Optimal Retirement with Increasing Longevity

Bloom, David E.; Canning, David; Moore, Michael J.

doi:10.1111/sjoe.12060

Cited by 70 publications

(77 citation statements)

References 55 publications

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“…Changes in retirement behaviour, and therefore in the average length of working life, do not occur automatically as longevity rises and health improves. In fact, from a life-cycle consumption model point of view, it may be optimal to spend more time in retirement as longevity increases (Bloom et al 2014;Leinonen et al 2015). What is presented here is a best-case scenario, in terms of both behavioural responses and the speed of policy-induced changes.…”

Section: Longer Working Livesmentioning

confidence: 99%

Measuring dependency ratios using National Transfer Accounts

Barslund¹,

Werder²

2017

Populationyearbook

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It is now widely recognised that the socio-economic changes that ageing societies will bring about are poorly captured by the traditional demographic dependency ratios (DDRs), such as the old-age dependency ratio that relates the number of people aged 65+ to the working-age population. Compared to the older people of today, future older generations will be in better health, and will likely work longer. However, strictly from a public finance perspective, the extent to which the DDRs capture the challenges that stem from ageing depends on future changes in the age structure of the population, in behavioural patterns, and in age-related public transfers. Combining population projections and National Transfer Accounts (NTA) data (i.e., data on age-specific public transfers), we construct a 'transferbased' demographic dependency ratio for seven European countries up to 2050. We then compare the quantitative impact of the transfer-based DDR with that of the traditional DDR for three different policy responses to population ageing: net immigration, healthy ageing, and longer working lives. This is done by linking agespecific public health transfers and labour market participation rates to changes in mortality. Four main findings emerge. First, the simple old-age dependency ratio overestimates the future public finance challenges faced by the countries studied, and substantially so for some countries, such as Austria, Finland, and Hungary. Second, healthy ageing (i.e., keeping health transfers constant for a given mortality rate) has a modest effect on public finances, except in the case of Sweden, where it plays an important role. Third, the long-run effect of immigration is captured well by the traditional DDR measure if the common assumption that immigrants are similar to natives is maintained. The immediate to short-term impact of immigration tends to be overstated by the traditional DDR measure. Finally, increasing the average * Mikkel Christoffer Barslund (corresponding author), Centre for European Policy Studies, Place du Congrès,

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Section: Longer Working Livesmentioning

confidence: 99%

Measuring dependency ratios using National Transfer Accounts

Barslund¹,

Werder²

2017

Populationyearbook

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“…While most of the conventional public pension literature ignores issues of health and longevity, there exists a smaller literature investigating the impact of health on labor supply and retirement when health is exogenous (Philipson and Becker, 1998;French, 2005;Heijdra and Romp, 2009;French and Jones, 2011;Imrohoroglu and Kital, 2012;Bloom, Canning and Moore, 2014) and when it is endogenously determined via the Grossman model of health capital accumulation (Wolfe, 1985;Galama et al, 2013). In Wolfe (1985), however, retirement is not determined by welfare maximization, and in Galama et al (2013) longevity is not affected by health investment.…”

Section: Related Literaturementioning

confidence: 99%

“…Heijdra and Romp (2009) analyze the impact from pension reform in a general equilibrium setting, in the presence of a realistic -but exogenously given -mortality process. Bloom, Canning and Moore (2014) develop a life cycle model and use it to gauge the impact of changes in income and life expectancy on age of retirement. Calibration to the US suggests that the optimal retirement age decreases because of an income effect when wages grow despite increases in longevity.…”

Section: Related Literaturementioning

confidence: 99%

Optimal Social Insurance and Health Inequality

Grossmann

Strulik

2017

SSRN Journal

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This paper integrates into public economics a biologically founded, stochastic process of individual ageing. The novel approach enables us to investigate the interaction between health and retirement policy in order to quantitatively characterize the optimal joint design of the social insurance system today and in response to future medical progress, and its implications for health inequality. Calibrating our model to Germany, we find that currently the public health and pension system is approximately optimal. Future progress in medical technology calls for a potentially drastic increase in health spending that typically shall be accompanied with a lower pension savings rate and a higher retirement age. Medical progress and higher health spending is predicted to lead to more health inequality.

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“…It is often argued that utility itself depends on health (see for example Grossman, 1972;Ehrlich and Chuma, 1990;Hall and Jones, 2007;Kuhn et al, 2015;Bloom et al, 2014b;Dalgaard and Strulik, 2014). We could capture some aspects of the utility-enhancing effect of health investments by adding a term to the utility function that increases with the gender-specific health levels.…”

Section: Endogenous Healthmentioning

confidence: 99%

The Contribution of Female Health to Economic Development

Bloom¹,

Kühn²,

Prettner³

2015

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We analyze the economic consequences for less developed countries of investing in female health. In so doing we introduce a novel micro-founded dynamic general equilibrium framework in which parents trade off the number of children against investments in their education and in which we allow for health-related gender differences in productivity. We show that better female health speeds up the demographic transition and thereby the take-off toward sustained economic growth. By contrast, male health improvements delay the transition and the take-off because ceteris paribus they raise fertility. According to our results, investing in female health is therefore an important lever for development policies. However, and without having to assume anti-female bias, we also show that households prefer male health improvements over female health improvements because they imply a larger static utility gain. This highlights the existence of a dynamic trade-off between the short-run interests of households and long-run development goals. Our numerical analysis shows that even small changes in female health can have a strong impact on the transition process to a higher income level in the long run. Our results are robust with regard to a number of extensions, most notably endogenous investment in health care.

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Optimal Retirement with Increasing Longevity

Cited by 70 publications

References 55 publications

Measuring dependency ratios using National Transfer Accounts

Measuring dependency ratios using National Transfer Accounts

Optimal Social Insurance and Health Inequality

The Contribution of Female Health to Economic Development

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