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Care for money? Mortality improvements, increasing intergenerational transfers, and time devoted to the elderly

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  • Tobias Vogt

    (Max Planck Institute for Demographic Research, Rostock, Germany)

  • Fanny A. Kluge

    (Max Planck Institute for Demographic Research, Rostock, Germany)

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    Abstract

    Background: After the reunification of Germany, mortality among older eastern Germans converged quickly with western German levels. Simultaneously, the pension benefits of eastern Germans rose tenfold. Objective: We make use of German reunification as a natural experiment to show that, first, increasing financial transfers from the elderly to their children led to increasing reverse transfers in the form of care; and, second, this rise in the number of hours spent on care led to a reduction in old-age mortality. Method: As a first step, we calculated intergenerational transfer profiles by age for eastern and western Germany to determine whether any changes in downward and in upward transfers in the form of time and money occurred since reunification. We use generalized linear regression to test whether rising pensions led to an increase in the number of hours spent on care, and whether this increase led to a reduction in old-age mortality. We use different macro level data sources to test our hypothesis, including mortality rates and time use surveys for East and West Germany and information on private intergenerational transfers from the National Transfer Accounts project for Germany. Results: We show that since German reunification, intergenerational downward transfers more than doubled in percentage terms in the east. This was predominantly caused by the sharp increase in pension benefits since the fall of the Berlin Wall. At the same time, mortality among pensioners dropped markedly, and converged to western German levels. We further show that the rise in pension income was strongly correlated with the increase in social support and the decline in mortality among older eastern Germans. Discussion: Our result suggest that there was an interfamilial monetary transfer from the elderly to the young in exchange for social support. This mutual beneficial exchange may have helped to improve the survival of older East Germans after the reunification.

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    Bibliographic Info

    Paper provided by Max Planck Institute for Demographic Research, Rostock, Germany in its series MPIDR Working Papers with number WP-2013-014.

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    Length: 23 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:dem:wpaper:wp-2013-014

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    Web page: http://www.demogr.mpg.de/

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    Keywords: Germany; mortality determinants;

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    1. Anne Case & Darren Lubotsky & Christina Paxson, 2001. "Economic Status and Health in Childhood: The Origins of the Gradient," NBER Working Papers 8344, National Bureau of Economic Research, Inc.
    2. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
    3. Babones, Salvatore J., 2008. "Income inequality and population health: Correlation and causality," Social Science & Medicine, Elsevier, vol. 66(7), pages 1614-1626, April.
    4. Shleifer, Andrei & Summers, Lawrence H. & Bernheim, B. Douglas, 1986. "The Strategic Bequest Motive," Scholarly Articles 3721794, Harvard University Department of Economics.
    5. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
    6. Olsen, Rolf Bang & Olsen, Jørn & Gunner-Svensson, Finn & Waldstrøm, Bodil, 1991. "Social networks and longevity. A 14 year follow-up study among elderly in Denmark," Social Science & Medicine, Elsevier, vol. 33(10), pages 1189-1195, January.
    7. Barro, Robert J & Friedman, James W, 1977. "On Uncertain Lifetimes," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 843-49, August.
    8. David Cutler & Angus Deaton & Adriana Lleras-Muney, 2005. "The Determinants of Mortality," Working Papers 235, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
    9. Angus Deaton, 2001. "Health, Inequality, and Economic Development," NBER Working Papers 8318, National Bureau of Economic Research, Inc.
    10. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
    11. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
    12. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
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