A Dynamic Analysis of Household Dissolution and Living Arrangement Transitions by Elderly Americans

This paper exploits the new non-response files of the Panel Study of income Dynamics in order to study living arrangement transitions of elderly Americans. The focus of the paper is an estimate of the probability of household dissolution, i.e., the probabilities of transitions from living independently to living with adult children or other related or unrelated persons and the probability of becoming institutionalized, and an investigation of the factors causing such transitions. Our main result is an astounding stability of living arrangements even after incisive life-events such as death of a spouse, onset of a disability, or in the years immediately preceding death, in particular the large proportion of elderly who stay living independently until their deaths. Almost two thirds of all elderly are living independently in the year of their deaths. 14.4 percent share at least once housing with relatives or friends, 3.1 percent experience a stay in an institution. Old age, being male or of low income significantly increases the risk of institutionalization. Elderly with a large family and nonwhite elderly are the groups most likely to share housing. All this might be expected. An important new finding, however, is the time trend of these probabilities. Holding all other factors constant, the risk of institutionalization increased substantially between 1968 and 1984 while the likelihood of being "taken in" by relatives or friends markedly decreased.

Pension Reform in Germany: The Impact on Retirement Decisions

The financing problems beleaguering the public pension system have again shifted the spotlight onto the retirement age. This paper examines the impact of various reform options on the actual retirement choices of older workers. The paper focuses in particular on the long-term implications of the changes implemented in pension legislation since 1992 and the reform options discussed by the German Social Security Reform Commission installed in 2002, the so called R?rup Commission'. Our simulations show that the early-retirement pension adjustment factors introduced by the 1992 pension reform will, in the long term, raise the average effective age of retirement for men by somewhat less than two years. The across-the-board two-year increase in all the relevant age limits proposed by the R?rup Commission' would raise the effective average age of retirement of men by about eight months. If the actuarial adjustment factor is increased from 3.6% to 6% per year, the effective average retirement age rises by almost two years. The effects are considerably weaker for women.

Household Saving in Germany: Results of the first SAVE study

Germany is an interesting country to study saving among older households since nearly everyone - whether in the middle income bracket or richer - saves substantial amounts in old age. Only households in the lowest quarter of the income distribution spend more between the ages of 60 and 75 than they save. Our paper exploits newly collected data, the first wave of the so-called SAVE panel, specifically collected to understand economic, psychological and sociological determinants of saving. Overall, we find extraordinarily stable savings patterns. More than 40% of German households save regularly a fixed amount. About 25% of German households plan their savings and have a clearly defined savings target in mind. Most of German household saving is in the form of contractual saving, such as saving plans, whole life insurance and building society contracts. This makes the flow of saving rather unresponsive to economic fluctuations, such as income shocks. Most households prefer to cut consumption if ends do not meet. In particular the elderly do not like to use credit cards, and they eschew debt. We suspect large cohort differences and will study them once further waves of the SAVE panel will become available.

Household Dissolution and the Choice of Alternative Living Arrangements Among Elderly Americans

For the elderly, housing choices are more complex than merely the choice of housing expenditure, dwelling size, and tenure. They also include the choice among alternative living arrangements such as living in one household with their adult children or sharing accommodations with other related or unrelated elderly. We first contrast living arrangements of elderly Americans with the population under age 65 and describe the changes from 1974 to 1983. We detect a growing discrepancy in household formation/dissolution patterns between the elderly and the younger population: after a steady decline in the 1970s, we observe a rapid increase in the rate of "doubled-up" young families in the beginning of the 1980s. No such development can be found among elderly Americans. Instead, the proportion of elderly living in- dependently steadily increases from 1974 to 1983. To explain this discrepancy, we estimate a multinomial choice model among living independently and six categories of alternative living arrangements. The main finding is the predominance of demographic determinants as opposed to economic variables. The difference in income growth between the young and the elderly -- real income declined for the young but increased for the elderly -- can explain only part of the discrepancy in household dissolution decisions. The remaining discrepancy must be attributed to inertia and low mobility rates.

Risiken im Lebenszyklus: Theorie und Evidenz

Der einzelne Mensch ist im Lebensverlauf erheblichen biometrischen, ökonomischen, familiären und politischen Risiken ausgesetzt. Viele meinen, diese wären in den letzten Jahren größer geworden. Haben wir die richtigen Institutionen, um diese Risiken effizient abzudecken? Unter Institutionen verstehen wir individuelles Sparen, familiäre Hilfe, private Versicherungen und schließlich den Staat mit seinen Sozialversicherungen. Wo und wann funktionieren diese Institutionen? Wo und wann nicht? Was muss man tun, um sie zu verbessern? Wie sieht modernes "Social Risk Management" aus? Der erste Teil dieses Übersichtsbeitrags skizziert die wirtschaftstheoretischen Grundlagen des Sparverhaltens, der Portefeuillewahl und der Versicherungsnachfrage. Im Hauptteil werden die empirischen Befunde gesammelt, um im dritten Teil wirtschaftspolitische Schlussfolgerungen zu ziehen

Healthy, Wealthy, and Knowing Where to Live: Predicted Trajectories of Health, Wealth and Living Arrangements Among the Oldest Old

Health, wealth and where one lives are important, if not the three most important material living conditions. There are many mechanisms that suggest that living arrangements and well-being derived from health and economic status are closely related. This paper investigates the joint evolution of the three conditions, using a microeconometric approach similar to what is known as vector autoregressions' (VAR) in the macroeconomics literature.