April 2021
15Apr

Involuntary unemployment in overlapping generations model due to instability of the economy and fiscal policy

By Yasuhito Tanaka The existence of involuntary unemployment advocated by J. M. Keynes is a very important problem of the modern economic theory. Using a three-generations overlapping generations model, we show that the existence of involuntary unemployment is due to the instability of the economy. Instability of the economy is the instability of the difference equation about the equilibrium price around the full-employment equilibrium, which means that a fall in the nominal wage rate caused by the presence of involuntary...

April 15, 2021
Articles, Labor Market, ,
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15Apr

Do Required Minimum Distribution 401(K) Rules Matter, and for Whom? Insights from a Lifecycle Model

By Vanya Horneff, Raimond Maurer, Olivia S. Mitchell Tax-qualified vehicles helped U.S. private-sector workers accumulate $25Tr in retirement assets. An often-overlooked important institutional feature shaping decumulations from these retirement plans is the “Required Minimum Distribution” (RMD) regulation, requiring retirees to withdraw a minimum fraction from their retirement accounts or pay excise taxes on withdrawal shortfalls. Our calibrated lifecycle model measures the impact of RMD rules on financial behavior of heterogeneous households during their worklives and retirement. We show that proposed...

April 15, 2021
Articles, Pension design, Savings, ,
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08Apr

Robert C. Merton and the Science of Finance

By Zvi Bodie Starting with his 1970 doctoral dissertation and continuing to today, Robert C. Merton has revolutionized the theory and practice of finance. In 1997 Merton shared a Nobel Prize in Economics “for a new method to determine the value of derivatives.” His contributions to the science of finance, however, go far beyond that. In this essay I describe Merton’s main contributions. They include the following: 1. The introduction of continuous-time stochastic models (the Ito calculus) to the theory...

April 8, 2021
Articles, System Sustainability, ,
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08Apr

Population aging and comparative advantage

By Jie Cai, Andrey Stoyanov In this paper we show that demographic differences between countries are a source of comparative advantage in international trade. Since many skills are age-dependent, population aging decreases the relative supply and increases the relative price of skills which depreciate with age. Thus, industries relying on skills in which younger workers are relatively more efficient will be more productive in countries with a younger labor force and less productive in countries with an older population. Building upon the neuroscience and economics...

April 8, 2021
Aging, Articles, ,
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08Apr

Longevity Risk and Capital Markets: The 2019-20 Update

By David P. Blake, Andrew J. G. Cairns This Special Issue of the Insurance: Mathematics and Economics contains 16 contributions to the academic literature all dealing with longevity risk and capital markets. Draft versions of the papers were presented at Longevity 15: The Fifteenth International Longevity Risk and Capital Markets Solutions Conference that was held in Washington DC on 12-13 September 2019. It was hosted by the Pensions Institute at City, University of London. Longevity risk and related capital market solutions...

April 8, 2021
Articles, Investment, ,
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01Apr

Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities

By Arthur Seibold This paper documents and analyzes an important and puzzling stylized fact about retirement behavior: the large concentration of job exits at specific ages. In Germany, almost 30% of workers retire precisely in the month when they reach one of three statutory retirement ages, although there is often no incentive or even a disincentive to retire at these thresholds. To study what can explain the concentration of retirements around statutory ages, I use novel administrative data covering the...

April 1, 2021
Aging, Articles, Pension design, , ,
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01Apr

Informal Sector in GDP: A Panel Estimation Method

By Nitesh Kansara, Gopal K. Basak, Pranab Kumar Das Estimation of the activities of the informal sector in an economy poses a serious problem for obtaining a correct estimate of GDP. This happens to be so because of the fact that informal sector activities are not registered. The literature has tried to solve the problem of estimation of the informal sector using the method of latent variables. The standard approach is generally aims to estimate for a single point. The present...

April 1, 2021
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01Apr

Understanding Social Insurance: Risk and Value Pluralism in the Early British Welfare State

By Rachel Friedman This article seeks to make two contributions to the understanding of social insurance, a central policy tool of the modern welfare state. Focusing on Britain, it locates an important strand of theoretical support for early social insurance programs in antecedent developments in mathematical probability and statistics. While by no means the only source of support for social insurance, it argues that these philosophical developments were among the preconditions for the emergence of welfare policies. In addition, understanding...

April 1, 2021
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March 2021
25Mar

Public Pensions and Private Savings

By Esteban García-Miralles, Jonathan Leganza How does the provision of public pension benefits impact private savings? We answer this question in the context of a reform in Denmark that altered old-age benefit payouts through a discontinuous increase in pension eligibility ages contingent on birthdate. Using detailed administrative data and a regression discontinuity design, we identify the causal effects of the policy, leveraging our setting to study essentially the entire financial portfolio. We document responses over two distinct time horizons. First,...

March 25, 2021
Articles, Pension design, System Sustainability, , , ,
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25Mar

Do public pensions matter to marriage? Evidence from China

By Hua Chen, Zining Liu, Xiaoxu Yang This article examines the role of public pensions on the marriage market based on China Health and Retirement Longitudinal Study (CHARLS). Firstly, we investigate if the extensive margin of public pensions, i.e., whether to participate in public pensions or not, has a significant effect through Difference-in-Difference (DID). The results indicate that public pensions have a significant effect on marriage for both urban and rural residents, and the gender and income heterogeneity of the...

March 25, 2021
Adequacy, Articles, , ,
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