Publications - Malene Kallestrup-Lamb

Households’ Investments in Socially Responsible Mutual Funds  

Christiansen, C., Jansson, T., Kallestrup-Lamb, M., Norén, V. A. — Sun, 01 Jan 2023 20:59:22 +0100

We use a large administrative panel data set to study which characteristics are related to households’ investments in socially responsible investing (SRI) mutual funds. To isolate financial and non-financial preferences for SRI investments, we distinguish between two types of SRI funds; ESG and charitable funds. We also analyze to what extent liquid wealth and age play a role in allocation of SRI funds. We find that participation in SRI funds is lower for young and retired investors. Moreover, we find that young adults are more likely to be ESG investors, while retired investors are more likely to participate in charitable funds. Further, liquid wealth is important for SRI participation but becomes less relevant once investors have sufficient liquid wealth. For the exposure to SRI funds, the overall picture is quite different as it is negatively related to wealth, income, risky share, and education. The relationship between investors’ characteristics and the returns on their conventional fund portfolio are similar for conventional and SRI investors. Our analysis indicates that SRI investors might have non-financial objectives for their SRI investments. Finally, we find that, on average, SRI investors earn higher returns on their total fund portfolio compared to conventional investors.

Forbrugerens udfordringer med forsikrings- og pensionsbeslutninger

Hougaard Jensen, S. E., Kallestrup-Lamb, M., Mogensen, S., Tanggaard, C. — Wed, 01 Jan 2020 20:59:22 +0100

Undervejs gennem livet kan man blive ramt af uheld, ulykke eller sygdom. Man kan også ende med at blive meget gammel. For at sikre en jævn forbrugsprofil gennem hele livet er det derfor vigtigt at træffe kvalificerede valg med hensyn til forsikringer og pension. Dette gælder ikke blot pensionsopsparing, men også skadeforsikringer mod tyveri og brand; forsikringer mod sygdom, der sætter en uden for arbejdsmarkedet for en periode samt livsforsikring. Denne artikel redegør for nogle af de vigtigste forhold med hensyn til pensioner og forsikringer, som man skal være opmærksom på over et livsforløb, både generelt og i specifikke aldersklasser.

Labor Force Exit in Denmark 1980-2016: Impact from Changes in Incentives

Bingley, P., Datta Gupta, N., Kallestrup-Lamb, M., Pedersen, P. J. — Fri, 01 Jan 2021 20:59:22 +0100

Linking retirement age to life expectancy does not lessen the demographic implications of unequal lifespans

Álvarez, J., Kallestrup-Lamb, M., Kjærgaard, S. — Tue, 01 Dec 2020 20:59:22 +0100

The fact that individuals are living longer and thus spending more time in retirement challenges the sustainability of pension systems. This has forced policy makers to rethink the design of pension plans to mitigate the burden of increased longevity. Countries such as the Netherlands, Estonia, Denmark and Finland have implemented reforms that link retirement age to changes in life expectancy. However, the demographic and financial implications of such linkages are not well understood. This study analyses the Danish case, using high-quality data from population registers during the period 1985-2016. We identify trends in demographic and actuarial measures after retirement by sex and socio-economic group. We also introduce a new decomposition method to disentangle the demographic sources of socio-economic disparities in pension costs per year of expected benefits. We reach two main results. First, linking retirement age to life expectancy increases uncertainty about length of life after retirement, with the financial cost becoming more sensitive to changes in mortality. Second, socio-economic disparities in lifespans persist regardless of the age at which individuals retire. Males from lower socio-economic groups are at a greater disadvantage, because they spend fewer years in retirement, pay higher pension costs per year of expected benefits and are exposed to higher longevity risk than the rest of the population. This disadvantageous setting is magnified when retirement age is linked to life expectancy.

Insight into stagnating adult life expectancy

Kallestrup-Lamb, M., Kjærgaard, S., Rosenskjold, C. P.T. — Tue, 01 Dec 2020 20:59:22 +0100

This study analyzes the complexity of female longevity improvements. As socioeconomic status is found to influence health and mortality, we partition all individuals, at each age in every year, into five socioeconomic groups based on an affluence measure that combine an individual's income and wealth. We identify the particular socioeconomic groups that have been driving the standstill for Danish females at older ages. Within each socioeconomic group, we further analyze the cause of death patterns. The decline in life expectancy for Danish females is present for four out of five subgroups, however, with particular large decreases for the low-middle and middle-affluence groups. Cancers, smoking-related lung and bronchus causes, and other diseases particularly contribute to the stagnation. For four of the five socioeconomic groups only small cardiovascular improvement are experienced during the period of stagnating life expectancy compared to an equally long and subsequent period.

Variability in pension products

Balter, A. G., Kallestrup-Lamb, M., Rangvid, J. — Tue, 01 Sep 2020 20:59:22 +0200

The Danish and the Dutch pension systems are often referred to as among the best in the world. We compare pension systems and pension products in Denmark and The Netherlands. We focus on the shifts that have taken place in both countries, from pension products with relatively low levels of risk for the participant to pension products with more risk but also higher expected return. We end by drawing lessons that are relevant for discussions in many countries.

Longevity forecasting by socio-economic groups using compositional data analysis

Wed, 01 Jan 2020 20:59:22 +0100

Several Organisation for Economic Co-operation and Development countries have recently implemented an automatic link between the statutory retirement age and life expectancy for the total population to ensure sustainability in their pension systems due to increasing life expectancy. As significant mortality differentials are observed across socio-economic groups, future changes in these differentials will determine whether some socio-economic groups drive increases in the retirement age, leaving other groups with fewer pensionable years. We forecast life expectancy by socio-economic groups and compare the forecast performance of competing models by using Danish mortality data and find that the most accurate model assumes a common mortality trend. Life expectancy forecasts are used to analyse the consequences of a pension system where the statutory retirement age is increased when total life expectancy is increasing.

The move towards riskier pensions: The importance of mortality

Balter, A. G., Kallestrup-Lamb, M., Rangvid, J. — Wed, 27 Nov 2019 20:59:22 +0100

This paper models the impact of unanticipated changes in forecasted life expectancies on guaranteed and unguaranteed pension products. We study a unique data set containing individuals offered the opportunity to substitute a guaranteed pension product with relatively low levels of risk to an unguaranteed product with a higher degree of financial and longevity risk. The complexity of the products and the increase in the level of financial literacy required by the individual to make such a decision motivate the need to properly model the most important drivers that characterize the differences between guaranteed and unguaranteed pension products. This is done within the standard Merton, Black and Scholes framework and we find a clear tradeoff between financial risk and longevity risk in terms of their effect on future pension payments. We find that unguaranteed pension products allow for more financial risk-taking and thus higher expected returns. However, unexpected longevity shocks can reduce pension payments in unguaranteed pension products to a lower level relative to guaranteed products.

Insight into Stagnating Life Expectancy: Analysing Cause of Death Patterns across Socio-economic Groups

Kallestrup-Lamb, M., Kjærgaard, S., Rosenskjold, C. P. T. — Mon, 18 Nov 2019 20:59:22 +0100

This article analyzes the complexity of female longevity improvements. As socio-economic status is found to influence health and mortality, we partition all individuals, at each age in every year, into five socio-economic groups based on an affluence measure that combine an individual’s income and wealth. We identify the particular socio-economic groups that have been driving the standstill for Danish females. Within each socio-economic group, we further analyze the cause of death patterns. The decline in life expectancy for Danish females is present for four out of five subgroups, however with particular large decreases for the low-middle and middle affluence groups. Cancers, smoking related causes, and other diseases particularly contribute to the stagnation. Moreover, cardiovascular and cerebrovascular diseases are found to be important for capturing the following catch-up in longevity.

Modelling socio-economic differences in mortality using a new affluence index

Cairns, A. J.G., Kallestrup-Lamb, M., Rosenskjold, C., Blake, D., Dowd, K. — Tue, 01 Jan 2019 20:59:22 +0100

We introduce a new modelling framework to explain socio-economic differences in mortality in terms of an affluence index that combines information on individual wealth and income. The model is illustrated using data on older Danish males over the period 1985-2012 reported in the Statistics Denmark national register database. The model fits the historical mortality data well, captures their key features, generates smoothed death rates that allow us to work with a larger number of sub-groups than has previously been considered feasible, and has plausible projection properties.

Forecasting causes of death by using compositional data analysis

Fri, 01 Nov 2019 20:59:22 +0100

Cause-specific mortality forecasting is often based on predicting cause-specific death rates independently. Only a few methods have been suggested that incorporate dependence between causes. An attractive alternative is to model and forecast cause-specific death distributions, rather than mortality rates, as dependence between the causes can be incorporated directly. We follow this idea and propose two new models which extend the current research on mortality forecasting using death distributions. We find that adding age, time and cause-specific weights and decomposing both joint and individual variation between different causes of death increased the forecast accuracy of cancer deaths by using data for French and Dutch populations.

Longevity forecasting by socio-economic groups using compositional data analysis

Kjærgaard, S., Ergemen, Y. E., Boucher, M. B., Oeppen, J., Kallestrup-Lamb, M. — Mon, 13 May 2019 20:59:22 +0200

Several OECD countries have recently implemented an automatic link between the statutory retirement age and life expectancy for the total population to insure sustainability in their pension systems when life expectancy is increasing. Significant mortality differentials are observed across socio-economic groups and future changes in these differentials will determine whether some socio-economic groups drive increases in the retirement age leaving other groups with fewer years in receipt of pensions. We forecast life expectancy by socio-economic groups and compare the forecast performance of competing models using Danish mortality data and find that the most accurate model assumes a common mortality trend. Life expectancy forecasts are used to analyse the consequences of a pension system where the statutory retirement age is increased when total life expectancy is increasing

Forecasting Causes of Death using Compositional Data Analysis: the Case of Cancer Deaths

Thu, 09 May 2019 20:59:22 +0200

Cause-specific mortality forecasting is often based on predicting cause-specific death rates independently. Only a few methods have been suggested that incorporate dependence among causes. An attractive alternative is to model and forecast cause-specific death distributions, rather than mortality rates, as dependence among the causes can be incorporated directly. We follow this idea and propose two new models which extend the current research on mortality forecasting using death distributions. We find that adding age, time, and cause-specific weights and decomposing both joint and individual variation among different causes of death increased the forecast accuracy of cancer deaths using data for French and Dutch populations

End-of-Life Medical Spending In Last Twelve Months of Life is Lower than Previously Reported

French, E. ., Aragon, M., Mccauley, J. ., et al. — Sun, 01 Jan 2017 20:59:22 +0100

Although end-of-life medical spending is often viewed as a major component of aggregate medical expenditure, accurate measures of this type of medical spending are scarce. We used detailed health care data for the period 2009-11 from Denmark, England, France, Germany, Japan, the Netherlands, Taiwan, the United States, and the Canadian province of Quebec to measure the composition and magnitude of medical spending in the three years before death. In all nine countries, medical spending at the end of life was high relative to spending at other ages. Spending during the last twelve months of life made up a modest share of aggregate spending, ranging from 8.5 percent in the United States to 11.2 percent in Taiwan, but spending in the last three calendar years of life reached 24.5 percent in Taiwan. This suggests that high aggregate medical spending is due not to last-ditch efforts to save lives but to spending on people with chronic conditions, which are associated with shorter life expectancies.

Insight into the Female Longevity Puzzle: Using Register Data to Analyse Mortality and Cause of Death Behaviour Across Socio-economic Groups

Kallestrup-Lamb, M., Rosenskjold, C. P. T. — Mon, 13 Feb 2017 20:59:22 +0100

This paper analyses the complexity of female longevity improvements. As socio-economic status influence health and mortality, we partition all individuals, at each age and year, into ten socio-economic groups based on an affluence measure. We identify the particular socio-economic groups that have been driving the standstill for Danish women and within each socio-economic group we further analyse the cause of death pattern. Further, we compare the forecast performance of the Lee-Carter model with the multi-population Li and Lee model. The decline in life expectancy for Danish women is present for all subgroups, however with particular large decreases for the low-middle and middle affluence groups. We find that causes of deaths related to smoking partly contribute to the slowdown in female longevity. However the lack of improvements in deaths relating to ischemic heart diseases is dominant in explaining the slowdown and the following catch up effect in life expectancies.

Medical Spending in Denmark

Christensen, B. J., Gørtz, M., Kallestrup-Lamb, M. — Mon, 21 Nov 2016 20:59:22 +0100

Using full population longitudinal data from merged administrative registers
for Denmark, we document that medical spending is highly concentrated in the
population, and persistent through time at the individual level. In
addition, we provide overviews of institutional details of the Danish health
care system, aggregate trends in health care expenditures, and the relevant
register data. Nearly two thirds of expenditures are on hospitals and one
fifth on long-term care, with the remainder roughly equally split between
primary care and prescription drugs. Health expenditures are higher for men
than for women from age 61 to 78, and otherwise higher for women. Between
ages 50 and 80, hospital expenditures more than triple for men while more
than doubling for women, and total health expenditures quadruple for men
while tripling for women. The top 1 per cent of all spenders account for nearly one-quarter of total spending in a given year, and averaging over three years
only reduces this fraction to one-fifth. The top 20 per cent of spenders in a given year are more likely to remain in that category two years later than not. The poorest fifth of the population aged 25 and above is responsible for more than twice as much spending on health as the richest, and this reverse social gradient is even stronger for long-term care and is stronger among men than among women, especially in hospital expenses. Expenditures in the year (over the three years) before death are nearly 12 times (respectively nine times) higher than average, but nevertheless are only 11 per cent (respectively a quarter) of lifetime spending. Out-of-pocket expenses on prescription drugs only amount to 3 per cent of total health expenditures and are less concentrated than these.

Modelling Socio-Economic Differences in the Mortality of Danish Males Using a New Affluence Index

Cairns, A. J.G., Kallestrup-Lamb, M., Rosenskjold, C. P. T., Blake, D., Dowd, K. — Wed, 04 May 2016 20:59:22 +0200

We investigate and model how the mortality of Danish males aged 55-94 has changed over the period 1985-2012. We divide the population into ten socio-economic subgroups using a new measure of affluence that combines wealth and income reported on the Statistics Denmark national register database. The affluence index, in combination with sub-group lockdown at age 67, is shown to provide consistent sub-group rankings based on crude death rates across all ages and over all years in a way that improves significantly on previous studies that have focused on life expectancy. The gap between the most and least affluent is confirmed to be widest at younger ages and has widened over time.
We introduce a new multi-population mortality model that fits the historical mortality data very well and generates smoothed death rates that can be used to model a larger number of smaller sub-groups than has been previously possible without losing the essential character of the raw data.
The model produces bio-demographically reasonable forecasts of mortality rates that preserve the sub-group rankings at all ages. It also satisfies reasonableness criteria related to the term structure of correlations across ages and over time through consideration of future death and survival rates.

Deterministic and stochastic trends in the Lee-Carter mortality model

Callot, L., Haldrup, N., Kallestrup-Lamb, M. — Thu, 01 Jan 2015 20:59:22 +0100

The Lee and Carter (1992) model assumes that the deterministic and stochastic time series dynamics load with identical weights when describing the development of age-specific mortality rates. Effectively this means that the main characteristics of the model simplify to a random walk model with age-specific drift components. But restricting the adjustment mechanism of the
stochastic and linear trend components to be identical may be too strong a simplification. In fact, the presence of a stochastic trend component may itself result from a bias induced by properly fitting the linear trend that characterizes mortality data. We find empirical evidence that this feature of the Lee–Carter model overly restricts the system dynamics and we suggest to separate the deterministic and stochastic time series components at the benefit of improved fit and forecasting performance. In fact, we find that the classical Lee–Carter model will otherwise overestimate the reduction of mortality for the younger age groups and will underestimate the reduction of mortality for the older age groups. In practice, our recommendation means that the Lee–Carter model instead of a one-factor model should be formulated as a two- (or several) factor
model where one factor is deterministic and the other factors are stochastic. This feature generalizes to the range of models that extend the Lee–Carter model in various directions.

Lassoing the Determinants of Retirement

Kallestrup-Lamb, M., Kock, A. B., Kristensen, J. T. — Fri, 01 Jan 2016 20:59:22 +0100

This article uses Danish register data to explain the retirement decision of workers in 1990 and 1998. Many variables might be conjectured to influence this decision such as demographic, socioeconomic, financial, and health related variables as well as all the same factors for the spouse in case the individual is married. In total, we have access to 399 individual specific variables that all could potentially impact the retirement decision. We use variants of the least absolute shrinkage and selection operator (Lasso) and the adaptive Lasso applied to logistic regression in order to uncover determinants of the retirement decision. To the best of our knowledge, this is the first application of these estimators in microeconometrics to a problem of this type and scale. Furthermore, we investigate whether the factors influencing the retirement decision are stable over time, gender, and marital status. It is found that this is the case for core variables such as age, income, wealth, and general health. We also point out the most important differences between these groups and explain why these might be present.

Deterministic and stochastic trends in the Lee-Carter mortality model

Callot, L., Haldrup, N., Kallestrup-Lamb, M. — Thu, 20 Nov 2014 20:59:22 +0100

The Lee and Carter (1992) model assumes that the deterministic and stochastic time series dynamics loads with identical weights when describing the development of age specific mortality rates. Effectively this means that the main characteristics of the model simplifies to a random walk model with age specific drift components. But restricting the adjustment mechanism of the stochastic and linear trend components to be identical may be a too strong simplification. In fact, the presence of a stochastic trend component may itself result from a bias induced by properly fitting the linear trend that characterizes mortality data. We find empirical evidence that this feature of the Lee-Carter model overly restricts the system dynamics and we suggest to separate the deterministic and stochastic time series components at the benefit of improved fit and forecasting performance. In fact, we find that the classical Lee-Carter model will otherwise over estimate the reduction of mortality for the younger age groups and will under estimate the reduction of mortality for the older age groups. In practice, our recommendation means that the Lee-Carter model instead of a one-factor model should be formulated as a two (or several)-factor model where one factor is deterministic and the other factors are stochastic. This feature generalizes to the range of models that extend the Lee-Carter model in various directions.

Lassoing the Determinants of Retirement

Kallestrup-Lamb, M., Kock, A. B., Kristensen, J. T. — Mon, 01 Jul 2013 20:59:22 +0200

This paper uses Danish register data to explain the retirement decision of workers in 1990 and 1998.Many variables might be conjectured to influence this decision such as demographic, socio-economic, financially and health related variables as well as all the same factors for the spouse in case the individual is married. In total we have access to 399 individual specific variables that all could potentially impact the retirement decision.We use variants of the Lasso and the adaptive Lasso applied to logistic regression in order to uncover determinants of the retirement decision. To the best of our knowledge this is the first application of these estimators in microeconometrics to a problem of this type and scale. Furthermore, we investigate whether the factors influencing the retirement decision are stable over time, gender and marital status. It is found that this is the case for core variables such as age, income, wealth and general health. We also point out themost important differences between these groups and explain why these might be present.

The Impact of Health Changes on Labor Supply: Evidence from Merged Data on Individual Objective Medical Diagnosis Codes and Early Retirement Behavior

Christensen, B. J., Kallestrup-Lamb, M. — Sun, 01 Jan 2012 20:59:22 +0100

The justification bias in the estimated impact of health shocks on retirement is mitigated by using objective health measures from a large, register-based longitudinal data set including medical diagnosis codes, along with labor market status, financial, and socio-economic variables. The duration until retirement is modeled using single and competing risk specifications, observed and unobserved heterogeneity, and flexible baseline hazards. Wealth is used as a proxy for elapsed duration to mitigate the potential selection bias stemming from conditioning on initial participation. The competing risk specification distinguishes complete multi-period routes to retirement, such as unemployment followed by early retirement. A result on comparison of coefficients across all states is offered. The empirical results indicate a strong impact of health changes on retirement, and hence a large potential for public policy measures intended to retain older workers longer in the labor force. Disability responds more to health shocks than early retirement, especially to diseases of the circulatory, respiratory, and musculoskeletal systems, as well as mental and behavioral disorders. Some unemployment spells followed by early retirement appear voluntary, and spurred by life style diseases.

The Role of the Spouse in Early Retirement Decisions for Older Workers

Kallestrup-Lamb, M. — Sun, 01 Jan 2012 20:59:22 +0100

This paper investigates the determinants of older workers’ early retirement behavior in Denmark. Instead of considering dual retirement we recognize the importance of the spouse in the early retirement decision by assessing the effect of a rich number of spousal variables. Given the grouped nature of the data we set up a semi-parametric single risk grouped duration proportional hazard model accounting for right censoring and allows for time-varying covariates, a nonparametric baseline and unobserved heterogeneity. We find that spousal characteristics do influence the retirement decision and significant gender asymmetries also exist in the effects of spouse’s characteristics.

Health, Retirement and Mortality

Kallestrup-Lamb, M. — Sat, 01 Jan 2011 20:59:22 +0100

The Impact of Health Changes on Labor Supply: Evidence from Merged Data on Individual Objective Medical Diagnosis Codes and Early Retirement Behavior

Christensen, B. J., Kallestrup-Lamb, M. — Fri, 01 Jan 2010 20:59:22 +0100

People quit the labor force for many different reasons, voluntarily or not, through various arrangements such as unemployment benefits, disability benefits or specially designed early retirement schemes. This paper complements the existing literature by considering a large, register-based sample including objective medical diagnosis codes. We estimate detailed hazard models of duration until retirement, controlling for unobserved heterogeneity and nonparametric baseline hazards, as well as observed heterogeneity through time-varying explanatory variables. These include diagnosis codes, along with a host of demographic, labor market and financial regressors. The panel structure of the data allows following individuals year by year from the age of 50 and precisely measure changes in objectively measured health and other regressors, as well as labor market status. We consider 12 broad, mutually exclusive and exhaustive categories of health diagnoses defined by aggregation across ICD codes. The use of objective medical diagnosis codes should eliminate the justification bias due to self-reports of health, and the large sample size obtained by using register rather than survey data should mitigate the e¤ect of any remaining mismeasurement of true work incapacity. Together, these improvements should help distinguish empirically important effects of health and economic variables on retirement. We distinguish a number of alternative exit routes, in particular, disability, early retirement, unemployment, and others (including out of the labor force and welfare). We estimate both single risk models, lumping all retirement states, and competing risk specifications, including all separate exit routes. Throughout, females are included in the estimations, and we present separate results by gender. We find sizeable differences in retirement behavior across marital status, gender, labor market attachment, occupation, income, and in particular health. We find that the disability retirement exit route that requires specific medical criteria to be met is different from the early retirement route. The latter shares similarities with private pension schemes in a number of countries, including the U.S., where benefits are tied to previous wages, and employers also contribute to this retirement scheme. These differences are pronounced within labor market attachment, income, and in particular health. Furthermore, unemployment followed by early retirement is different from unemployment followed by other programs regarding marital status, gender, income, and health. These comparisons hinge on the competing risk framework. Finally, even when using objective medical diagnosis measures we still find significant effects from health on retirement. Thus, not all health impact on retirement reported in earlier literature was due to justification bias.