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Shu Chen, Yafei Si, Katja Hanewald, Bingqin Li, Hazel Bateman, Xiaochen Dai, Chenkai Wu, and Shenglan Tang
Background: Measuring chronological age alone does not provide sufficient context for understanding the impact of ageing on societal resource planning. The burden of age-related diseases (ARDs) reflects age-related morbidity and mortality at the population level, which unveils the underlying health burden of ageing. The current study aims to measure the ARD burden and its disparities at subnational level of China, a rapidly ageing country with regional imbalances in economic and health development, and assess the impact of health resource allocation on this burden.
Methods: We used the longitudinal data collected from the Global Burden of Diseases, Injuries, and Risk Factors Study (GBD) 2016 and 2019 to measure the ARD burden in 31 provinces in mainland China, and from China Statistical and Health Statistical Yearbooks for health resources and socio-economic indicators from 2010 to 2016. We first identified the ARDs, defined as diseases with incidence rates that increased quadratically with age, and calculated the burden as the sum of the disability-adjusted life-years (DALYs) of the ARDs. We further compared the disparities in the ARD burden by province, sex, and disease group, based on the ARD burden of non-communicable diseases (NCDs). The ARD burden-adjusted age for each province was also calculated by assuming each province shared the same age-specific burden rate as the national average. Historical changes in burden between 1990 and 2016 were assessed after standardising the age structure. Total health expenditures per capita, total health professional density, licensed doctor density, and licensed nurse density were used as proxy indicators for health resources. Panel data analysis approach was used to assess the impact of these indicators on the burden of ARDs from 2010 to 2016 based on multivariate regression models.
Findings: NCDs accounted for over 90% of China’s total ARD burden in 2019. There were significant regional disparities: the rate of ARD burden was lowest in the south-eastern coast provinces, followed by the central provinces, and trailed by the north-eastern and western provinces. In 2016, the ARD burden-adjusted ages of Shanghai, Beijing, and Zhejiang were the youngest, at 30·86, 30·90 and 36·21 years, respectively. In contrast, the respective ARD burden- adjusted ages of Sichuan, Heilongjiang, and Chongqing were 66·39, 66·14, and 62·98. After standardising the age structure, Tibet, Qinghai, Guizhou, and Xinjiang had the highest burden of ARDs and oldest ARD burden-adjusted age. Males are disproportionately affected by ARDs, with burden rate 70% higher than females. China’s overall age-standardised ARD burden has been decreasing since 1990. The largest decline was observed in the eastern provinces, followed by the central and western provinces. However, the burden rate of neurological disorders has continued to increase, albeit only by a small amount. Panel regression results showed increasing either health expenditures or health workforce density could not significantly lower the ARD burden. However, the existing urban-rural gap in health workforce density was positively associated with a consistent increase in the ARD burden. A 100% increase in the urban-rural ratio in total health professional density, licensed doctor density, and licensed nurse density led to 2·55% (p=0·09; 95% CI: -0·42, 5·53), 2·29% (p=0·07; 95% CI: -0·24, 4·80), and 2.21% (p=0·08; 95% CI: -0·31, 4·73) increases in the ARD burden respectively, ceteris paribus.
Interpretation: Older demographic structure does not necessarily mean higher ageing-related health burden. Resource planning for an ageing society should consider the burden of ARDs. In China, concerted efforts should be made to reduce the ARDs burden and its disparities, especially among western provinces which face greatest health threat due to future ageing. Continued investment in health is useful. Particularly, health workforce supply should be deliberately biased toward rural areas in western provinces.
Mengyi Xu, Jennifer Alonso Garcia, Michael Sherris, and Adam W. Shao
Abstract: We study the impact of housing wealth and individual preferences on demand for annuities and long-term care insurance (LTCI). We build a multi-state lifecycle model that includes longevity risk and health shocks. The preference is represented by a recursive utility function that separates risk aversion and elasticity of intertemporal substitution (EIS). When health shocks are considered, a higher level of risk aversion lowers the annuity demand, while a lower level of the EIS has the opposite effect. The impact diminishes with a weaker bequest motive, more liquid wealth, or access to LTCI, all of which increase the demand for annuities. The presence of home equity can enhance annuity demand, but the enhancement is marginal when the LTCI is available. The presence of home equity has a crowding-out effect on LTCI demand, and the effect is strengthened by a lack of bequest motives or a lower degree of risk aversion. The cash poor but asset rich may demand more LTCI coverage than their renter counterparts to preserve bequests. When both life annuities and the LTCI are available, we find that the product demand is robust to changes in risk aversion and the EIS, providing insights into product designs that bundle annuities and LTCI.
Keywords: Recursive utility, Housing, Life annuities, Long-term care insurance, Lifecycle model
Abstract: This paper investigates the economy-wide effects of mandating private (employment- related) pensions. It draws on the Australian experience with its Superannuation Guarantee legislation which mandates contributions to private retirement (superannuation) accounts. Our key objective is to quantify the long-run implications of alternative mandatory superannuation contribution rates for household economic decisions over the life cycle, household welfare, and macroeconomic and fiscal aggregates. To that end, we develop a stochastic, overlapping generations (OLG) model with labor choice and endogenous retirement, which distinguishes between (i) ordinary private (liquid) assets and (ii) superannuation (illiquid) assets. The benchmark model is calibrated to the Australian economy, fitted to Australian demographic, household survey and macroeconomic data, and accounting for a detailed representation of Australia’s government policy, including its mandatory superannuation system. The model is then applied to simulate the effects of alternative mandatory superannuation contribution rates, with a specific focus on the counterfactual of a legislated future rate of 12% of gross wages. Based on the model simulations, we show that in the long run, this increased mandate generates larger average household wealth, output and consumption per capita and (rational) household welfare across income distribution.
Keywords: Private Pension, Social Security, Income Taxation, Labor Supply, Endogenous Retirement, Stochastic General Equilibrium
Darapheak Tin and Chung Tran
Abstract: We study the nature of lifecycle earnings dynamics by documenting higher-order moments of earnings shocks over the lifecycle, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001-2020. Similar to other countries (e.g. see Guvenen et al. (2021) and De Nardi et al. (2021)), the distribution of earnings shocks in Australia displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. However, the sources of fluctuations and the role of family and government insurance are quite different. Wages account more for the dispersion of earnings shocks (second-order risk), while hours drive the negative skewness and excess kurtosis (third- and fourth-order risks, respectively). Wage changes are strongly associated with earnings changes, whereas hour changes are largely absent in upward movement and relatively small in downward movement of earnings changes. Family insurance via pooling income of family members and adjusting labor market activities of secondary earners, and government insurance embedded in the progressive tax and transfer system play distinct roles in reducing risks over age and by income group. Government insurance is more important in mitigating the dispersion of earnings shocks; meanwhile, family insurance is more dominant in mitigating the magnitude and likelihood of extreme and rare shocks. Family insurance interacts with government insurance; however, their joint forces fail to eliminate the non-Gaussian and non-linear features. Furthermore, comparison between groups reveals: (i) the risk equalizing effect of government insurance, and (ii) the persistent nature of risks for certain demographics such as female heads of household and non-parents. Hence, our findings shed new insights into the complexity of earnings dynamics and the importance of family and government insurance.
Keywords: Income dynamics; Earnings risk; Higher-order moments; Non-Gaussian shocks; Family insurance; Government insurance; Inequality.
Abstract: This paper investigates the effect of child dependency on the economy and external imbalances under an asymmetric demographic and productivity transition within a lifecycle model. It embeds dependent children within a two-country model with lifecycle features to examine child dependency’s effect on the economy and external imbalances. Specifically, the paper compares the effects of the same fertility and mortality shocks across models with and without children. Simulations show that child dependency changes both the steady-state and the transition dynamics under a demographic shock. The paper finds that while child dependency changes the direction of the impact of the fertility transition on external imbalances in the short run, it changes the magnitude of the effects in the long run. Furthermore, the model comparison shows that parameters must be chosen differently across models with and without child dependency to start from the same interest rate in the steady-state. Different calibration affects the magnitude of the transition dynamics of different models. These findings illustrate the importance of considering child dependency in studies that seek to explain the historical contribution of demographic changes to external imbalances, and suggest to approach studies that use models without child dependency for this purpose with caution.
Keywords: Global imbalances,Trade imbalances, Demographic transition, Life-cycle model
George Kudrna, John Piggott and Phitawat Poonpolkul
Abstract: This paper examines the economy-wide effects of government policies to extend public pensions in emerging Asia - particularly pertinent given the region's large informal sector and rapid population ageing. We first document stylized facts about Indonesia's labour force, drawing on the Indonesian Family Life Survey (IFLS). This household survey is then used to calibrate micro behaviours in a stochastic, overlapping-generations (OLG) model with formal and informal labour. The benchmark model is calibrated to the Indonesian economy (2000- 2019), fitted to Indonesian demographic, household survey, macroeconomic and fiscal data. The model is applied to simulate pension policy extensions targeted to formal labour (contributory pension extensions to all formal workers with formal retirement age increased from 55 to 65), as well as to informal labour (introduction of non-contributory social pensions to informal 65+). First, abstracting from population ageing, we show that: (i) the first set of pension policy extensions (that have already been legislated and are being implemented in Indonesia) have positive effects on consumption, labour supply and welfare (of formal workers) (due largely to the formal retirement age extension); (ii) the introduction of social pensions targeted to informal workers at older age generates large welfare gains for currently living informal elderly; and (iii) the overall pension reform leads to higher welfare across the employment-skill distribution of households. We then extend the model to account for demographic transition, finding that the overall pension reform makes the contributory pension system more sustainable but the fiscal cost of non-contributory social pensions more than triples to 1.7% of GDP in the long run. As an alternative, we examine application of a means- tested social pension system within the overall pension reform. We show that this counterfactual reduces the fiscal cost (of social pensions) and further increases the welfare for both current and future generations.
Keywords: Informal Labour, Population Ageing, Social Security, Taxation, Redistribution, Stochastic General Equilibrium.
Katja Hanewald, Hazel Bateman, Hanming Fang and Tin Long Ho
Abstract: This paper explores new mechanisms to fund long-term care using housing wealth. Using data from an online experimental survey fielded to a sample of 1,200 Chinese homeowners aged 45-64, we assess the potential demand for new financial products that allow individuals to access their housing wealth to buy long-term care insurance. We find that access to housing wealth increases the stated demand for long-term care insurance. When they could only use savings, participants used on average 5% of their total (hypothetical) wealth to purchase long-term care insurance. When they could use savings and a reverse mortgage, participants used 15% of their total wealth to buy long-term care insurance. With savings and home reversion, they used 12%. Reverse mortgages do not require regular payments until the home is sold, while home reversion involves a partial sale and leaseback. Our results inform the design of new public or private sector programs that allow individuals to access their housing wealth while still living in their homes.
Keywords: Long-term care insurance, housing, reverse mortgages, home reversion, China
Manuela Naldini, Myra Hamilton and Elisabeth Adamson
Abstract: The social investment paradigm has received widespread attention as an approach to ‘prepare’ individuals, families, and societies to respond to new social risks they are likely to encounter throughout the life course, particularly those associated with post-industrialisation and globalisation. Early childhood education and care (ECEC) and policies that support women to participate in employment have been a central focus of the social investment paradigm. But while post-industrialisation and globalisation are closely linked to increases in migration, migrant families are largely absent from social investment policies. From a social investment perspective, access to ECEC and work/care reconciliation policy measures are crucial for migrant children and families. Yet there is a gap in the social investment literature when it comes to access to ECEC and work/care reconciliation policies by migrant families. Against this backdrop, this paper asks: To what extent are migrant families included or excluded from ECEC and work/care reconciliation policies in the two countries? Drawing on a comprehensive analysis of eligibility for and access to ECEC and work/care policies by migrant families in Australia and Italy, this paper critically examines the capacity of the social investment approach to respond to new life course risks associated with migration and mobility. This paper compares social investment policies for migrant families in two countries: Australia and Italy. These two countries have markedly different migration, employment, and care regimes, with both similarities and differences in the organisation of ECEC and policies to promote work/care reconciliation. It draws attention to the way in which the emergence of the social investment paradigm to address ‘new social risks’ does not take account of the importance of migration and mobility in the contemporary life course. Manuela Naldini, Myra Hamilton and Elisabeth Adamson