Essays on the economics of ageing
Creators: name: Pandey, Manoj Kumar
Publisher: name: The Australian National University
Year: 2014

description: This thesis consists of three essays on the economics of ageing. Following an introductory chapter, the first essay recognises the importance of old-age health shocks and assesses the adverse effects of these on household welfare. In particular, it examines the effects of old-age health shocks on the consumption and income smoothing of South African households. For analysis purposes, I use nationally representative household panel data from the National Income Dynamics Study (NIDS) for 2008, 2010 and 2012, and an instrumental variable approach to explicitly address the endogeneity of illness. Using different measures of health shocks, instrumental variables and econometric estimation strategies, I find strong adverse effects of old-age health shocks on income and consumption growth for households. The analysis reveals that while nonmedical income, total nonmedical consumption and nonmedical non-food consumption are more sensitive to health shocks, the adverse effects of health shocks on food consumption are limited. I also show that improvements in health conditions play a positive and significant role in preventing households from moving from non-poverty into poverty, as well as helping to transit from poverty to non-poverty economic conditions. The second essay uses life satisfaction data to test one of the basic predictions of the signaling model of conspicuous consumption over the life cycle. Assuming the correct prediction, individuals' satisfaction should increase with an increase in the ranking in the distribution of highly observable consumption within the reference group, but should not be affected by an increase in the ranking of highly unobservable consumption. Using Household, Income and Labour Dynamics in Australia (HILDA) panel data for 2005-11, I examine the validity of this prediction over the individual's life cycle. The econometric results suggest that while predictions differ across individuals' life cycles, the prediction is consistent only for individuals in the middle-age group (45-59 years). I do not find conclusive evidence in support of the predictions of the signaling model. Moreover, a sensitivity analysis reveals that the prediction of the model is sensitive to the choice of the estimation methods. The third essay studies the early retirement dynamics of married couples, and explores the relevance of spousal and labour market state dependence in explaining the individual and joint retirement behaviour of Australians using panel data from the HILDA survey. The study distinguishes between full and the partial retirement status. Based on a dynamic random effects multinomial logit estimation technique, I calculate transition matrices between different labour market states. The results reveal that temporal persistence in early retirement behaviour can be explained by observed and unobserved characteristics. The results yield strong evidence of state dependence for individual retirement. However, the evidence for this is relatively weak for joint retirement. Further, the evidence on spousal dependence in retirement behaviour is restricted only to the fully retired couples. This implies that while a fully retired individual is more likely to have a fully retired spouse, the partial retirement of an individual does not depend on whether the partner is fully or partially retired.