{"title":"Economic‐Financial Literacy and (Sustainable) Pension Reforms: Why the Former is a Key Ingredient for the Latter","authors":"E. Fornero","doi":"10.2139/ssrn.2665089","DOIUrl":"https://doi.org/10.2139/ssrn.2665089","url":null,"abstract":"Financial literacy has important implications for economic reforms. Reforms are meant to change people’s behavior and their effectiveness crucially depends on the ability of citizens to recognize and generally approve, their necessity, their general design and their “sense of direction”. Without basic understanding by citizens, reforms risk having little or no effect or even being reversed. Informed judgment about economic reforms requires information and numeracy as well as literacy. This is particularly true of pension reforms because of their profound impact on people’s life plans. The 2011 Italian pension reform is a case in point.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131594963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Rise and Fall of the Dutch Savings Schemes","authors":"L. Delsen, J. Smits","doi":"10.2139/SSRN.2414546","DOIUrl":"https://doi.org/10.2139/SSRN.2414546","url":null,"abstract":"Dutch savings schemes are a case in point. In 1994, Dutch employees got the opportunity to save tax free to build up financial assets in the voluntary Salary Savings Scheme (SSS). From 2006, they could also choose to save in the innovative Life Course Savings Scheme that offered them the opportunity to save tax free to finance periods of unpaid leave. In 2010 the Rutte I government decided to combine the schemes into the so-called Vitality Scheme, aimed at giving employees and entrepreneurs more freedom and responsibility to shape their career themselves. However, in 2012 the new Rutte II government decided to cut spending and not to introduce the Vitality Scheme. In this paper we look back to draw policy lessons from the Dutch experience. The design of the three savings schemes will be discussed and empirical evidence regarding participation of Dutch civil servants in the Life Course Savings Scheme and the Salary Savings Scheme is presented. This allows us to put forward recommendations for an effective fiscally facilitated individualised savings scheme.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124286279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Practical Integration of Positive and Normative Approaches to Cost-Benefit Analysis of National Defense Spending","authors":"David Blau","doi":"10.2139/ssrn.2377638","DOIUrl":"https://doi.org/10.2139/ssrn.2377638","url":null,"abstract":"Cost-benefit analyses for national defense spending can suffer from industry trade association biases evident in inflated supposed gains from industrial multiplier effects. At the same time, ideological presumption of normative values to either increasing or decreasing defense spending (and therefore presence) by the US ignores a more effective analytic framework: first quantifying the purely financial costs of defense spending: immediate cash expense, and increased borrowing costs and slower growth due to increased debt; and the purely financial benefits: the most accurate multiplier effect.This is still only the first part of the story. Quantifying the above first allows us to evaluate the premium we may be paying for defense as a public good. This positive approach could be complemented by a normative one that ignores rhetoric, but simply attempts to assign particular defense spending line items to the particular percent reduction in the chance of a possible conflict (with an identifiable cost) to which it contributes, and use this expected value to determine the return-on-investment of defense as public good. While this framework is tested on the sequestration cuts (for the positivist component) and the costs of potential conflict in Sudan (for the normative one, where ideally defense spending items could be traced to the expected value of their ability to reduce the chance of that conflict occurring), it can be extended to any defense investment decision. This framework is hopefully preferable to anything short of combining sophisticated input-output models with a wargaming simulation.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130004320","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"How Individuals React to Defined Benefit Pension Risk","authors":"Nicolás Salamanca, A. de Grip, O. Sleijpen","doi":"10.2139/ssrn.2347976","DOIUrl":"https://doi.org/10.2139/ssrn.2347976","url":null,"abstract":"We develop a measure of (hybrid) defined benefit (DB) pension risk and show how this pension risk affects individual portfolio decisions. We find that people in riskier DB plans are, on average, not only less likely to hold equity but also hold a smaller share of their wealth in equity. This relation is stronger for people who are better informed about their pension plan risk, and for retirees. We also check whether pension risk is related to retirement decisions but find no evidence to support this hypothesis. Our main results are robust to a number of model specifications and alternative explanations. Our findings suggest that properly funded DB pension plans can increase participants’ welfare by allowing them to seek higher returns in their individual portfolios while at the same time relieving less sophisticated participants from the decisions required by a defined contribution plan.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122514346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Can Temptation Explain Housing Choices in Later Life?","authors":"V. Angelini, A. Bucciol, M. Wakefield, G. Weber","doi":"10.2139/ssrn.2297349","DOIUrl":"https://doi.org/10.2139/ssrn.2297349","url":null,"abstract":"We use individual life-history data on twelve European countries to investigate the role of temptation in explaining the decision to become home-owners relatively late in life. The model we consider takes into account the standard motives for saving and investing in illiquid assets such as housing and individual retirement accounts, but recognizes that illiquid assets may be used by individuals who find it hard to procrastinate current consumption to control the temptation linked to having plenty of cash on hand. The evidence we produce is consistent with the notion that tempted individuals first resort to illiquid financial assets to control temptation, but as retirement age approaches they are more likely to use home-ownership as a commitment device.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125895215","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Stocks for the Long Run? Evidence from Emerging Markets","authors":"Zaghum Umar, L. Spierdijk","doi":"10.2139/ssrn.2260196","DOIUrl":"https://doi.org/10.2139/ssrn.2260196","url":null,"abstract":"We estimate the myopic (single-period) and intertemporal hedging (long-run) demand for stocks in 20 growth-leading emerging market economies and the US during the 1999-2012 period. We consider two types of emerging market investors: a domestic investor (whose returns are denominated in the local currency) and an international investor who can invest in US and emerging markets stocks (with returns in US dollars). We establish significant short-run and long-run domestic demand for stocks in several emerging market economies. For international investors only the short-run demand for emerging market stocks tends to be significant. Hence, only for domestic investors emerging market stocks are assets for the long run.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115727228","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Price Efficiency in the Dutch Annuity Market","authors":"E. Cannon, Ralph Stevens, Ian Tonks","doi":"10.2139/ssrn.2269556","DOIUrl":"https://doi.org/10.2139/ssrn.2269556","url":null,"abstract":"We provide the first analysis of annuity rates in the Netherlands for the period 2001-2012. During this period, the number of annuity providers was high and stable and we find that falls in annuity rates can be explained entirely by changes in yields and life expectancy. We show that annuitants could have increased their annuity income by about 5%, by shopping around and purchasing their annuities from alternative providers. Money’s worth calculations show that the market is efficient by international standards, with a money’s worth above 0.9 for the whole period and close to unity by the end of the period. We present conflicting evidence on the existence of adverse selection because although we find money’s worths are inversely related to age of purchase, we find they are positively related to size of purchase.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114736049","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Cohort Mortality Risk or Adverse Selection in the UK Annuity Market?","authors":"E. Cannon, Ian Tonks","doi":"10.2139/ssrn.2269560","DOIUrl":"https://doi.org/10.2139/ssrn.2269560","url":null,"abstract":"The \"money's worth\" measure has been used to assess whether annuities are fairly valued and also as evidence for adverse selection in the annuity market. However, a regulated life assurer with concerns about predicting long-run mortality may price annuities to reduce these risks which will affect the money’s worth. We provide a simple model of the effect of cohort mortality risk on the money’s worth. We demonstrate that cohort mortality risk is quantitatively important, and show that it is not possible to identify the effect of a cohort mortality risk model from that of an adverse selection model.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"54 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116515248","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"What Do Wages Add to the Health-Employment Nexus? Evidence from Older European Workers","authors":"M. Flores, A. Kalwij","doi":"10.2139/ssrn.2236899","DOIUrl":"https://doi.org/10.2139/ssrn.2236899","url":null,"abstract":"This paper adds to the empirical literature on health as an important determinant of employment at older ages by exploring the role in the health-employment nexus of the wage rates of 50 to 64-year-old workers. To do so, we use individual-level panel data from the Survey of Health, Ageing and Retirement in Europe to estimate a system of equations for health, wages and employment. Our model also takes into account both the potential for measurement error in the health variable and selectivity issues related to the wage equation. We find that for men (women) a one-unit (one standard deviation) increase in health yields, on average, a 7 (8) percentage higher hourly wage rate, resulting in a 2 (4) percentage point higher employment probability. We also show a direct impact of health on employment: a similar increase in health raises the employment probability of men (women) by 16 (13) percentage points. As regards differences between European countries, our findings suggest that for all country groups, the mediating role of wages in the health-employment nexus is relatively small while the direct impact of health on employment is relatively large and rather similar. Overall, our findings indicate only a minor role for disability income policies likes wage subsidies to encourage the employment of (older) workers with health limitations, but an instrumental role for policy aimed at helping employers accommodate these workers on the job and keep them employed at older ages.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"183 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114953688","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Why the Rich Drink More and Smoke Less: The Impact of Wealth on Health Behaviors","authors":"H. van Kippersluis, T. Galama","doi":"10.2139/ssrn.2251190","DOIUrl":"https://doi.org/10.2139/ssrn.2251190","url":null,"abstract":"Wealthier individuals engage in healthier behavior. This paper seeks to explain this phenomenon by developing a theory of health behavior, and exploiting both lottery winnings and inheritances to test the theory. We distinguish between the direct monetary cost and the indirect health cost (value of health lost) of unhealthy consumption. The health cost increases with wealth and the degree of unhealthiness, leading wealthier individuals to consume more healthy and moderately unhealthy, but fewer severely unhealthy goods. The empirical evidence presented suggests that differences in health costs may indeed provide an explanation for behavioral differences, and ultimately health outcomes, between wealth groups.","PeriodicalId":357131,"journal":{"name":"Netspar Research Paper Series","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114496859","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}