February 2022
17Feb

Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil

By Niklas Engbom, Gustavo Gonzaga, Christian Moser & Roberta Olivieri Using rich administrative and household survey data spanning 34 years from 1985 to 2018, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil’s formal sector. Higher-order moments of the distribution of earnings changes show cyclical movements in Brazil that are similar to those...

February 17, 2022
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17Feb

Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance

By John Edward Sabelhaus, Jeffrey P. Thompson In this paper, we present updated measures of racial disparities in wealth using the most recent data from the Survey of Consumer Finances (SCF), augmented by household-level estimates of defined benefit (DB) pension wealth developed by Sabelhaus and Volz (2020). Including this important asset, we find that racial wealth disparities are smaller than the numbers typically discussed in other research or in the media, but the disparities remain substantial. The paper proceeds by...

February 17, 2022
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17Feb

Assessing Chile’s Pension System: Challenges and Reform Options

By Christopher Evans & Samuel Pienknagura Chile’s pension system came under close scrutiny in recent years. This paper takes stock of the adequacy of the system and highlights its challenges. Chile’s defined contribution system was quite influential when introduced, and was taken as an example by other countries. However, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics and global returns, while informality persists in the labor...

February 17, 2022
Articles, Pension design, Savings, , , , ,
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11Feb

Low Demand for Reverse Mortgages in Canada: Price, Knowledge or Preferences?

By Admin SSRN au/at CIRANO, Ismael Choiniere Crevecoeur & Pierre-Carl Michaud High borrowing costs, limited knowledge and preferences could explain why few Canadians purchase reverse mortgages, an asset decumulation product that is appealing to those who are house-rich but cash-poor. In this paper, we first use an asset pricing model to calculate the actuarial fair costs of guarantees built into reverse mortgage products in Canada and compare those estimates to prevailing interest rates in the market for these products. We...

February 11, 2022
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11Feb

Extending pension policy in emerging Asia: An overlapping-generations model analysis for Indonesia

By George Kudrna, John Piggott & Phitawat Poonpolkul 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...

February 11, 2022
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11Feb

Reforming the Greek Pension System

By Daehaeng Kim, Alvar Kangur & Niki Kalavrezou The Greek pension system has been costly, complex, and distortive, which has contributed to Greece’s fiscal problems and discouraged labor force participation. Several attempts to reform the system faltered due to lack of implementation, pushback by vested interests, and court rulings leading to reversals. A series of reforms introduced throughout 2015–17 unified benefit and contribution rules, removed several distortions and reduced fragmentation and costs. If fully implemented throughout the long-term, these reforms...

February 11, 2022
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03Feb

Do pensions have real teeth? Evidence from the state government borrowing costs

By Sumit Agarwal, Chunlin Liu, Qiyuan Peng, Qun Wu & Ting Zhang Yes, they do. State governments with risky defined benefit pension plans have higher borrowing costs, as measured by larger bond offering yield spreads. To control for the potential endogenous issue, we utilize the instruments of actuarial firms’ reputation, and direct flight between the state capital and actuarial firm headquarter. We further identify the relation between pension plan investment risks and borrowing costs using two quasi-experimental shocks: the introduction...

February 3, 2022
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03Feb

Target Date Funds and Portfolio Choice in 401(k) Plans

By Olivia S. Mitchell & Stephen P. Utkus Target date funds in corporate retirement plans grew from $5B in 2000 to $734B in 2018, partly because federal regulation sanctioned these as default investments in automatic enrollment plans. We show that adopters delegated pension investment decisions to fund managers selected by plan sponsors. Including these funds in retirement saving menus raised equity shares, boosted bond exposures, curtailed cash/company stock holdings, and reduced idiosyncratic risk. The adoption of low-cost target date funds...

February 3, 2022
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January 2022
28Jan

Managing Misbehavior: Rational Choice in an Uncertain Retirement

By Rene Martel, Jennifer Gongola, sean klein, Avi Sharon Behavioral science has helped encourage better behaviors for many investors who are accumulating savings for retirement. This paper investigates the application of behavioral science to decumulation to help investors make better choices and maintain quality of life in retirement. We conducted a proprietary research study, collecting more than 750 responses from affluent and high-net-worth investors in the United States age 55 and older. The results identify key behavioral influences linked to...

January 28, 2022
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28Jan

Financial Attitude and Pension Savings Among Informal Economy Workers in Ghana: Application of the Theory of Planned Behaviour

By Dominic Buer Boyetey, Francis Enu-Kwesi The Theory of Planned Behaviour (TPB) was applied to examine the financial attitude of informal economy workers in pension saving. This was against the background that informal economy workers were left out of formal pension schemes while micro pension schemes (MPS) remain as options that can guarantee economic security after retirement for people with the right financial attitudes. We used interview schedules and interview guides to collect quantitative and qualitative responses concurrently on key...

January 28, 2022
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