The Socioeconomic Health Gradient and Rising Old-Age Inequality
Final Report Abstract
Our goal in this project was to investigate how the social welfare system affects the relationship of socioeconomic status (occupation and lifetime earnings) to morbidity, longevity, and old-age income. In line with this goal and the expected milestones laid out in the project proposal, we specifically examined how an increase of the statutory retirement age affects old-age inequality of health and income in the status quo pension system, how a pension system that accounts for longevity gaps across occupational groups should be designed to provide equal expected returns of pension contributions, and how health care rationing and sick pay affect health inequality in old age. The methodological challenge was to set up multi-period overlapping generations models that capture existing social welfare systems, feasible alternative policy instruments, and human aging in line with modern gerontology research. We measured human aging as individualspecific deterioration of the functioning of body and mind, which we conceptualized as the accumulation of health deficits. This contrasts the still common approach in health economics of treating health status as latent variable. The existing literature on the macroeconomics of health has neglected the path-dependency of health deficits. We conjectured that the common (but biologically unfounded) approaches to measure health status as health capital or mortality risk that is determined by contemporaneous health spending downplayed the implications of health care rationing on the ageing process, and thus on life expectancy. They also miss the potential of incentivizing early retirement for workers in arduous and hazardous jobs for longevity. In contrast, our modelling approach is based on the empirical finding that the number of health deficits of an individual correlates exponentially with age and is closely related to mortality risk. Based on the health deficit approach, we were successful in developing several dynamic models with an age-structured population and a public insurance system that allowed us to study our research questions in an empirically founded way. That is, as envisioned as first milestone laid out in the project proposal, we were able to study the transmission and amplification of pre-existing inequalities from working age into retirement age and the special role of the health and pension system in this process. We calibrated the models by using original data that we constructed for several European countries. The expected second milestone was to inform the scientific community and policymakers about the institutional drivers of old age poverty and health inequality and to discuss reforms of the welfare state in order to fight income inequality among the elderly and to narrow the widening socioeconomic gradient of health in old age.
Publications
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Optimal demand for medical and long-term care. The Journal of the Economics of Ageing, 23, 100400.
Schünemann, Johannes; Strulik, Holger & Trimborn, Timo
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Anticipation of deteriorating health and information avoidance. Journal of Health Economics, 89, 102755.
Schünemann, Johannes; Strulik, Holger & Trimborn, Timo
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Health and aging before and after retirement. Journal of Population Economics, 36(4), 2825-2855.
Abeliansky, Ana Lucia & Strulik, Holger
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Health Care Rationing, Sick Pay, and the Socioeconomic Health Gradient. Discussion Paper.
Grossmann, V., Schuenemann, J. & Strulik, H.
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The economics of aging with infectious and chronic diseases. Economics & Human Biology, 52, 101319.
Strulik, Holger & Grossmann, Volker
