Demographic change, endogenous labor supply and the political feasibility of pension reform

Options for reforming unfunded public pension schemes that are now being discussed all share the feature that the burden induced by demographic change would be shifted towards presently living and away from unborn generations. Existing models of the political economy of pension reform can not explain why such reform options are being discussed at all. We present an alternative model in which the possibility of evasion of workers from payment of social security taxes is taken into account by modelling a labor supply function. It turns out that the burden of demographic change may fall completely or at least predominantly on the pensioners. Thus this type of model can much better explain recent trends in legislature on unfunded public pension systems in industrial democracies. Received: 7 January 1999/Accepted: 20 December 1999     

Excluding Institutionalized Elderly from Surveys: Consequences for Income and Poverty Statistics

Growing life expectancy and changes in financial, marriage and labour markets have placed the income position of the elderly at the center of scientific and political discourse. As a consequence, the last decades witnessed the publication of various influential reports that contained comparative statistics on old age income inequalities on the basis of international surveys. Common to these surveys is that they exclude the elderly who live in institutions. The divergence between the target population (e.g. the population aged 65 and over) and the survey population (e.g. the noninstitutionalized population aged 65 and over) that thus arises, might lead to important bias in the survey results. However, hardly any research has been conducted quantifying the direction and strength of this bias. This article tries to fill this gap and assesses the consequences of excluding the institutionalized elderly for the validity and international comparability of a number of indicators. Analyses with the Belgian Datawarehouse Labour Market and Social Protection show that the resulting bias is negligible for average equivalent pension income, but that assistance dependency among pensioners is underestimated by 10%. Furthermore, on the basis of international statistics, it is shown that the share of elderly in institutions varies substantially across countries. It is argued how this jeopardizes the international comparability of old age statistics. Finally, the article opens up a discussion on the meaning of lack of income and wealth among institutionalized elderly. It concludes that depending on how this question is answered, poverty will be under- or overestimated in countries with a high share of institutionalized elderly.     

Below-replacement fertility in east and southeast asia: Consequences and policy responses

Fourteen countries in Asia have total fertility rates at or below replacement level. This is more pronounced in China, Japan, the Republic of Korea, Singapore and Thailand. The implications are far-reaching and profound as they affect the age structure of the population, giving rise to population ageing, labour force shortages, increased elderly dependency ratios and feminization of the aged population. Evidence from European countries suggests that although fertility may rebound, in most countries it is highly unlikely that fertility will recover sufficiently to reach replacement level in the near future. Mortality reduction will continue to be an overriding policy goal, which would further enhance the ageing process. Therefore, the greatest challenge will be to pension systems, old-age care systems, and health systems or health insurance. This paper first examines the fertility transition in five low-fertility countries. It then discusses the policy measures that these countries have adopted in response to low fertility and population ageing. The paper concludes with the policy implications for healthcare, social care, income security and caregiving facility, and the scope for further study.     

Population Aging and the Rising Cost of Public Pensions

Rapid population aging is raising concerns about the sustainability of public pension systems in high‐income countries. The first part of this study identifies the four factors that determine trends in public pension expenditures: population aging, pension benefit levels, the mean age at retirement, and the labor force participation rate. The second part presents projections to 2050 of the impact of demographic trends on public pension expenditures in the absence of changes in pension benefits, labor force participation, and age at retirement. These projections demonstrate that current trends are unsustainable, because without reforms population aging will produce an unprecedented and harmful accumulation of public debt. A number of projection variants assess the potential impact of policy options aimed at improving the sustainability of public pension systems. Although the conventional responses are considered, particular attention is given to the demographic options of encouraging higher fertility and permitting more immigration. This analysis is illustrated with data from the seven largest OECD countries.     

Tax reform,population ageing and the changing labour supply behaviour of married women

The burden of financing retirement incomes in an ageing population is predicted to rise sharply in future decades. This paper investigates the effects of reforms to the Australian tax-benefit system involving a greater reliance on proportional taxation for raising revenue and a more targeted welfare system for cutting government expenditure, in order to reduce expected budget deficits. Estimates of changes in net incomes and hours of work suggest that reforms of this kind shift the tax burden to lower and middle income households with a second earner and that they can have counter-productive labour supply effects. The study explores the impact of projected increases in female work force participation and illustrates the importance of shifts in the labour supply of married women in predicting the fiscal effects of demographic change.I wish to thank the discussants of this paper, Sijbren Cnossen and Hiromitsu Ishi, for their detailed and constructive comments which have been most helpful in revising the paper. Thanks are also due to John Buchanan, Glenn Jones, John McCallum and Elizabeth Savage for their comments and suggestions.This research has been supported by a grant from the Australian Research Council.     

Reference Groups and Pensioners’ Subjective Economic Well-Being in Europe

This study contributes to the interdisciplinary debate over the effects of absolute and relative income on subjective well-being by introducing country-level measures of income into the analysis of pensioners’ economic well-being. Both the relevance of alternative reference groups for different phases of old age, measured through median incomes, and the effect of general income inequality within countries are explored. Analyses are based on the cross-sectional components of the survey European Union Statistics on Income and Living Conditions from 2005 to 2011, containing information on 458,769 pensioners from 31 European countries. With the multilevel linear regression analysis method, the effects of different income measures are analyzed both at the individual and country levels. The main result shows that the average income level of pensioners within countries hold spillover effects strong enough to conclude other pensioners constitute a relevant reference point. Pensioners’ high income level decreases individual income adequacy regardless of age. Results also indicated the labour market group having varying effects on different age groups. The general income inequality does not affect pensioners’ subjective economic well-being.     

Gender,power, and population change

This report describes fertility and mortality trends in developing countries and discusses how gender is defined and measured in some countries. The discussion relies on case studies and country statistics to reveal how gender shapes the lives of all people in all societies. Gender is defined as the different roles women and men play in society. Gender is manifested in institutional structures, power relations, and culturally determined behavior. In no society do women and men share equal roles. The effects of inequality for women are manifested differently between countries. The 1994 International Conference on Population and Development in Cairo established the goal of gender equality. Educational enrollment and illiteracy are two measures of gender inequality that affect opportunities in society for advancement, power, and status. Girls are less likely to be enrolled in school than boys and more likely to have higher absenteeism rates. In China, absenteeism of girls is actually increasing under reforms. Marriage practices may devalue the investment in girls' education. Women experience different working conditions: they work longer hours, are paid less or not at all, and hold lower-status jobs. The exceptions are found in the Philippines and Brazil, where women hold more professional jobs than men. Women carry multiple responsibilities that consume time and prevent greater involvement in public life. Dowry and brideprice can constrain family relations. Women generally have fewer inheritance rights. Few women hold high-level public office positions or parliamentary seats. The extent to which gender inequality is reflected in demographic processes depends upon the gap in power in education, employment, and income. The relationship between gender and demographic processes is a central topic currently being researched.     

Pension reform, employment by age, and long-run growth

We study the effects of pension reform on hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate growth in a four-period OLG model. The model explains important facts well for many OECD countries. Our simulation results prefer an intelligent pay-as-you-go system above a fully funded private system. Positive effects on employment and growth are the strongest when the pay-as-you-go system includes a tight link between individual labor income and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base.     

Population growth and poverty in the developing world

The links between rapid population growth and the absolute poverty currently affecting 780 million people in the developing countries (excluding China and other centrally planned economies) were examined. Absolute poverty is defined as having less than the income necessary to ensure a daily diet of 2150 calories per person ($200 per person a year in 1970 United States dollars). Focus is on poverty and demography in the developing world (defining poverty; income, fertility and life expectancy; demographic change and poverty), effect of poverty on fertility, family planning programs and the poor, and the outlook for the future. Rapid population growth stretches both national and family budgets thin with the increasing numbers of children to be fed and educated and workers to be provided with jobs. Slower per capita income growth, lack of progress in reducing income inequality, and more poverty are the probable consequences. Many characteristics of poverty can cause high fertility -- high infant mortality, lack of education for women in particular, too little family income to invest in children, inequitable shares in national income, and the inaccessibility of family planning. Experience in China, Indonesia, Taiwan, Colombia, Korea, Sri Lanka, Cuba and Costa Rica demonstrate that birthrates can decline rapidly in low income groups and countries when basic health care, education, and low-cost or free family planning services are made widely available.     

Welfare measurement in labour supply models with nonlinear budget constraints

This paper is concerned with the measurement of individual welfare in labour supply models which allow for the impact of income taxation and income support schemes on labour supply decisions. The paper is motivated by the concern over the need to have measures which can be interpreted easily, which can be compared with net income, and which can be meaningfully aggregated. To illustrate the issues we use estimates of a discrete choice model of labour supply for United Kingdom lone mothers to compute alternative welfare measures which might be considered as having intuitive appeal to policy-makers. We compute welfare change based on these measures arising from a recent reform of the child support payments system. Received: 25 February 1997/Accepted: 12 March 1998     

Welfare Regimes for Aging Populations: No Single Path for Reform

We consider recent trends in pension policies in OECD countries in light of demographic aging associated with welfare regime type (Liberal, Social Democratic, Continental, and Southern European). These regime types represent different responsibilities assumed for social security on the part of the market, the state, and the family. While there are significant differences in labor market characteristics, the demographic similarities in aging bring similar pressures for pension reforms across OECD countries. These reforms address fiscal issues in state pensions, typically by increasing the length of the working life, placing more of the pension responsibility on individuals, or converting to defined‐contribution approaches. Our study shows that there is no single path for pension reform. While there are some variations, welfare states tend to follow their traditional paths, which differ across welfare regime types.     

A growth model with population as an endogenous variable

Abstract This paper presents a recursive model of economic growth in which particular attention is paid to the demographic assumptions and their effects on the growth of income per head. The labour inputs depend both on the growth of the labour force and on the effectiveness of labour supplied, which in turn depends on the level of consumption per head, given the stock of capital and natural resources. Population growth is a function of two types of birth control programme; one is the subsidized supply of birth control instruments and the other is a bonus scheme which pays people not to have children. In examining the solution of the model, emphasis is placed on the sensitivity of the growth rate to variations in the allocation of the state's budget among various growth and non-growth inducing expenditures, including birth control. A numerical simulation, based on South Asian data, indicates the kind of calculation that can be made in this type offully recursive model.     

Land grabbing: a preliminary quantification of economic impacts on rural livelihoods

Global demands on agricultural land are increasing due to population growth, dietary changes and the use of biofuels. Their effect on food security is to reduce humans’ ability to cope with the uncertainties of global climate change. In light of the 2008 food crisis, to secure reliable future access to sufficient agricultural land, many nations and corporations have begun purchasing large tracts of land in the global South, a phenomenon deemed “land grabbing” by popular media. Because land investors frequently export crops without providing adequate employment, this represents an effective income loss for local communities. We study 28 countries targeted by large-scale land acquisitions [comprising 87 % of reported cases and 27 million hectares (ha)] and estimate the effects of such investments on local communities’ incomes. We find that this phenomenon can potentially affect the incomes of ~12 million people globally with implications for food security, poverty levels and urbanization. While it is important to note that our study incorporates a number of assumptions and limitations, it provides a much needed initial quantification of the economic impacts of large-scale land acquisitions on rural livelihoods.     

Geopolitical Aspects of Population in the Twenty‐First Century

Over the second half of the twentieth century rapid population growth in the less developed countries has redrawn the global demographic map. Many once‐poor countries have also experienced strong economic growth, which in combination with the demographic change has yielded marked shifts in the world's economic balance, with far‐reaching geopolitical implications. At the same time, low fertility in much of the developed world presages a future of population shrinkage, accompanied by pronounced population aging. In per capita terms, the economic advantages of the developed countries will likely persist for many years, but their actual and potential falls in population may accentuate their loss of relative economic power and eventually lead to marginalization of their international standing and influence. Preventing population shrinkage will be an urgent task for them, requiring either large‐scale immigration (likely to be ruled out) or raising the birth rate. Existing pro‐family policies have had at best modest effects on fertility levels. Two novel approaches are described that would plausibly have greater impact. One would counteract the disproportionate influence of older voters in the electorate by granting voting rights to all citizens, allowing custodial parents to vote on behalf of their children. The second would reform the public pension system to reestablish the link between the financial security of retired persons and the number of children they have raised to productive adulthood.     

中国老年人口收入差异研究

老年人口是一个弱势群体,但是也有很强的异质性,老年人口的收入差异是一个值得关注的问题。基于中国老龄科研中心2000年"中国城乡老年人口一次性抽样调查"的数据,采用"五分法"对中国老年人口的收入差异进行分析,发现老年人口内部的收入差异较大,总收入的一半以上集中在20%收入最高的老年人群当中。文章还分别考察了不同收入组的收入结构以及不同特征老年人口的收入差异情况,并根据这些发现提出若干政策建议,以缩小老年期的收入差异,建设一个和谐的老龄社会。     

俄罗斯的中亚劳务人员对双边关系的影响

俄罗斯独立后,一直面临严重的人口危机,同时也有移民大批进入。俄罗斯的移民政策法规也在不断调整。中亚地区是俄罗斯主要的移民地区,已经形成了独特的劳务经济。劳务人员将对中亚国家国民经济、内政外交、经济结构以及自身的社会结构产生重要影响。     

中国农村老年人养老规划的现状及影响因素研究

制定养老规划是农村老年人积极应对养老风险的重要举措。利用中国老年社会追踪调查2018年数据,文章分析了农村老年人的养老规划现状及其影响因素,发现约34.6%的农村老年人实际有养老规划,约13.8%的老年人误判了自身的养老规划状况;现金储蓄是农村老年人的主要规划方式。相比农村居住的非留守老年人,农村留守老年人和进城农村老年人有养老规划的比例更高。农村老年人的经济收入对其是否做养老规划既存在显性影响,也具有通过养老观念的中介作用而表现出的显著的隐含影响。在养老责任观念的中介作用下,认同由政府和社会承担养老责任的养老观念会促使有劳动收入、子女给予经济支持和有新型农村养老保险的老年人做养老规划的可能性下降。     

A note on intergenerational risk sharing and the design of pay-as-you-go pension programs

Different versions of pay-as-you-go public pension programs may have entirely different effects on the intergenerational distribution of income risk. If the pension benefit is a fixed proportion of previous labor income, a pay-as-you-go program increases the net income risk of all generations. On the other hand, a pay-as-you-go program characterized by a fixed labor income tax rate and uncertain pension benefits provides intergenerational risk sharing. Received: 10 December 1996 / Accepted: 24 November 1997     

Social security reform and the support for public education

Old age pensions and public education account for a large share of public budgets. We link both programs through a tax-transfer system that is also sensitive to labor market distortions. We analyze the impact that alternative pension reforms have, through the political process, on publicly financed education. We explain how changes in the pension system design affect the link between the two programs and also labor market incentives. These effects, if they exist, act in opposite directions. Overall, we find that most proposals that entail a partial privatization of pensions reduce the willingness of the society to fund public education.