The Routledge Handbook of the Economics of Ageing

Description

Ageing populations pose some of the foremost global challenges of this century. Drawing on an international pool of scholars, this cutting-edge Handbook surveys the micro, macro and institutional aspects of the economics of ageing. Structured in seven parts, the volume addresses a broad range of themes, including health economics, labour economics, pensions and social security, generational accounting, wealth inequality and regional perspectives. Each chapter combines a succinct overview of the state of current research with a sketch of a promising future research agenda. This Handbook will be an essential resource for advanced students, researchers and policymakers looking at the economics of ageing across the disciplines of economics, demography, public policy, public health and beyond. Cover Half Title Title Page Copyright Page Table of Contents Figures Tables Contributors 1 Introduction to the Handbook 1.1 Why This Handbook? 1.2 A Brief Overview 1.2.1 Health 1.2.2 Pensions and Social Security 1.2.3 Income and Economic Growth 1.2.4 Work and Employment 1.2.5 Data and Measurement 1.2.6 Ageing and Personality 1.2.7 Regional Developments 1.3 Acknowledgments Part I: Health 2 Modeling the Impact of Population Ageing on Future Fiscal Obligations 2.1 Introduction 2.2 Accounting Identity/Macroeconomic Approach 2.2.1 Description 2.3 Microsimulation/Markov Transition Approach 2.3.1 Description 2.3.2 Evaluation 2.4 Overlapping Generations/Microeconomic Approach 2.4.1 Description 2.4.2 Evaluation 2.5 Selected Review of Papers and Results 2.6 Suggestions for Future Work 3 Medical Innovations and Ageing: A Health Economics Perspective 3.1 Introduction 3.2 Trends in Health Expenditure, Morbidity, and Life Expectancy 3.3 Health Effects and Cost-Effectiveness of Medical Innovations 3.4 R&D Costs and Patent Values 3.5 Life-Cycle Considerations and the Value of Life 3.5.1 Lifetime Utility, Budget Constraint, and Optimization 3.5.2 Value of a Statistical Life 3.6 Morbidity, Healthcare Demand, and Medical R&D 3.6.1 Health Deficit Approach 3.6.2 Health Capital Approach 3.6.3 Non-Path-Dependent Mortality 3.6.4 Market Size Effects: Empirical Evidence 3.7 Effect of Health Innovations on Health Inequality 3.8 Avenues for Future Research 3.9 Conclusion 4 Medical Progress, Ageing, and Sustainability of Healthcare Finance 4.1 Introduction 4.2 Ageing and Medical Progress as Drivers of Health Expenditure Growth 4.2.1 Ageing: A Mixed Bag 4.2.2 Medical Progress, Income Growth, and Welfare State Institutions: Will the Culprit behind Spending Growth Please Stand Up? 4.3 Healthcare and Medical Progress as Drivers of Longevity 4.4 What Is It Worth? Value of Medical Progress 4.5 Endogenous Medical Progress: Empirical Evidence 4.6 Putting Things Together: Integrated Macroeconomic Modeling of Healthcare 4.6.1 Ageing in Macroeconomic Models with a Healthcare Sector 4.6.2 Medical Progress in Macroeconomic Models 4.6.3 Macroeconomic Models with Endogenous Medical Progress 4.7 Conclusions 4.7.1 The Ageing–Medical Progress–Healthcare Spending Nexus 4.7.2 Role of Economic Development 4.7.3 Role of Institutions 4.7.4 Type and Implementation of Medical Innovation 4.7.5 Distributional Concerns 4.7.6 Future Development 5 Technologies to Mitigate Cognitive Ageing 5.1 Introduction 5.2 Age-Associated Changes in Cognition 5.3 The Role of Technology in Mitigation 5.3.1 Rehabilitation 5.3.2 Augmentation 5.3.3 Substitution 5.4 Promising Technologies and Domains for Intervention 5.4.1 Prevention: Boosting Cognitive Health to Support ADLs and IADLs 5.4.2 Rehabilitation and Augmentation for Work 5.4.3 Augmentation and EADL Support 5.5 Conclusions 6 Gender, Ageing, and Health 6.1 Introduction 6.2 Gender Differences in Health among Older Adults 6.2.1 Life Spans 6.2.2 Physical Health 6.2.3 Mental Health 6.2.4 Cognitive Health 6.2.5 Subjective Well-Being 6.2.6 Health Impact of Birth Control 6.3 Explanations for Gender Health Gaps among Older Adults 6.3.1 Epidemiological Explanations 6.3.2 Biological Factors 6.3.3 Social Explanations 6.3.4 Contextual Factors 6.3.5 Methodological Explanations 6.4 Conclusion 7 Economics of Disease Prevention in the Elderly 7.1 Introduction and Summary 7.2 The Economic Challenges of Ageing Populations and the Role of Disease Prevention in Addressing Those Challenges 7.3 Burden of Disease in the Elderly 7.4 Scope Setting 7.5 The Intrinsic and Instrumental Value of Elderly Health 7.6 Rationale for the Government’s Role in Optimal Investment in Elderly Health Promotion 7.7 Evidence on Value for Money of Health Promotion and Disease Prevention Policies 7.8 Does Government Invest Enough in Elderly Disease Prevention? 7.9 R&D 7.10 Conclusion 8 The Economics of Long-Term Care 8.1 Introduction 8.2 The Market for Long-Term Care 8.3 The Contrast between Health Economics and the Economics of Long-Term Care 8.4 Key Issues for the Economics of Long-Term Care 8.5 Systematic Search for Articles Relating to the Economics of Long-Term Care 8.6 Issues Identified by Systematic Search 8.6.1 Unpaid Care 8.6.2 Demand/Insurance 8.6.3 Expenditure 8.6.4 Labor Market 8.7 Conclusion and Discussion 9 In Good and Bad Times—Associations between Spousal Health and Assortative Matching on Early-Life Factors in Europe 9.1 Introduction 9.2 Literature 9.3 Data 9.4 Associations in Spousal Adult Health and Its Determinants across Regions 9.5 Assortative Matching on Childhood Background and Adult Health 9.5.1 The Matching Model 9.5.2 Results: Matching Attributes and Health Outcomes 9.6 Conclusion 10 Mental Health and Illness in Ageing 10.1 Introduction 10.2 Common Characteristics of Mental Illness Relevant to Ageing 10.2.1 Compounded Consequences of Mental Illness for Social and Financial Well-Being due to Early Onset, Chronic Persistence, and Episodic Recurrence 10.2.2 Responsiveness to Economic, Social, and Personal Circumstances 10.3 Epidemiology of Mental Illnesses in a Life Course Context 10.3.1 Life Satisfaction 10.3.2 Suicide 10.3.3 Mortality and Morbidity 10.4 Policy Challenges Posed by Mental Illness in the Context of Ageing 10.4.1 Financial Security, Savings, and Investments 10.4.2 Social Capital, Social Networks, and Caregiver Burden 10.4.3 Implications for Health Systems 10.5 Concluding Observations Part II: Pensions and Social Security 11 Social Security Reforms in Heterogeneous Ageing Populations 11.1 Introduction 11.2 Redistribution in Pension Plans: The Internal Rate of Return 11.3 Mortality Gradient by SES and the Impact on the IRR 11.4 Correction of Pension Plans for the Mortality Gradient by SES 11.4.1 Contributions 11.4.2 Benefits 11.5 Directions of Future Research 11.5.1 Estimation of the Mortality Gradient by SES 11.5.2 Empirical Evidence on the Variation of the IRR across SES Groups 11.5.3 Impact of Pension Reforms on Inequality (Behavioral Reactions) 11.5.4 Transition Costs 11.5.5 Multi-Pillar Approach 11.5.6 Dealing with the Source of the Inequality Problem 11.6 Conclusion 11.7 Appendix 11.7.1 Determinants of the IRR 11.7.2 Independence of the IRR to Different Income Levels 12 Economic Preparation for Retirement 12.1 Introduction 12.2 The Income Replacement Rate 12.2.1 Measurement of Replacement Rates 12.2.2 Shortcomings of the Income Replacement Rate 12.2.3 Financing of Consumption Out of Savings 12.2.4 Differential Mortality 12.2.5 The Role of Children 12.2.6 Life-Cycle Consumption Path Is Not Flat, Varies by Observables 12.3 Preparation for Retirement in the Context of a Structural Life-Cycle Model 12.4 Consumption-Based Measure of Economic Preparation for Retirement 12.5 Comparison with Income Replacement Rates 12.6 Summary and Conclusions 12.7 Future Research 13 Pension Policy in Emerging Asian Economies with Population Ageing: What Do We Know, Where Should We Go? 13.1 Introduction 13.2 Ageing and Informality 13.2.1 Demographic Change and Population Ageing 13.2.2 Informality and the Elderly Population 13.3 Pension Policy 13.3.1 Multi-Pillar Pension Taxonomy 13.3.2 Pension Policy in Emerging EA and SEA Economies 13.4 Policy Directions—Expanding Social Pensions 13.4.1 Policy Objectives and Economic Analysis 13.4.2 Features of Social Pensions 13.4.3 Fiscal Costs of Targeted Social Pensions—An Example 13.5 Concluding Comments 14 Trends in Pension Reforms in OECD Countries 14.1 Introduction 14.2 Extent, Limit, and Impact of Pension Reforms Over the Last Decades 14.2.1 Greater Recognition of Challenges Ahead but Uneven Pension Policy Achievements 14.2.2 Pension Reforms and the Political Process 14.2.3 More Efforts Needed to Assess the Impact of Enacted Reforms on Old-Age Income Inequality 14.2.4 The Shrinking Pension Gender Gap 14.3 New Avenues for Pension Policies 14.3.1 Policy Options to Increase Effective Retirement Ages and Their Limitations 14.3.2 The Question of Greater Sustainability of Pension Systems through Flexible Retirement 14.3.3 Pension Issues Related to Self-Employment 14.3.4 Impact of COVID-19 on Pensions 14.3.5 Consideration of Inequality in Life Expectancy in the Design of Pension Policies 14.3.6 News in the Debate between PAYG and Funded Pensions Part III: Income and Economic Growth 15 Economic Growth, Intergenerational Transfers, and Population Ageing 15.1 Introduction 15.2 The Recent Literature 15.3 The Age-Distributed Economy 15.4 Population Ageing, Economic Output, and Its Primary Distribution 15.5 Population Ageing and the Intergenerational Redistribution of Income 15.6 Insights from National Transfer Accounts 15.7 Summary Measures of Imbalances Created by Population Ageing 15.8 Estimated Impact of Population Ageing on Economic Flows Over the Next 50 Years 15.9 Summary Indices: General Support Ratio and Transfer Load 15.10 Other Aspects of Population Ageing in Relation to Economic Growth 15.11 Research Directions 16 Consumption, Saving, and Wealth Accumulation at Old Age: Comparing Evidence from Developed and Developing Countries 16.1 Introduction 16.2 Consumption, Saving, and Wealth in Developed and Developing Countries 16.3 Consumption, Saving, and Wealth at Older Ages 16.3.1 Developed Countries 16.3.2 Longevity Risk 16.3.3 Bequest Motives 16.3.4 Medical Expenditures 16.3.5 Developing Countries 16.4 Advanced Research on Consumption, Savings, and Wealth Accumulation Decisions at Old Ages: New Data from Developing Countries 16.5 Conclusion 17 Automation and Ageing 17.1 Introduction and Background 17.2 The Role of Automation in Compensating for Ageing: A Simple Theoretical Illustration and the Current State of Empirical Research 17.3 Potential Displacement of Workers by Robots 17.4 The Effects of Automation on Health 17.5 Important Future Research Questions 17.6 Conclusions 18 Working Life—Labor Supply, Ageing, and Longevity 18.1 Introduction 18.2 Cross-Country and Historical Trends 18.2.1 Fact 1. Labor Force Participation Shows an Inverted U-Shaped Relationship with Age 18.2.2 Fact 2. Labor Force Participation of Men and Women Show Broadly Similar Variations with Age 18.2.3 Fact 3. Since the 1990s Labor Force Participation Rates in High-Income Countries Have Been Rising, Reversing a Century-Long Period of Decline 18.2.4 Fact 4. Increased Employment in Older Age Groups Has Become an Important Source of Overall GDP Growth 18.2.5 Fact 5. While Employment at Older Ages Has Increased, It Is Highest and Increasing Fastest among Those with Higher Levels of Education 18.2.6 Fact 6. Older Workers Are More Likely to Be Engaged in Part-Time Work and Be Self-Employed 18.2.7 Fact 7. Older Age Groups Remain Active and Productive Outside of the Labor Market 18.3 The Age of Retirement 18.3.1 Optimal Retirement 18.3.2 The Link between Retirement and Longevity 18.4 Beyond Retirement 18.4.1 Health 18.4.2 Wages 18.4.3 Hiring and Labor Demand 18.4.4 Education 18.4.5 The Nature of Work 18.5 Toward a Theory of Ageing 18.5.1 Different Concepts of Ageing 18.5.2 The Role of Time in Ageing 18.5.3 Are Older Workers Different? 18.6 Conclusions 19 Education and Ageing: Human Capital Investments and Ageing 19.1 Introduction 19.2 Production of Human Capital through the Life Cycle 19.2.1 Lifetime Effects of General versus Vocational Initial Education 19.2.2 Learning by Doing 19.2.3 Learning from Peers in the Workplace 19.3 Skills Obsolescence 19.4 Lifelong Learning: Returns on Human Capital Investments of Older Workers 19.5 Training and Retirement of Older Workers 19.6 Research Agenda Part IV: Work and Employment 20 The Employment of Older Workers 20.1 Introduction 20.2 Changes in the Labor Supply 20.2.1 Health and Mortality 20.2.2 Education and Qualifications 20.2.3 Women’s Labor Force Participation 20.3 Technological and Structural Developments 20.3.1 The Productivity of Older Workers 20.3.2 Sectorial Transformations 20.3.3 The Transformations of Working Conditions 20.4 Social Security and Public Policies 20.4.1 Retirement Systems 20.4.2 Health Insurance 20.4.3 Labor Market Regulations 21 Retirement and Health 21.1 Introduction 21.2 Setting the Stage—Cross-Country Comparison of Retirement-Related Statistics 21.3 How Retirement Affects Mental Health and Physical Health 21.3.1 Cross-Country Studies 21.3.2 Single-Country Studies 21.3.3 Overview Studies 21.4 Effects of Retirement on Mortality 21.5 Cross-Partner Effects of Retirement 21.6 What Have We Learned? 21.7 What Can We Do? 21.8 Where Do We Go from Here? 22 The Relevance of Cognition in the Context of Population Ageing 22.1 Background 22.2 Data 22.3 Education, Employment, and Earnings 22.4 Marriage, Cohabitation, and Fertility 22.5 Health and Mortality 22.6 Cohort Trends 22.7 Conclusion 23 Productivity in an Ageing World 23.1 Introduction 23.2 Methodological Challenges 23.2.1 Age-Productivity Profile of Individuals 23.2.2 Methodological Challenges at the Country Level 23.3 Age and Productivity at the Micro Level 23.4 Ageing and Productivity at the Country Level 23.5 Summary and Conclusions 24 Population Ageing and Gender Gaps: Labor Market, Family Relationships, and Public Policy 24.1 Introduction 24.2 The Relationship between Female Employment and Fertility 24.3 The Labor Market 24.3.1 The Labor Supply of Elderly Workers 24.3.2 The Labor Demand of Elderly Workers 24.3.3 The “Double Burden” of Age and Gender 24.3.4 Gender Gaps from the Labor Market to Pensions 24.4 Family Relationships 24.5 Public Policy 24.6 Conclusions Part V: Data and Measurement 25 Measuring Ageing 25.1 Introduction 25.2 The Force of Mortality 25.3 The Gompertz-Makeham Formula 25.4 Human Life Span and the Strehler–Mildvan Correlation 25.5 Reliability Theory 25.6 The Frailty Index 25.7 Individual Ageing 25.8 Ageing of Populations 25.9 Discussion and Conclusion 26 The Health and Retirement Study 26.1 Introduction 26.2 Phase 1: HRS Origins 26.3 Phase 2: The Steady State 26.3.1 The Steady-State Sample Design 26.3.2 Ancillary Studies 26.3.3 Internet 26.3.4 Dementia 26.4 Phase 3: Expanding Scope in the Core Survey 26.5 Phase 4: New External Initiatives 27 National Transfer Accounts and the Economics of Ageing 27.1 The Generational Economy and NTA Foundations 27.2 NTA Illustrated 27.3 NTA around the World 27.4 Use of NTA to Understand the Economics of Ageing 27.4.1 Youth and Old-Age Deficits 27.4.2 The Demographic Dividend 27.4.3 A Longitudinal Perspective 27.5 Future Directions 27.6 Conclusion 28 Ageing and Dependency 28.1 Introduction 28.2 Economic Dependency 28.3 Noneconomic Dependency 28.4 Measures of Population Ageing without Dependency 28.5 Usefulness of the Old-Age Dependency Ratio Despite Its Problems 28.6 Conclusion 29 Patterns of Time Use among Older People 29.1 Introduction 29.2 Literature Review 29.3 Data Resources 29.4 Patterns of Time Use by Age 29.5 Patterns of Time Use among Older People by Sociodemographic Characteristics 29.6 Research Needs and Opportunities Part VI: Ageing and Personality 30 Ageing and Economic Preferences 30.1 Introduction 30.2 Age and Economic Preferences 30.2.1 Measures of Preferences 30.2.2 Risk Attitudes 30.2.3 Patience 30.3 Identifying the Age Gradient 30.3.1 The Age-Period-Cohort Problem 30.3.2 Age and Longevity 30.4 Mechanisms Linking Preferences to Age 30.5 Outlook 31 Financial Literacy and Financial Behavior at Older Ages 31.1 Introduction 31.2 Retirement Planning, Debt, and Financial Fragility at Older Ages 31.3 Financial Literacy at Older Ages 31.4 Financial Literacy and Financial Behaviors in Later Life 31.5 Limitations and Extensions 31.6 Policy Implications and Next Steps 32 Age and the Value of Life 32.1 Introduction 32.2 Age and the Value per Statistical Life 32.3 The Social Welfare Function Approach 32.4 Age and the Social Value of Mortality Risk Reduction 32.5 Discussion and Conclusion 33 Happiness and Ageing in the United States 33.1 Introduction 33.2 The Existence of a U-Shape in Happiness and Life Satisfaction 33.3 Empirical Evidence 33.3.1 Behavioral Risk Factor Surveillance System 2005–2017 (n=2,405,840) 33.3.2 Gallup U.S. Daily Tracker Poll, 2008–2017 (n=2,436,798) 33.3.3 General Social Surveys, 1972–2018 (n=60,054) 33.4 The Differences between the Married and the Non-Married 33.5 The Elderly 33.6 Conclusion 34 Ageing and Foreign Policy Preferences 34.1 Introduction 34.2 Population Ageing and Increased Preferences for International Peace 34.3 Ageing and Decreased Preferences for Internationalism 34.3.1 Ageing and Reduced Capabilities 34.3.2 Ageing and the Empowerment of Nationalist Leaders 34.4 Conclusion 35 Behavioral Science and Noncommunicable Diseases in Low- and Middle-Income Countries 35.1 Introduction 35.2 Key Care Differences between NCDs and Infectious Diseases and Their Implications for Clinician and Patient Behavior 35.3 Behaviors of Health System Actors Needed for Delivery of High-Quality NCD Care 35.3.1 Knowledge 35.3.2 Patient Norms and Beliefs 35.3.3 Inertia, Attention, and Habit 35.3.4 Health System Barriers and Design Frictions 35.4 Patient Behaviors Important for NCD Management 35.4.1 Biased Beliefs and Mismatched Mental Models 35.4.2 Present Bias 35.4.3 Forgetting, Inattention, and Salience 35.5 How Might Interventions Improve Compliance with NCD Care? 35.5.1 Provider-Focused Interventions 35.5.2 Provider Interventions to Address Knowledge Gaps 35.5.3 Interventions to Address Clinical Inertia and Low Attentiveness 35.5.4 Provider Interventions to Address Incentives 35.5.5 Patient-Focused Interventions 35.5.6 Patient Interventions for Forgetting or Inattentiveness 35.5.7 Patient Interventions to Address Present Bias 35.5.8 Patient-Focused Interventions 35.6 Conclusions 36 The Implications of Population Ageing for Immigrant- and Gender-Related Attitudes 36.1 Introduction 36.2 Ageing and Attitudes toward Immigration 36.2.1 Individual Ageing 36.2.2 Population Ageing 36.2.3 Policy Implications 36.3 Ageing and Attitudes toward Women 36.3.1 Individual Ageing 36.3.2 Population Ageing 36.3.3 Policy Implications 36.4 Concluding Remarks Part VII: Regional Developments 37 Global Ageing and Health 37.1 An Ageing World 37.2 Ageing Populations 37.2.1 Demographic Transition 37.2.2 Population Growth 37.2.3 Population Aged 65 or Over 37.3 Ageing Individuals 37.3.1 Life Expectancy 37.3.2 Healthy Life Expectancy 37.3.3 Morbidities and Mortality among the Elderly 37.4 Ageing and Other Megatrends 37.4.1 Chronic Conditions and Ageing 37.4.2 Universal Health Coverage and Ageing 37.4.3 Pandemics and Ageing 37.4.4 Climate Change and Ageing 37.4.5 Migration and Ageing 37.4.6 Family Structures and Ageing 37.4.7 Ageing in a Digital World 37.5 Opportunities and Challenges for an Ageing World 38 Social Protection and Population Ageing: A Comparative Analysis of India and Indonesia 38.1 Introduction 38.2 Demographic Dynamics in India and Indonesia 38.2.1 National Comparisons 38.2.2 Intra-Country Observations 38.3 Key Characteristics and Recent Initiatives 38.3.1 Overview 38.3.2 India: Recent Initiatives 38.3.3 Service Provision Component 38.3.4 Managerial Component 38.3.5 Co-Payment Component 38.3.6 Technological Component 38.3.7 Indonesia: Recent Initiatives 38.4 Sustainability and Fairness: Major Challenges 38.5 Research Agenda 38.5.1 Actuarial Projections 38.5.2 Financial and Investment Management Literacy 38.5.3 Risk Management in the Payout Phase 38.5.4 Modernization of Social Protection Organizations 38.5.5 The Political Economy of Social Protection Reforms 39 Ageing in China 39.1 Introduction 39.2 Demographic Characteristics of Population Ageing 39.3 Economics of Ageing 39.3.1 Social Security 39.3.2 Retirement 39.4 Health Status and Healthcare of the Ageing Population 39.4.1 Health Status 39.4.2 Health Behaviors 39.4.3 Health Insurance and Healthcare Utilization 39.5 Family Support 39.5.1 Financial Support 39.5.2 Long-Term Care 39.5.3 The Future Role of Family 39.6 Discussion and Conclusions 40 Ageing in Latin America 40.1 Introduction 40.2 Measuring Ageing in the Region 40.3 Population Ageing and Economic Consequences 40.4 Overview of Social Support Systems in Latin America 40.5 Demographic Changes, Intergenerational Transfers, and Inequality 40.6 Demographics, Gender, and Time Use in Latin America 40.7 Migration, Gender Differences, and Ageing 40.8 Conclusion and Policy Implications 41 Population Ageing and Migration 41.1 Introduction 41.2 Previous Literature 41.2.1 Self-Selection of International Migrants 41.2.2 Effects of Immigration in Destination Countries 41.2.3 Welfare Effects of Emigration in Origin Countries 41.2.4 Demographic Change and Global Migration 41.3 Theoretical Framework 41.4 Empirical Evidence 41.5 Research Agenda for the Future Index