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2024Feb
CEPAR
Impact of Retirement and Re-employment on the Life Satisfaction of Older Adults in Korea

Do Won Kwak and Jong-Wha Lee

Abstract: An aging workforce has adversely impacted the economy in Korea, amid growing fiscal challenges associated with providing pension and healthcare for older people. The increasing elderly population has raised concerns about the diminishing quality of life among seniors. This study explores the impact of retirement and re-employment on the life satisfaction of older individuals, utilizing longitudinal data from 2008 to 2020. To address endogeneity concerns, we use statutory eligibility ages for retirement pension benefits and the expected monetary value of these benefits as instrumental variables for retirement and re-employment status. Our findings suggest that retirement leads to a significant reduction in overall life satisfaction among older individuals. Conversely, life satisfaction improves significantly when retired individuals are re-employed. This study examines the dynamic effects of retirement on life satisfaction by employing the event study framework and investigating the reversal of retirement through re-employment. The findings emphasize that the life satisfaction of older individuals can be enhanced through policies that enable them to extend their employment or pursue new opportunities after retirement.

Keywords: aging, retirement, re-employment, life satisfaction, longitudinal study, pension

 

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2024Feb
Annamaria Olivieri
Stochastic Assessment of Special-Rate Life Annuities

Annamaria Olivieri and Daniela Tabakova

Abstract: Special-rate life annuities offer customized annuity rates, based on the lifestyle or health status of the individual. Their main purpose is to encourage the annuity demand, which is still underdeveloped in many markets; as better annuity rates are quoted for individuals showing a higher mortality profile, the number of individuals attracted by life annuities could increase. Providers should then gain larger pool sizes; however, this is possibly matched by a greater heterogeneity of the pool, due to several risk classes defined by the annuity design. Heterogeneity emerges not only in terms of different life expectancies, but also in respect of the dispersion of the lifetime distribution; indeed, situations resulting in a lower life expectancy also show greater variability of the lifetime. As it is well-known, pooling effects are reinforced by the pool size, while they are weakened by its heterogeneity, with a possibly unclear impact on the overall longevity risk to which the provider is exposed.

In this paper we investigate the longevity risk profile of an annuity pool consisting of several risk classes. We consider both the idiosyncratic and aggregate components of the risk, by modelling the random number of deaths and assuming a stochastic mortality dynamics. The heterogeneity of risk classes is represented alternatively in a deterministic and stochastic setting.

Our conclusions are in line with similar findings discussed in the literature, but obtained in a deterministic framework. Results suggest that the longevity risk profile of the provider is not significantly undermined by a greater pool heterogeneity, with a prevalence of the aggregate component whatever the pool composition.

Keywords: Underwritten annuities, Standard annuities, Enhanced annuities, Impaired annuities, Preferred risks, Substandard lives, Stochastic mortality, Longevity risk, Heterogeneity.

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2023Dec
climate change CEPAR
Global Economic Impacts of Physical Climate Risks

Roshen Fernando and Caterina Lepore

Abstract: This paper evaluates the global economic consequences of physical climate risks under two Shared Socioeconomic Pathways (SSP 1-2.6 and SSP 2-4.5) using firm-level evidence. Firstly, we estimate the historical sectoral productivity changes from chronic climate risks (gradual changes in temperature and precipitation) and extreme climate risks (representative of heatwaves, coldwaves, droughts, and floods). Secondly, we produce forward-looking sectoral productivity changes for a global multisectoral sample of firms. For floods, these estimates account for the productivity changes from the damage to firms’ physical capital. Thirdly, we assess the macroeconomic impact of these shocks within the global, multisectoral, intertemporal general equilibrium model: G-Cubed. The results indicate that, in the absence of additional adaptation relative to that already achieved by 2020, all the economies would experience substantial losses under the two climate scenarios, and the losses would increase with global warming. The results can be useful for policymakers and practitioners interested in conducting climate risk analysis.

Keywords: Climate change, Climate risks, Extreme events, Macroeconomic modelling

 

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2023Dec
Migration
Impact of Demographic Trends on Antimicrobial Resistance

Roshen Fernando

Abstract: Medical advancements in the twenty-first century significantly contribute to increased longevity and the current global demographic trends, including population aging. While rising antimicrobial resistance (AMR) threatens the sustainability of longevity prospects, the current demographic trends also contribute to worsening AMR. We investigate the role of four demographic indicators (population growth, population aging, population density, and urbanization) in the resistance growth of seven pathogens against twelve antimicrobials in 30 countries from 2000 to 2020. We observe heterogeneous responses of different antimicrobial drug-pathogen combinations to demographic trends. We observe that the demographic trends could affect resistance growth more than antimicrobial consumption growth in some antimicrobial- drug pathogen combinations. We emphasize the importance of a broader exploration of factors affecting AMR evolution from a one-health approach and enhanced AMR surveillance, among others, to produce effective policy responses to tame AMR.

Keywords: Antimicrobial resistance, Infectious diseases, Demographic Trends, Population Growth, Population Aging, Urbanization, Econometrics, Machine Learning

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2023Dec
cepar award
Impact of Physical Climate Risks on Antimicrobial Resistance

Roshen Fernando

Abstract: Antimicrobial resistance (AMR) and climate change are interrelated complex challenges to humanity. We investigate the role of physical climate risks in the resistance growth of seven pathogens against twelve antimicrobials in 30 countries from 2000 to 2020. Our empirical assessment considers both chronic (gradual changes in temperature, precipitation, and relative humidity) and extreme climate risks (representing extreme precipitation events, droughts, heatwaves, coldwaves, and storms). We observe heterogeneous responses of different antimicrobial drug-pathogen combinations to physical climate risks. We observe that the physical climate risks could affect resistance growth more than antimicrobial consumption growth in some antimicrobial-drug pathogen combinations. We also illustrate stronger effects of extreme climate risks on resistance growth compared to chronic risks in some antimicrobial-drug pathogen combinations. We emphasize the importance of a broader exploration of factors affecting AMR evolution from a one-health approach and enhanced AMR surveillance, among others, to produce effective policy responses to tame AMR.

Keywords: Antimicrobial resistance, Infectious diseases, Climate Change, Econometrics, Machine Learning

 

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2023Nov
health model
Actuarial Modelling of Australian Population Retirement Risks: An Australian Functional Disability and Health State Model

Kyu Park and Michael Sherris

Abstract: With increasing numbers of Australians in or entering retirement, the modelling of functional disability and health status is critical to the insuring and financing of retirement risks for both governments and individuals. The multi-state modelling of these risks underlie projections of the population by functional disability status, the estimation of healthy life expectancy, the sustainable financing of public aged care and innovations in private long-term care insurance. Developing a model for the Australian population is challenging because of the lack of longitudinal health and mortality data for older Australians. We use the cross-sectional data in the Survey of Disability, Ageing and Carers for years 1998, 2003, 2009, 2012, 2015 and 2018, providing prevalence of functional disability and illness across 20 years, to estimate a multi-state transitions model that best explain the observed changes of prevalence in Australia. We develop and estimate for the first time an Australian model for transitions between five states (healthy, disabled but not ill, ill but not disabled, disabled and ill, and dead) using age, sex and trend factors for those aged 60 or greater. Functional disability is defined by autonomy of activities of daily living. Illness is defined by chronic illness conditions including heart problems, diabetes, lung disease, and stroke. Model estimation is done numerically. Using the fitted model, we estimate yearly transition probabilities, life expectancy of retirees and projected population distributions by functional disability and health states. We also provide a comparison of the results with previous studies.

Keywords: functional disability, activities of daily living, multiple state model, cross-sectional data, life expectancy, long-term care insurance

 

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2023Oct
Financial growth
Postcode-Level Reverse Mortgages: Longevity Risks, House Price Risks, and Welfare Gain

Lingfeng Lyu

Abstract: This research evaluates the Home Equity Access Scheme (HEAS) versus downsizing for older Australians, factoring in elements such as means tests, health expenditures, taxes, and home maintenance. It builds on a utility approach, considering region-specific house prices and longevity risks. Findings reveal that HEAS enhances healthy aging for healthy and mildly disabled retirees more than downsizing. This scheme benefits cash-poor but asset-rich retirees who have lower bequest motives, derive higher satisfaction from spacious homes, and prioritise long-term gratification. However, spatial disparities in housing prices and life expectancy decrease the uptake of HEAS, offering new perspectives on housing decisions among seniors in Australia.

Keywords: Home Equity Release, Reverse Mortgage, Downsizing, Healthy Ageing, Utility Approach.

 

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2023Oct
Ageing data
Hierarchical House Price Model incorporating Geographical and Macroeconomic Factors

Lingfeng Lyu

Abstract: This paper presents a tri-level hierarchical approach to house price modelling at the postcode level, which is considered the most granular geographical scale, incorporating macroeconomic influences from the national level and integrating data from the largest sub-state level (SA4). By employing a Risk Premium - Principal Component Analysis (RP-PCA) for SA4-level risk factors and combining these with national-level risk factors, a vector autoregressive (VAR) model is developed. This geographically conditional multi-factor model with a hierarchical structure offers enhanced short-term prediction accuracy while maintaining long-term forecasting capabilities. The model’s predictive accuracy is further enhanced by introducing an empirical copula to describe the dependence structure of one-step residuals across various suburbs. This methodology grants a dynamic and granular view of housing price trends in Australia. Key determinants like interest rate shifts, GDP growth, and exchange rate variances play a crucial role, particularly in urban areas in metropolitan cities. The analysis of economic and demographic factors on the SA4 level indicates that elements such as home debt increments, wage fluctuations, and population shifts are pivotal in shaping housing prices, underscoring the significance of a granular regional analysis.

Keywords: House price modelling, Hierarchical framework, Macroeconomic variables, Risk Premium - Principal Component Analysis (RP-PCA)

 

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2023Jul
Rural-Urban Migration and the Health of Left-Behind Older Adults

Tess Stafford, Xiaoyun Zhang and Katja Hanewald

Abstract: We study the effect of rural-urban migration on the well-being of older adults that re- main in rural communities in China, a country that is experiencing extensive rural-urban migration and rapid population aging. We exploit China’s historic “sent-down youth” program which temporarily relocated millions of urban youth to rural villages and created lasting social ties between sending cities and receiving villages. These ties, coupled with present-day variation in urban growth, create exogenous variation in present-day rural-urban migration rates, allowing us to uncover causal effects of migration. Results suggest that migration negatively affects the physical, cognitive, and emotional health of older adults that remain behind. (JEL I12, I15, J24, J61, O15, O18, R23)

 

 

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