Population Aging Research Center
The Population Aging Research Center (PARC) at the University of Pennsylvania was established in 1994 with a P30 grant from the National Institute on Aging (www.nih.gov/nia), which fosters research on the demography and economics of health and aging. PARC research associates come from four schools, 16 academic departments, and three centers/institutes across the university, including Sociology, Economics, Anthropology, Business, Nursing, Medicine, etc. PARC also sponsors an annual pilot proposal competition and a weekly seminar series in conjunction with the Population Studies Center.
The overall research themes of PARC reflect the interests and expertise of our research associates and include health at older ages, including biodemography; health and economics of pensions and retirement and health care systems; aging families and households, intergenerational relations, and resource transfers across multiple generations; and diversity of aging populations.
PublicationPersonal Attributes and the Financial Well-Being of Older Adults: The Effects of Control Beliefs(2009-09-01) Zurlo, Karen AAs the baby-boom population ages, adults are expected to take greater responsibility and control of their financial situation, but often are not equipped to assume that responsibility. This lack of control of one's finances exposes individuals to financial risk, potentially resulting in a reduced standard of living in retirement. This study explores the relationship between the personal attributes of older adults and their financial well-being, measured as financial satisfaction, while focusing on the mediating effects of control beliefs, defined as general sense of control and domain-specific levels of control related to work, health, and finances. Responses from two components of the Health and Retirement Study (HRS), the core survey and a psychosocial leave-behind questionnaire (LBQ) administered in 2006, were merged and used to test a mediation model. Using a series of regression analyses and a sample of approximately 7400 adults, aged 51 and greater, the findings provide some support of the four hypothesized models. The results of this study indicate that general sense of control and domain-specific control beliefs have a comparable influence on the relationship between personal attributes and the financial satisfaction of the older adult population. PublicationThe Behavioral Economics of Altruism, Reciprocity, and Transfers within Families and Rural Communities: Evidence from Sub-Saharan Africa(2007-02-01) Chao, Li-wei; Kohler, Hans-PeterTransfers between strangers, neighbors, families, and spouses were examined using Triple Dictator Games (TDG, involving only givings) and Trust Games (TG, involving both givings and reciprocations) among 240 participants from 60 families in 20 villages in rural Malawi. In TDG, more was sent by those who were older, male, in better physical health, financially poorer, or frequent lenders of personal items, but less was sent to neighbors by participants with higher HIV felt stigma. In TG, higher transfers were associated with the expected amount of reciprocation, amount sent in TDG, and prior lending behavior; participants with high HIV stigmatization attitudes gave less, especially to their own families and spouses. Higher reciprocation in TG was associated with better mental health. Those with HIV stigmatization attitudes reciprocated differently, depending on whether their game-partner was the neighbor, family, or spouse. Social distance, physical and mental health, and HIV-stigma were predictors of transfers behavior. PublicationFinancial Literacy, Schooling, and Wealth Accumulation(2010-09-28) Behrman, Jere R; Mitchell, Olivia S; Soo, Cindy; Bravo, DavidFinancial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. Here we use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation. While financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, our approach reveals even stronger and larger effects of financial literacy on wealth. It also indicates no significant positive effects of schooling attainment conditional on financial literacy in a linear specification, but positive effects when interacted with financial literacy. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs. PublicationWhat Determines Adult Cognitive Skills? Impacts of Pre-Schooling, Schooling and Post-Schooling Experiences in Guatemala(2006-04-01) Behrman, Jere R; Hoddinott, John; Maluccio, John A; Soler-Hampejsek, Erica; Behrman, Emily L; Martorell, Reynaldo; Ramirez-Zea, Manuel; Stein, Aryeh DMost investigations of the importance of and the determinants of adult cognitive skills assume that (a) they are produced primarily by schooling and (b) schooling is statistically predetermined. But these assumptions may lead to misleading inferences about impacts of schooling and of pre-schooling and post-schooling experiences on adult cognitive skills. This study uses an unusually rich longitudinal data set collected over 35 years in Guatemala to investigate production functions for adult (i) reading-comprehension and (ii) non-verbal cognitive skills as dependent on behaviorally-determined pre-schooling, schooling and post-schooling experiences. Major results are: (1) Schooling has significant and substantial impact on adult reading comprehension (but not on adult non-verbal cognitive skills) —but estimates of this impact are biased upwards substantially if there is not control for behavioral determinants of schooling in the presence of persistent unobserved factors such as genetic endowments and/or if family background factors that appear to be correlated with genetic endowments are included among the first-stage instruments. (2) Both pre-schooling and post-schooling experiences have substantial significant impacts on one or both of the adult cognitive skill measures that tend to be underestimated if these pre- and post-schooling experiences are treated as statistically predetermined—in contrast to the upward bias for schooling, which suggests that the underlying physical and job-related components of genetic endowments are negatively correlated with those for cognitive skills. (3) The failure in most studies to incorporate pre- and post-schooling experiences in the analysis of adult cognitive skills or outcomes affected by adult skills is likely to lead to misleading over-emphasis on schooling relative to these pre-and post-schooling experiences. (4) Gender differences in the coefficients of the adult cognitive skills production functions are not significant, suggesting that most of the fairly substantial differences in adult cognitive skills favoring males on average originate from gender differences in completed grades of schooling and in experience in skilled jobs favoring males. These four sets of findings are of substantial interest in themselves. But they also have important implications for broader literatures, pointing to limitations in the cross-country growth literature of using schooling of adults to represent human capital, supporting hypotheses about the importance of childhood nutrition and work complexity in explaining the “Flynn effect” of substantial increases in measured cognitive skills over time, and questioning the interpretation of studies that report productivity impacts of cognitive skills without controlling for the endogeneity of such skills. PublicationPension Payouts in Chile: Past, Present, and Future Prospects(2009-08-01) Mitchell, Olivia S; Ruiz, JoseOne of the most interesting features of the Chilean pension system is that approximately two-thirds of all retirees purchase annuities, resulting in annuitization rates much higher than in other countries. In this paper we review recent developments in the payout market for Chilean pensions, focusing particularly on the role of annuities, and we discuss what makes the payout market in Chile so different from those in other nations. PublicationSubjective Expectations in the Context of HIV/AIDS in Malawi(2007-01-01) Delavande, Adelin; Kohler, Hans-PeterIn this paper we present a newly-developed interactive elicitation methodology to collect probabilistic expectations in a developing country context with low levels of literacy and numeracy, and we evaluate the feasibility and success of this method for a wide range of outcomes in rural Malawi. We find that respondent’s answers about subjective expectations respect basic properties of probabilities, and vary meaningfully with observable characteristics and past experience. From a substantive point of view, the elicited expectations indicate that individuals are generally aware of differential risks. For example, individuals with less income and less land feel rightly at more risk of financial distress than people with higher SES, or people who are divorced or widow feel rightly at more risk of being infected with HIV than currently married individuals. While many expectations—including also the probability of being currently infected with HIV—are well-calibrated compared to actual probabilities, mortality expectations are substantially over-estimated compared to lifetable estimates. This overestimation may lead individuals to underestimate the benefits of adopting HIV risk-reduction strategies. The skewed distribution of expectations about condom use also suggests that a small group of innovators are the forerunners in the adoption of condoms within marriage for HIV prevention. PublicationReforms to an Individual Account Pension System and their Effects on Work and Contribution Decisions: The Case of Chile(2008-09-01) Vélez-Grajales, VivianaThis study evaluates the effect of Chile’s pension system rules and regulations on individuals’ contribution and working decisions. In 1980 Chile was the first country to switch from a pay-as-you-go system to a privatized system based on individual investment accounts; then it has since been a model for pension reforms in many other Latin American countries. The Chilean system has also been considered by U.S. policy makers as a possible prototype for reform. This paper develops and estimates a dynamic behavioral model of individual decision-making about formal or informal sector employment and about pension contributions, accounting for regulations that govern the timing and level of pension benefits. Model parameters are obtained by the method of simulated maximum likelihood applied to longitudinal data from a new household survey, the Social Protection Survey (2002 to 2004), and administrative data from the pension regulatory agency. The estimated model is used to simulate the impact on employment and contribution patterns of changing the system rules. Reducing the number of quarters required to obtain the Minimum Pension and increasing the size of that pension increases work in the formal sector and contributions in the informal sector. PublicationHidden Regret and Advantageous Selection in Insurance Markets(2007-01-01) Huang, Rachel J; Muermann, Alexander; Tzeng, Larry YWe examine insurance markets in which there are two types of customers: those who regret suboptimal decisions and those who don't. In this setting, we characterize the equilibria under hidden information about the type of customers and hidden action. We show that both pooling and separating equilibria can exist. Furthermore, there exist separating equilibria that predict a positive correlation between the amount of insurance coverage and risk type, as in the standard economic models of adverse selection, but there also exist separating equilibria that predict a negative correlation between the amount of insurance coverage and risk type, i.e. advantageous selection. Since optimal choice of regretful customers depends on foregone alternatives, any equilibrium includes a contract which is not purchased. PublicationAn Analysis of the Medicare Prescription Drug Benefit(2006-08-01) Claudio, LucarelliMedicare has recently experienced the largest expansion of benefits since its in- ception: the inclusion of prescription drug coverage under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The policy debate has mainly focused on estimating the cost of implementing the new benefit, with little attention to the quantification of its impact on beneficiaries’ life expectancy, health status, and health-related behaviors. The policy came into effect in January 2006; therefore, no post-policy data are available yet. This paper develops and estimates a dynamic model of the demand for supplemental health insurance and different types of medical care, and uses the model to forecast the effects of the new Medicare benefit in a way that ex- plicitly takes into account the policy’s unique actuarial design and the dynamic features it includes. The results show that the new policy increases expenditure on prescription drugs by 24%, and has a positive effect on health status and life expectancy. There is a corresponding increase in the utilization of inpatient and outpatient care, due to the extension of life for people in poor health. The cost of extending life by a year is estimated to be between $38,000 and $62,000. The take-up rate of the new benefit reaches 85% by the fifth year of implementation, and there is a sizable crowding-out effect of private plans offering supplemental prescription drug coverage. The dynamic model is also used to evaluate the impact of alternative designs for the prescription drug benefit. PublicationThe More the Better? Characteristics and Efficiency of 401(k) Investment Menus(2008-03-18) Tang, NingFew previous studies have explored whether defined contribution retirement saving plans offer sufficiently diversified investment menus, though it is likely that these menus significantly shape workers’ accumulations of retirement wealth. This paper assesses the efficiency and performance of 401(k) investment options offered by a large group of US employers. We show that the majority of plans is efficient compared to market benchmark indexes. Three performance measures underscore the fact that these plans tend to offer a sensible investment menu, when measured in terms of the menus’ mean-variance efficiency, diversification, and participant utility. The key factor contributing to plan efficiency and performance is the particular set of funds offered, rather than the total number of investment options provided. We conclude that, in 401(k) arena, “more” is not necessarily “better.”