2018

Playing with Fire? Debt near Retirement in Canada

Because retired households cannot adjust quickly to shocks, for example by working more, they represent a vulnerable group when credit conditions deteriorate. We analyze the evolution of debt among households nearing retirement in Canada over the period 1999-2016. First, we find that debt as a ratio of income has risen considerably over that period and debt as a fraction of assets has also doubled even tough assets remain roughly five times as large as debt.

The Effect of College Education on Health and Mortality: Evidence from Canada

We investigate the returns to college attendance in Canada in terms of health and mortality reduction. First, we use a dynamic health microsimulation model to document how interventions which incentivize college attendance among high school graduates impact their health trajectory, health care consumption and life expectancy. We find large returns on these three aspects.

Who Benefits from Tax-Preferred Savings Accounts?

Under the main types of tax-preferred vehicles used to incentivize saving, governments tax savings in the contribution year (TEE-type) or in the withdrawal year (EET-type). The relative returns of the two types depend on effective marginal tax rates in these two years, which in turn depend on earnings dynamics. This paper estimates a model of earnings dynamics on a Canadian longitudinal administrative database containing millions of individuals. The model is then used, together with a tax simulator, to predict returns across income groups.

Homeownership, Labour Market Transitions and Earnings

The paper investigates the links between homeownership, employment and earnings for which no consensus exists in the literature. Our analysis is cast within a carefully specified dynamic setting, and uses the French sample of the EU Survey on Income and Living Conditions for the years 2004–2013. Results show that while homeowners have longer employment and unemployment spells, they must contend with lower earnings than tenants upon reemployment.

Demand for Annuities: Price Sensitivity, Risk Perceptions, and Knowledge

To assess the reasons behind low demand for voluntary individual lifetime annuities, we designed an experiment with varying characteristics of annuity contracts, in order to estimate individuals’ sensitivity to their value-to-cost ratio (or money’s worth). Using different measures of objective longevity risk and subjective survival expectations, we investigate how product knowledge and mortality risk misperceptions affect the take-up of – as well as the sensitivity of the demand for – annuities.

Understanding Joint Retirement

We estimate a model of labor supply and retirement of partners in a couple, modelling interdependent preferences; imperfect knowledge of the spouse’s preferences; and subjective expectations about the future. We rely in a new way on data collected in the U.S. Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and income replacement rates of both spouses, considering 1) their own preferences only; 2) the preferences of their spouse only; or 3) the most likely decision for the household.

Measuring Physicians’ Response to Incentives: Evidence on Hours Worked and Multitasking

We measure the response of physicians to monetary incentives, using matched administrative and time-use data on specialists from Quebec who were paid fee-for-service. Our sample covers a period during which the government changed the prices paid for clinical services. We apply these data to a multitasking model of physician labour supply, measuring two responses: 1) the labour-supply response to broad-based fee increases; and 2) the response to changes in the relative prices of services. Our results confirm that physicians respond to incentives in predictable ways.

Poverty Among the Elderly: The Role of Public Pension Systems

The objective of this paper is to measure the impact of first-pillar public pension spending on the prevalence of poverty among the elderly. Using data from 27 European countries from 1995 to 2014, we estimate the sensitivity of the poverty rate among individuals aged over 65 years to per capita public pension spending. We show the existence of a – nonlinear – relationship between these two variables. The sensitivity (or elasticity) is negative and statistically significant beyond a level of spending of €685 per capita.

Accounting for the Rise of Health Spending and Longevity

We estimate a life-cycle model of health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We find that technological change (31%) and the increase in the generosity of health insurance (5%) on their own may explain 36% of the rise in health spending, while income explains 4%. By simultaneously occurring, these changes may have led to complementarity effects which explain an additional 59% increase.

Long Term Care Risk Misperceptions*

Based on a survey we conducted in Canada, we contrast subjective probabilities with actual probabilities for three different risks: needing help for at least one activity of daily life, needing access to a nursing home, and living to be 85 years old. The paper describes how objective and subjective probabilities differ and correlate; studies cross-correlations between different types of risks; and then study how risk misperceptions correlate with individual characteristics, and how misperceptions affect purchase intentions and actual holdings of long-term care insurance (LTCI).

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