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Income Mobility in Old Age in Britain and Germany

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  • Felix Büchel
  • Joachim R. Frick
  • Asghar Zaidi

Abstract

The increases in human longevity in recent decades and the trends for early retirement have posed new challenges for policy makers, and require a holistic understanding of the processes that influence the economic resources of older people. This paper contributes to this knowledge by examining the income mobility experienced by older people living in Britain and Germany during the 1990s, and by identifying personal attributes and life-course events that influenced its direction and likelihood. The analysis uses the British Household Panel Survey (BHPS) and the German Socio-Economic Panel (SOEP) panel data. The comparative perspective yields insights about the different income experience of older people in the two markedly different welfare regimes. Results show that old-age income mobility is more pronounced in Britain than in Germany, and that in both countries its occurrence is particularly associated with changes in living arrangements, in the employment status of the co-resident family members and with widowhood among women. Unemployment during working life is also associated with significant negative later life income mobility. Among those on low incomes, a high share of income from an earnings-related pension had a significant and positive effect in both countries. One policy implication is the need to strengthen the social safety net, to safeguard against downward income mobility in old age, particularly among widows. Policy incentives are required to encourage flexible living arrangements in old age, as well as a greater protection from unemployment during working life, more so in Germany than in Britain.

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Bibliographic Info

Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number 089.

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Date of creation: Dec 2004
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Handle: RePEc:cep:sticas:089

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Web page: http://sticerd.lse.ac.uk/case/_new/publications/default.asp

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Keywords: income mobility; old age; pensions; Britain and Germany;

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  1. Axel Borsch-Supan & Reinhold Schnabel, 1997. "Social Security and Retirement in Germany," NBER Working Papers 6153, National Bureau of Economic Research, Inc.
  2. Jarvis, Sarah & Jenkins, Stephen P, 1998. "How Much Income Mobility Is There in Britain?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(447), pages 428-43, March.
  3. Fields, Gary S. & Ok, Efe A., 1996. "The Meaning and Measurement of Income Mobility," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(2), pages 349-377, November.
  4. Fields, Gary S & Ok, Efe A, 1999. "Measuring Movement of Incomes," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 66(264), pages 455-71, November.
  5. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, Elsevier, vol. 19(2), pages 376-393, December.
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  7. David A. Wise, 1989. "The Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise89-1, October.
  8. Winfried Schmähl, 1998. "Recent Developments of Pension Schemes in Germany: Present and Future Tasks in Conflict," LABOUR, CEIS, CEIS, vol. 12(1), pages 143-168, 03.
  9. Bliss, Christopher, 1999. "Galton's Fallacy and Economic Convergence," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 4-14, January.
  10. Karen Holden & Richard Burkhauser & Daniel Feaster, 1988. "The timing of falls into poverty after retirement and widowhood," Demography, Springer, Springer, vol. 25(3), pages 405-414, August.
  11. Tsakloglou, Panos, 1996. "Elderly and Non-elderly in the European Union: A Comparison of Living Standards," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(3), pages 271-91, September.
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