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The Prospects of the Baby Boomers: Methodological Challenges in Projecting the Lives of an Aging Cohort

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  • Christian Westermeier
  • Anika Rasner
  • Markus M. Grabka

Abstract

In most industrialized countries, the work and family patterns of the baby boomers characterized by more heterogeneous working careers and less stable family lives setthem apart from preceding cohorts. Thus, it is of crucial importance to understand how these different work and family lives are linked to the boomers' prospective material well-being as they retire. This paper presents a new and unique matching-based approach for the projection of the life courses of German baby boomers, called the LAW-Life Projection Model. Basis for the projection are data from 27 waves of the German Socio-Economic Panel linked with administrative pension records from the German Statutory Pension Insurance that cover lifecycle pension-relevant earnings. Unlike model-based micro simulations that age the data year by year our matching-based projection uses sequences from older birth cohorts to complete the life-courses of statistically similar baby boomers through to retirement. An advantage of this approach is to coherently project the work-life and family trajectories as well as lifecycle earnings. The authors present a benchmark analysis to assess the validity and accuracy of the projection. For this purpose, they cut a significant portion of already lived lives and test different combinations of matching algorithms and donor pool specifications to identify the combination that produces the best fit between previously cut but observed and projected life-course information. Exploiting the advantages of the projected data, the authors compare the returns to education - measured in terms of pension entitlements - across cohorts. The results indicate that within cohorts, differences between individuals with low and high educational attainment increase over time for men and women in East and West Germany.East German boomer women with low educational attainment face the most substantial losses in pension entitlements that put them at a high risk of being poor as they retire.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 440.

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Length: 54 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp440

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Keywords: Forecasting Models; simulation methods; SOEP; baby boomers; education; public pensions;

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References

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  1. Easterlin, Richard A., 1987. "Birth and Fortune," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226180328, 01-2013.
  2. Gordon B.T. Mermin & Richard W. Johnson & Dan Murphy, 2006. "Why Do Boomers Plan to Work So Long?," Working Papers, Center for Retirement Research at Boston College, Center for Retirement Research wp2006-19, Center for Retirement Research, revised Nov 2006.
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  7. Michela Coppola, 2011. "Einkommens- und Vermögenssituation der Babyboomer," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 80(4), pages 31-50.
  8. Geyer, Johannes & Steiner, Viktor, 2010. "Public Pensions, Changing Employment Patterns, and the Impact of Pension Reforms across Birth Cohorts: A Microsimulation Analysis for Germany," IZA Discussion Papers 4815, Institute for the Study of Labor (IZA).
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  10. Julia Simonson & Laura Romeu Gordo & Nadiya Kelle, 2011. "The Double German Transformation: Changing Male Employment Patterns in East and West Germany," SOEPpapers on Multidisciplinary Panel Data Research 391, DIW Berlin, The German Socio-Economic Panel (SOEP).
  11. Jan Goebel & Markus M. Grabka, 2011. "Entwicklung der Altersarmut in Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 80(2), pages 101-118.
  12. Jan Goebel & Markus M. Grabka, 2011. "Zur Entwicklung der Altersarmut in Deutschland," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 78(25), pages 3-16.
  13. Dale Dannefer, 2003. "Cumulative Advantage/Disadvantage and the Life Course: Cross-Fertilizing Age and Social Science Theory," Journals of Gerontology: Series B, Gerontological Society of America, Gerontological Society of America, vol. 58(6), pages S327-S337.
  14. Kornelia Hagen & Axel Kleinlein, 2011. "Zehn Jahre Riester-Rente: kein Grund zum Feiern," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 78(47), pages 3-14.
  15. Brugiavini, Agar, 2001. "Early retirement in Europe," European Review, Cambridge University Press, Cambridge University Press, vol. 9(04), pages 501-515, October.
  16. Pierre-Carl Michaud & Susann Rohwedder, 2008. "Forecasting Labor Force Participation and Economic Resources of the Early Baby Boomers," Working Papers, University of Michigan, Michigan Retirement Research Center wp175, University of Michigan, Michigan Retirement Research Center.
  17. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195311303, October.
  18. Axel Börsch-Supan & Anette Reil-Held & Christina Benita Wilke, 2003. "Der Nachhaltigkeitsfaktor und andere Formelmodifikationen zur langfristigen Stabilisierung des Beitragssatzes zur GRV," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 03030, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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Cited by:
  1. Nadiya Kelle & Julia Simonson & Laura Romeu Gordo, 2014. "Höhere Bildung = höhere Rentenanwartschaften? Eine Analyse von Frauen der Babyboomer- Kohorte in Ost- und Westdeutschland," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 21(02), pages 25-32, 04.

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