تغییرات جمعیتی، سیستم های امنیت اجتماعی و پس انداز
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24173||2007||23 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Monetary Economics, Volume 54, Issue 1, January 2007, Pages 92–114
In theory, improvements in healthy life expectancy should generate increases in the average age of retirement, with little effect on savings rates. In many countries, however, retirement incentives in social security programs prevent retirement ages from keeping pace with changes in life expectancy, leading to an increased need for life-cycle savings. Analyzing a cross-country panel of macroeconomic data, we find that increased longevity raises aggregate savings rates in countries with universal pension coverage and retirement incentives, though the effect disappears in countries with pay-as-you-go systems and high replacement rates.
Demographics can affect aggregate savings behavior. Most savings models that account for demographic factors focus on the fact that people at different ages save at different rates. In these models, demographic change affects aggregate savings through changes in the age structure of the population (e.g., Deaton and Paxson, 1997; Kelley and Schmidt, 1996; Higgins and Williamson, 1997; Higgins, 1998). However, we consider another fundamental demographic factor that may affect saving behavior: the length of life. In a simple life-cycle model, a longer life span need not affect savings rates; the optimal response to a longer life span can be a corresponding proportional increase in working lifetime, with savings rates while working remaining fairly steady. However, there is empirical evidence at the microeconomic level (Hurd et al., 1998) and at the macroeconomic level (Bloom et al., 2003) that higher life expectancy increases savings rates. This raises the question of why people who expect to live longer should choose to save more rather than simply retire later. We discuss four mechanisms through which life expectancy can affect savings: increased sickness in old age may prevent longer working lives; the influence of compound interest and wage growth over a longer working life may produce a wealth effect; imperfect annuity markets may reduce the effective returns to savings in high-mortality environments due to the chance of dying before spending one's wealth; and retirement incentives in social security systems may discourage or prevent longer worker lives. The effects of longer life spans on saving are potentially large. Deaton and Paxson (2000) have shown that variations in age structure made only a modest contribution to the savings boom in Taiwan over the last 40 years, due to the fact that variations in savings rates by age are not very pronounced. Using a simulation model, Lee et al. (2000) argue that, given a fixed retirement age, increases in longevity in Taiwan can explain the rise in savings rates at every age, and its savings boom. We use theoretical and empirical analyses to argue for a link between longevity and savings based on the existence of social security programs that offer incentives to retire at a fixed age. Gruber and Wise (1998) and Blondal and Scarpetta (1997) show that social security rules in OECD countries create powerful financial incentives to retire at a particular age and that many workers appear to respond to these incentives. This leads to a clustering of retirement at the ages at which retirement incentives are introduced in each country. Similar social security arrangements also exist in many countries outside the OECD. For example, Social Security Administration (2002) reports data on social security in Taiwan. When covered workers reach 60 years of age, they are eligible upon retirement to receive a lump sum payment based on their contributions to the system. A worker receives a sum equal to his or her monthly salary for each of the first 15 years of social security contributions. This increases to 2 months’ salary for the next 15 years of contributions. This lump sum is capped at 45 months of salary, though an extra 5 months worth of salary can be added to the lump sum by continuing to work to age 65. Thus, if one has worked to age 65, benefits no longer increase over time, although contributions continue. Two additional factors may also influence the decision to retire at younger ages. Because productivity declines with advancing age, the average wage on which the lump sum is based may decrease over time,1 and expected benefits may decrease. In addition, as one gets older, the probability of dying before collecting benefits increases. Thus, Taiwanese workers have an incentive not to extend their working careers past 65. This paper explores the hypothesis that the effect of life expectancy on national savings rates depends on the features of the social security system in place. As we show theoretically, with no social security system and perfect capital markets, the optimal response to an improvement in life expectancy is to lengthen of the working life, with no (or possibly a negative) effect on savings rates. However, in countries where social security provisions create strong incentives to retire, the retirement age may effectively be fixed, so that longer life spans lead to longer periods of retirement and greater pre-retirement savings. We first approach the issue from a theoretical perspective. Our model is similar to Blanchard (1985) in that it considers individual savings decisions over time and aggregates across cohorts to find national savings. Our innovation is to allow retirement decisions, as well as savings decisions, to depend on life expectancy. Aggregation gives us an equation whose parameters we estimate using data for a panel of countries over the period 1960–2000. The aggregate equation includes the usual demographic and economic growth effects on savings found in the literature. For our empirical analyses, we construct data on key features of the social security system in each country of the world. We summarize each system by four variables. Two dummy variables indicate whether or not the system covers all workers (universal coverage) and whether there is a retirement or earnings test to be eligible for benefits (retirement incentive). We also measure the replacement rate: the proportion of an average worker's wage that a pension plan replaces after retirement. We distinguish the portion of the coverage that is funded (through investments) from the portion that operates as a pay-as-you-go system (which holds claims on the government for future payment). Although funded retirement systems may be similar to private savings, pay-as-you-go systems may displace private savings without generating national savings (Feldstein, 1976). As expected, we find that national savings rates are higher with fully funded social security systems than with pay-as-you-go systems. Our results indicate that higher life expectancy does not increase savings rates in the absence of universal coverage and retirement incentives. We find that with universal coverage and retirement incentives, a longer life span is associated with higher savings rates, but this effect disappears in systems with pay-as-you-go pension finance and high replacement rates. Institutional incentives are not the only possible explanation of an effect of longevity on savings. As noted above, there are three other possible mechanisms to consider. The first relates to the possibility that although individuals are living longer, the years they gain in life expectancy may not be healthy ones. This implies that ill health among the elderly forces retirement at a fairly constant age, so that the increase in life expectancy requires more savings for old age from what remains a fairly steady length of working life. This argument is weakened by strong evidence for the “compression of morbidity,” the idea that with increased life spans the relative, or even absolute, length of life spent in chronic ill-health toward the end of life has declined (Fries, 1980 and Fries, 1989; Crimmins et al., 1997; Crimmins, 2004; Costa, 2002). In our theoretical model we allow for the compression of morbidity by assuming that health status, and the disutility of labor, depend on age relative to life expectancy. A second possible explanation is that, with positive interest rates, a longer working life allows compound interest to operate over a longer period. If there is technological progress and economic growth, a longer working life also allows a worker to earn more when real wages are higher. As a result, the worker at retirement will be wealthier than before. The worker can spend this wealth by taking more leisure (early retirement) or by having a higher level of lifetime consumption (and less savings while working). If both leisure and consumption are normal goods, the worker will do both and the market response to a longer life span will be a lower savings rate (Bloom et al., 2004). Our theoretical model allows for wealth effects associated with compound interest and real wage growth. A third argument is that mortality is random and thus lowers the effective interest rate by creating the possibility that one might die and leave unintentional bequests. As life expectancy increases, and the mortality rate falls, the effective rate of return to savings goes up, encouraging both savings and earlier retirement (Kalemli-Ozcan and Weil, 2002; Zhang et al., 2003). This effect depends on lack of access to annuity markets, and the substitution effect on savings of higher effective interest rates outweighing the income effect. We assume perfect annuity markets in our theoretical model, ruling out this mechanism. However, it seems likely that this effect plays a role when capital markets are incomplete. Although effects through these alternative mechanisms are plausible, we find no evidence of an effect of life expectancy on savings rates in the absence of social security institutions. We find significant effects when social security arrangements and retirement incentives do exist. The organization of this paper is as follows: Section 2 presents our theoretical model, Section 3 describes our data, Section 4 presents regression results, and Section 5 concludes.
نتیجه گیری انگلیسی
Demographics can influence aggregate savings not only via accounting effects associated with the age structure of a population, but also via behavioral effects associated with expected longevity. The response to a longer life span can take the form of a longer working life or increased savings. The response we see in practice depends on social security arrangements. When there are incentives to retire at particular ages, the labor supply response may be muted, leading to increased savings for a longer retirement. In terms of life-cycle behavior, our model only looks at the retirement decision and savings. A possible extension would be to examine the effect of life span extensions on schooling decisions as well. Further analysis of the effect of expected longevity on life-cycle behavior using individual- and family-level data observed under different social security systems also seems promising.