International Social Security

September 26-28, 2013

Alain Jousten, University of Liege, IZA, and Netspar, and Mathieu Lefebvre and Sergio Perelman, University of Liege

Health status, disability and retirement incentives in Belgium

Many Belgians retire well before the statutory retirement age. Numerous exit routes from the labor force can be identified: old-age pensions, conventional early retirement, disability insurance, and unemployment insurance are the most prominent ones. Jousten, Lefebvre, and Perelman analyze the retirement decisions of Belgian workers adopting an option value framework, and pay special attention to the role of health status. The authors estimate probit models of retirement using data from SHARE. The results show that health and incentives matter in the decision to exit from the labor market. Based on these results, the authors simulate the effect of potential reforms on retirement.

Kevin Milligan, University of British Columbia and NBER, and Tammy Schirle, Wilfrid Laurier University

Option Value of Disability Insurance in Canada

Paul Bingley and Michael Jørgensen, Danish National Centre for Social Research, and Nabanita Datta Gupta and Peder Pedersen, Aarhus University

Health, Disability Insurance and Retirement in Denmark

Luc Behaghel, Paris School of Economics-Inra; Didier Blanchet, INSEE-CREST; and Muriel Roger, Banque de France, Paris School of Economics-Inra, INSEE D2E

Retirement, Early Retirement and Disability: Explaining Labor Force Participation after 55 in France

Axel Börsch-Supan, Munich Center for the Economics of Aging and NBER; Hendrik Jürges and Lars Thiel, University of Wuppertal; and Tabea Bucher-Koenen, Johannes Rausch, and Morten Schuth, Munich Center for the Economics of Aging

Health, Financial Incentives, and Early Retirement: Micro-Simulation Evidence for Germany (NBER Working Paper 19889)

About 20 percent of German workers retire on disability pensions. Disability pensions provide fairly generous benefits for those who are not already age-eligible for an old-age pension and who are deemed unable to work for health reasons. Jürges, Thiel, Bucher-Koenen, Rausch, Schuth, and Börsch-Supan use two sets of individual survey data to study the role of health and financial incentives in early retirement decisions in Germany, in particular disability benefit uptake. They show that financial incentives to retire do affect sick individuals at least as much as healthy individuals. Based on 25 years of individual survey data and empirical models of retirement behavior, the authors then simulate changes in the generosity of disability pensions to understand how these changes would affect retirement behavior. The results show that making the disability benefit award process more stringent without closing other early retirement routes would not increase greatly labor force participation in old age.

Agar Brugiavini, Ca'Foscari University of Venice and Venice International University, and Franco Peracchi, University of Rome Tor Vergata and Einaudi Institute for Economics and Finance

Health Status, Disability Insurance and Incentives to Exit the Labor Force in Italy. Evidence from SHARE.

Satoshi Shimizutani, Gender Equality Bureau, and Mayu Fujii and Takashi Oshio, Hitotsubashi University

Option Value of Work, Health Status, and Retirement Decisions in Japan: Evidence from the Japanese Study on Aging and Retirement (JSTAR)

Adriaan Kalwij, Universiteit Utrecht; Klaas de Vos, Universiteit van Tilburg; and Arie Kapteyn, University of Southern California and NBER

Health, Disability Insurance and Labor Force Exit of Older Workers in the Netherlands (NBER Working Paper 17053)

Kalwij, de Vos, and Kapteyn present information on the labor market participation of the elderly, mortality and health, pathways to retirement, and rates of participation in various earnings replacing programs in the Netherlands. The authors present an overview of reforms to Disability Insurance (DI) and other income maintenance and early retirement programs over the past few decades, and examine to what extent these reforms have affected labor market exit routes of older workers. The overall picture that emerges is that DI receipt appears unrelated to the general health of the population and that over the last two decades relatively fewer older workers exited the labor market through DI. Arguably, this reduction may be attributed in part to stricter DI eligibility rules.

Pilar García-Gómez, Erasmus University Rotterdam; Sergi Jiménez-Martín, Universitat Pompeu Fabra, Barcelona GSE and FEDEA; and Judit Vall Castelló, Universitat de Girona and CRES at Universitat Pompeu Fabra

Financial Incentives, Health and Retirement in Spain

In this paper, García-Gómez, Jiménez-Martín, and Castelló combine wage data from Social Security working histories and health information from the Survey of Health and Retirement in Europe to explore the link between health, financial incentives, and retirement in Spain. The results show that individuals in worse health quintiles are, indeed, more responsive to financial incentives as they prove to be less likely to retire when incentives to continue working increase.

Per Johansson and Lisa Laun, Institute for Evaluation of Labor Market and Education Policy, and Mårten Palme, Stockholm University

Pathways to Retirement, Stringency in Disability Insurance Acceptance and the Role of Financial Incentives in Sweden

Johansson, Laun, and Palme study how economic incentives affect labor force exit through different income security programs: old-age pensions as well as income taxes in Sweden. They use the option value for staying in the labor force as a measure of economic incentives (Stock and Wise 1990) and estimate an econometric model for the choice of leaving the labor market. Although the authors consider Sickness Insurance and Unemployment Insurance, they focus on Disability Insurance (DI), which is the most important exit path. By simulating the effect of different probabilities of receiving DI, they show how changes in the stringency of DI admittance affect labor supply among older workers through economic incentives.

James Banks, University of Manchester and Institute for Fiscal Studies; Carl Emmerson, Institute for Fiscal Studies; and Gemma Tetlow, Institute for Fiscal Studies and University College London

Effect of Pensions and Disability Benefits on Retirement in the UK