liquidity and Investment Downside Protection,” by Vanya Horneff, Olivia S. Mitchell, Raimond Maurer, and Ralph Rogalla (WP 2013-04, June 2013, .pdf format, 39p.). Note: Links to the abstract and full-text can be found at:
www.pensionresearchcouncil.org/publications/document.php?file=1107
A. “Rising Demand for Long-Term Services and Supports for Elderly People,” by Stuart Hagen (June 2013, .pdf format, 40p.).
B. “Optimal Annuitization with Stochastic Mortality Probabilities,” by Felix Reichling and Kent Smetters (WP 2013-05, .pdf format, 44p.).
“Retirement and Cognitive Development: Are the Retired Really Inactive?” by Andries de Grip, Arnaud Dupuy. Jelle Jollesx, and Martin van Boxtel (Working Paper No 2013-11, June 2013, .pdf format, 40p.). Note: Links to the abstract and full-text can be found at:
“Expanding social insurance coverage in urban China,” by John Giles, Dewen Wang, and Albert Park (WPS No. 6497, June 2013, .pdf and ASCII text format, 52p.). Note: Links to the abstract and full-text can be found at:
A. “Medicaid Insurance in Old Age,” by Mariacristina De Nardi, Eric French, and John Bailey Jones (w19151, June 2013, .pdf format, 50p.).
Abstract:
The old age provisions of the Medicaid program were designed to insure poor retirees against medical expenses. However, it is the rich who are most likely to live long and face expensive medical conditions when very old. We estimate a rich structural model of savings and endogenous medical spending with heterogeneous agents, and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across single retirees.
We find that retirees with high lifetime incomes can end up on Medicaid, and often value Medicaid’s insurance features the most, as they face a larger risk of catastrophic medical needs at old ages, and face the greatest consumption risk. Finally, our compensating differential calculations indicate that retirees value Medicaid insurance at more than its actuarial cost, but that most would value expansions of the current Medicaid program at less than cost.
B. “Donative Behavior at the End of Life,” by Jonathan Meer and Harvey S. Rosen (w19145, June 2013, .pdf format, 20p.).
Abstract:
A general finding in the empirical literature on charitable giving is that among older individuals, both the probability of giving and the conditional amount of donations decrease with age, ceteris paribus. In this paper, we use data on giving by alumni at an anonymous university to investigate end-of-life giving patterns. Our main finding is that taking into account the approach of death substantially changes the age-giving profile for the elderly-in one segment of the age distribution, the independent effect of an increase in age on giving actually changes from negative to positive.
We examine how the decline in giving as death approaches varies with the length of time that a given condition is likely to bring about death, and the individual’s age when he died. We find that for individuals who died from conditions that bring about death fairly quickly, there is little decline in giving as death approaches compared to those who died from other causes. Further, the decline in giving as death approaches is steeper for the elderly (for whom death is less likely to be a surprise) than for the relatively young. These findings suggest that our primary result, that failing to take into account the approach of death leads to biased inferences with respect to the age-giving profile, is not merely an artifact of some kind of nonlinearity in the relationship between age and giving.
C. “Informal Care and Caregiver’s Health,” by Young Kyung Do, Edward C. Norton, Sally Stearns, and Courtney H. Van Houtven (w19142, June 2013, .pdf format, 30p.).
Abstract:
This study aims to measure the causal effect of informal caregiving on the health and health care use of women who are caregivers, using instrumental variables. We use data from South Korea, where daughters and daughters-in-law are the prevalent source of caregivers for frail elderly parents and parents-in-law. A key insight of our instrumental variable approach is that having a parent-in-law with functional limitations increases the probability of providing informal care to that parent-in-law, but a parent-in-law’s functional limitation does not directly affect the daughter-in-law’s health. We compare results for the daughter-in-law and daughter samples to check the assumption of the excludability of the instruments for the daughter sample. Our results show that providing informal care has significant adverse effects along multiple dimensions of health for daughter-in-law and daughter caregivers in South Korea.
D. “Propagation and Smoothing of Shocks in Alternative Social Security Systems,” by Alan Auerbach, Lorenz Kueng, and Ronald Lee (w19137, June 2013, .pdf format, 41p.).
Abstract:
Even with well-developed capital markets, there is no private market mechanism for trading between current and future generations, so a potential role for public old-age pension systems is to spread economic and demographic shocks among different generations. This paper evaluates the smoothing and propagation of shocks of three pay-as-you-go public pension schemes, based on the actual U.S. and German systems, which vary in the extent to which they rely on tax adjustments versus benefit adjustments to provide annual cash-flow budget balance. Modifying the Auerbach-Kotlikoff (1987) dynamic general-equilibrium overlapping generations model to incorporate realistic patterns of fertility and mortality and shocks to productivity, fertility and mortality, we evaluate the effectiveness of the three public pension systems at spreading the effects of such shocks. We find that the systems, particularly those that rely to some extent on tax adjustments, are effective at spreading fertility and mortality shocks, but that this is not the case for productivity shocks, for which the pension systems actually tend to concentrate the economic impact. These results suggest that both system design and the source of shocks are important factors in determining the potential of public pension arrangements to spread the burden of shocks.
“Careers and Mortality: What Do We Learn from Detailed Employment History Data?” by James M. Raymo, Andrew Halpern-Manners, and John R. Warren (CDE Working Paper 2013-05, June 2013, .pdf format, 40p.).
Abstract:
Our understanding of career influences on mortality is limited by reliance on relatively old data, use of surveys that contain only partial employment histories, and lack of consensus about how to best summarize detailed life history data. In this article, we address these limitations using data from the Wisconsin Longitudinal Study (WLS), a unique data source that contains mortality information through age 72 for one of the first cohorts exposed to growth in unstable employment and “bad jobs” for much of their adult lives. Results of parametric survival models show that less favorable employment histories are associated with a higher risk of death, but the nature of this relationship differs for men and women. The relationship is indirect for men and thus provides no support for the life course hypothesis that trajectories of employment experience should matter above and beyond employment characteristics and other correlates of mortality observed in late mid-life. For women, however, we find that inconsistent labor force participation across mid-life and loss of access to employer-provided health insurance in midcareer remain associated with a relatively high risk of mortality, net of temporally proximate correlates of death. These gender differences are unexpected in light of the theorized centrality of employment in men’s lives and provide an empirical basis for further efforts to advance our understanding of the pathways through which employment histories shape later-life well-being.
“Which Plan to Choose? The Determinants of Pension System Choice for Public School Teachers,” by Dan Goldhaber and Cyrus Grout (Working Paper 98, June 2013, .pdf format, 53p.). Note: Links to the abstract and full-text can be found at:
www.caldercenter.org/publications/calder-working-paper-98.cfm
“The Changing Well-being of Thai Elderly: An Update from the 2011 Survey of Older Persons in Thailand,” by John E. Knodel, Napaporn Chayovan, and Vipan Prachuabmoh (PSC Research Report No. 13-793, June 2013, .pdf format, 94p.). Note: Links to the abstract and full-text can be found at:
“Designing Better Pension Benefits Statements: Current Status, Best Practices and Insights from the Field of Judgment and Decisionmaking,” by Lauren A. Fleishman-Mayer, Angela A. Hung, Joanne K. Yoong, Jack Clift, and Caroline Tassot (WR-951, April 2013, .pdf format, 33p.). Note: Links to the abstract and full-text can be found at:
A. “Grandpa and the Snapper: the Wellbeing of the Elderly who Live with Children,” by Angus Deaton and Arthur A. Stone (w19100, June 2013, .pdf format, 26p.).
Abstract:
Elderly Americans who live with people under age 18 have lower life evaluations than those who do not. They also experience worse emotional outcomes, including less happiness and enjoyment, and more stress, worry, and anger. In part, these negative outcomes come from selection into living with a child, especially selection on poor health, which is associated with worse outcomes irrespective of living conditions. Yet even with controls, the elderly who live with children do worse. This is in sharp contrast to younger adults who live with children, likely their own, whose life evaluation is no different in the presence of the child once background conditions are controlled for. Parents, like elders, have enhanced negative emotions in the presence of a child, but unlike elders, also have enhanced positive emotions. In parts of the world where fertility rates are higher, the elderly do not appear to have lower life evaluations when they live with children; such living arrangements are more usual, and the selection into them is less negative. They also share with younger adults the enhanced positive and negative emotions that come with children. The misery of the elderly living with children is one of the prices of the demographic transition.
B. “The Effect of Medicare Advantage on Hospital Admissions and Mortality,” by Christopher C. Afendulis, Michael E. Chernew, Daniel P. Kessler (w19101, June 2013, .pdf format, 27p.).
Abstract:
Medicare currently allows beneficiaries to choose between a government-run health plan and a privately- administered program known as Medicare Advantage (MA). Because enrollment in MA is optional, conventional observational estimates of the program’s impact are potentially subject to selection bias. To address this, we use a discontinuity in the rules governing MA payments to health plans that gives greater payments to plans operating in counties in Metropolitan Statistical Areas with populations of 250,000 or more. The sharp difference in payment rates at this population cutoff creates a greater incentive for plans to increase the generosity of benefits and therefore enroll more beneficiaries in MA in counties just above versus just below the cutoff. We find that the expansion of MA on this margin reduces beneficiaries’ rates of hospitalization and mortality.
A. “Reforming the Railroad Retirement System,” by Steven A. Sass (WP No. 2013-13, June 2013, .pdf format, 26p.). Note: Links to the abstract and full-text can be found at:
crr.bc.edu/working-papers/reforming-the-railroad-retirement-system/
B. “How Do the Disabled Cope While Waiting for SSDI?” by Norma B. Coe, Stephan Lindner, Kendrew Wong and April Yanyuan Wu (WP No. 2013-12, June 2013, .pdf format, 38p.). Note: Links to the abstract and full-text can be found at:
crr.bc.edu/working-papers/how-do-the-disabled-cope-while-waiting-for-ssdi/
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