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Ageing in Australia: Financial independence and work disincentive issues

Ong, R. (2004) Ageing in Australia: Financial independence and work disincentive issues. PhD thesis, Murdoch University.

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This thesis investigates issues central to population ageing in Australia. A principal policy concern is financing the retirement incomes of an increasing number of aged retirees from a shrinking working age population. The investigation has two primary aims. The first is to measure the budgetary savings that alternative social security reforms may yield, and the implications of these reforms for the economic wellbeing of the elderly. The second is to examine how the aged can become more self sufficient through an exploration of the potential role of home equity conversion, an understanding of why the labour force participation of mature age Australians is low, and how labour force participation may be promoted as retirement approaches.

A microsimulation model is employed to conduct empirical analyses in the context of the new tax system introduced in July 2000. The main microsimulation exercises include measurement of the impacts of potential social security reforms and home equity conversion on the economic well-being of the elderly, and estimation of work disincentive measures, that is, effective marginal tax rates and replacement rates. The Replacement rate estimates are then used in econometric models of labour force participation. Innovative approaches are developed to overcome methodological problems that have prevented the inclusion of replacement rates in previous models.

The major findings are that reforms motivated by budgetary savings can have sizeable adverse impacts on the economic well-being of the elderly. Home equity conversion can promote financial independence, but significant risks are borne by elderly homeowners in those states and regions with less buoyant house prices. Blunt work incentives are experienced by specific mature age socio-economic groups, in particular persons whose partners' incomes help to cushion their economic position on quitting employment. The replacement rate is found to have a significant impact on the participation decision of mature age persons.

Item Type: Thesis (PhD)
Murdoch Affiliation(s): Murdoch Business School
Supervisor(s): Wood, Gavin
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