Pension Research Council: The Boettner Center: Working Paper Library: 2010 Series

Working Paper Library: 2010 Series

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Low Life Expectancy in the United States: Is the Health Care System at Fault?
Samuel H. Preston and Jessica Y. Ho
BWP2010-01

Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. This paper presents evidence on the relative performance of the US health care system using death avoidance as the sole criterion. We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol. We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.

[Keywords: health care, longevity, life expectancy, United States, cancer, disease, mortality, population]

The Impact of Shrouded Fees: Evidence from a Natural Experiment*
Santosh Anagol and Hugh Kim
BWP2010-02

We study a natural experiment in the Indian mutual funds sector that created a 22 month period in which closed-end funds were allowed to charge an arguably shrouded amortized fee whereas open-end funds were forced to charge standard entry loads. We nd that allowing closed-end funds to charge the shrouded type of fee led to a proliferation of closed-end funds in the market; 45 new closed-end funds were started over this 22 month period collecting 9.1 billion $U.S, whereas only two closed-ended funds were started in the 66 months prior to this period collecting .42 billion $U.S., and no closed-ended funds were started in the 20 months after this period. We argue that other theoretical determinants of the closed versus open ended organizational form did not change discretely around the natural experiment and thus are unlikely to explain the sudden emergence and disappearance of closed-end funds. We find closed-end funds did not perform better in terms of raw or risk-adjusted returns. If all the investors in closed-end funds during this period had invested in the lower fee open fund variety instead they would have paid 4.25 percent less in fees over this 22 month period, equal to approximately 500 million dollars in extra fees.

[Keywords: closed-funds, expenses, investors, mutual funds, India, stock market, load]

What Do People Know About Social Security?
Mathew Greenwald, Arie Kapteyn, Olivia S. Mitchell, and Lisa Schneider
WP2010-03

Innumerable studies over the past decade have shown that many people lack the basic knowledge of the Social Security system necessary for making informed decisions about when to retire and claim benefits, a decision which will impact their savings and their overall financial security. Accordingly, the Social Security Administration (SSA) seeks to educate and provide information to individuals to help them better understand their options for claiming benefits, how much they can receive, and the implications for personal retirement and financial planning. To gain benchmark information about how much people know about Social Security and the publicâ€™s attitudes toward the system overall, this project undertook two surveys in the Spring of 2010: a random-digit-dial telephone survey and an internet survey using the American Life Panel (ALP). This report summarizes survey results as well as significant differences between population subgroups. We find that, in both surveys, levels of Social Security literacy are low: half of all respondents receive a grade of D or F on a quiz testing knowledge of some basic elements of Social Security. Nevertheless, expectations for Social Security are high, as many believe benefits should provide more than just enough for basic necessities. Despite lackluster confidence in the solvency of Social Security, especially among younger respondents, we find an extremely high level of trust in the SSA and a strong desire for the SSA to provide information not only about how the system works, but also about how to prepare for retirement in general.

Framing Effects and Expected Social Security Claiming Behavior
Jeffrey R. Brown, Arie Kapteyn, and Olivia S. Mitchell
WP2010-04

Eligible participants in the U.S. Social Security system have the ability to claim benefits anytime between ages 62 and 70, with the level of benefit being actuarially adjusted based on the date of claiming. This project shows that individual intentions with regard to Social Security claiming age are sensitive to the manner in which the early versus late claiming decision is framed. Using an experimental design that alters the manner in which the implications of Social Security benefits are framed, we find evidence that the use of a â€œbreak-even analysisâ€ has the very strong effect of encouraging individuals to claim early. We show that individuals are more likely to report that they will delay claiming when later claiming is framed as a gain and when the information provides an anchoring point at older, rather than younger, ages. We also provide evidence that females, individuals with credit card debt, and individuals with lower expected benefits are more strongly influenced by framing. The finding that expected claiming decisions can be significantly altered by the framing of information suggests that individuals may not be making fully rational optimizing choices when it comes to choosing a claiming date.

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