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April 2017

03Apr

Approximate Solutions to Retirement Spending Problems and the Optimality of Ruin

By Faisal Habib, Huang Huaxiong & Moshe A. Milevsky (York University) Milevsky and Huang (2011) investigated the optimal retirement spending policy for a utility-maximizing retiree facing a stochastic lifetime but assuming deterministic investment returns. They solved the problem using techniques from the calculus of variations and derived analytic expressions for the optimal spending rate and wealth depletion time under the Gompertz law of mortality. Of course, in the real world financial returns are stochastic as well as lifetimes, raising the...

April 3, 2017
Aging, Articles, Regulation, ,
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03Apr

Nudge for Good? Choice Defaults and Spillover Effects

By Claus Ghesla, Manuel Grieder & Jan Schmitz (ETH Zurich) Policy makers increasingly use choice defaults to promote 'good' causes by influencing socially relevant decisions in desirable ways, e.g., to increase retirement savings, charitable giving, or pro-environmental choices. Such default nudges are remarkably successful when judged by their effects on the targeted behaviors in isolation. However, there is scant knowledge about possible spillover effects of defaults on subsequent related choices. Theoretically, such behavioral spillover effects could amplify, eliminate or even...

April 3, 2017
Articles, Labor Market, Savings,
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03Apr

Financial History: Lessons of the Past for Reformers of the Present

By Gerard Caprio Jr. (Williams College) & Dimitri Vittas (World Bank) The environment in which financial institutions operate has changed greatly, but the history of financial development offers important lessons for today. Among the lessons financial history offers: Macroeconomic stability - low inflation and sound public finance - is important for creating the right incentives for banks and for facilitating the development of securities markets. High inflation and large fiscal deficits distort economic behavior in favor of short-term speculative projects and...

April 3, 2017
Articles, Investing, Regulation, Savings, , ,
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March 2017

27Mar

Towards an Equitable and Sustainable Points System: A Proposal for Pension Reform in Belgium

By Erik Schokkaert (Catholic University of Leuven), Pierre Devolder (Catholic University of Louvain), Jean Hindriks (University of London) & Frank Vandenbroucke (University of Amsterdam) We describe the points system that has been proposed by the Belgian Commission for Pension Reform 2020-2040. Intragenerational equity can be realised in a flexible and transparent way through the allocation of points within a cohort. The intergenerational distribution is determined by fixing the value of a point for the newly retired and a sustainability parameter...

March 27, 2017
Aging, Articles, Labor Market, System Sustainability, , , ,
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26Mar

Redistribution Effect and Pension Choice: Theory and Evidence

By Hulai Zhang (Peking University) This paper mainly focuses on two issues, the factors influencing pension choice and the redistribution effect of the pension system in China. Our model studies the trade-offs of relative financial benefits and risks provided by various plans, as well as the accessibility to specific pension plans and accessibility to information on pensions. The features examined include individual features such as hukou, gender and education, family features like marital status and work features like job types....

March 26, 2017
Articles, Labor Market, Pension design, Regulation, , , ,
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26Mar

How Productivity Can Affect Pension Systems: The Case of Japan and Malaysia

By Mario Arturo Ruiz Estrada (University of Malaya) This research paper proposes a group of new indicators in the analysis of pension programs performance. Section one presents a new model of analysis to evaluate the pension systems. This new model, “The Pensions Systems Performance Evaluation Model (PSPE-Model)” is intended to offer policy-makers and researchers an additional analytical tool to study the impact of productivity on the pension systems performance from a new perspective. The PSPE-Model can be applied to the...

March 26, 2017
Articles, Corporate Governance, , ,
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26Mar

Pensions and Sovereign Default

By Sean Myers (Stanford University) This paper studies the effect of public pension obligations on a government's decision to default. In the model, the government can renege on its pension promises but suffers a cost from losing the trust of households about future pensions. Large pension promises act as a commitment device for debt because they require the government to have regular access to credit markets. The government's decision to default is driven by its total obligations, not just its...

March 26, 2017
Articles, System Sustainability, , ,
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23Mar

Beyond the Privatisation and Re-Nationalisation of the Argentine Pension System: Coverage, Fragmentation, and Sustainability

By Fabio Bertranou & Luis Casanova (International Labour Organization);  Oscar Cetrángolo & Carlos Grushka (University of Buenos Aires) In the last decades, the pension system in Argentina has experienced important changes that included the introduction of an individual account defined-contribution component (or individual capitalisation) in 1994 and its subsequent reversal to a defined benefit pay-as-you-go pension scheme in 2008. After the 2001 crisis, the favourable fiscal position allowed the implementation of policies that reversed the decline in pension coverage to unprecedented...

March 23, 2017
Articles, Corporate Governance, Regulation, System Sustainability, , , ,
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17Mar

Widowhood and Retirement Timing: Evidence from the Health and Retirement Study

By Philipp Schreiber (University of Mannheim) The combination of an increasing life expectancy, low fertility rates, and an early effective retirement age creates pressure to act for Governments and organizations. The pay-as-you-go social security systems of many countries are troubled by the increasing ratio of retirees to working people. In addition, many organizations face difficulties caused by a shrinking workforce and the accompanied shortage of skilled workers. To counteract, it is essential to create an environment in which older workers...

March 17, 2017
Aging, Articles, Labor Market, System Sustainability, ,
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17Mar

Understanding the Determinants of Financial Outcomes and Choices: The Role of Noncognitive Abilities

By Gianpaolo Parise (Bank for International Settlements) & Kim Peijnenburg (Netspar) We explore how financial distress and choices are affected by non cognitive abilities. Our measures stem from research in psychology and economics. In a representative panel of households, we find people in the bottom decile of non cognitive abilities are five times more likely to experience financial distress compared to those in the top decile. (more…)

March 17, 2017
Articles, Investing, Labor Market, Savings, ,
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