The effect of disability pension incentives on early retirement decisions
AbstractI investigate the incentive effects of disability pensions on disability retirement entry as a special type of early retirement. The implicit tax rate on further work is included as a forward looking incentive measure. A substantial change of the disability pension legislation caused exogenous variation in disability benefits in Germany in 2001 and is used to obtain estimates of individual's responses to financial incentives. Benefit levels appear to have no effect on the labour market behaviour. At the same time, there is a sizable and significant disincentive effect of implicit taxes on labour market income, indicating that alleviating such disincentives would likely increase labour force participation. Since the response to financial incentives occurs mainly among those in good health, such a policy might on the other hand imperil the aim of providing insurance against a health‐induced loss of one's working capacity.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Labour Economics.
Volume (Year): 19 (2012)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/labeco
Disability pensions; Labour force exit;
Other versions of this item:
- Barbara Hanel, 2011. "The Effect of Disability Pension Incentives on Early Retirement Decisions," Melbourne Institute Working Paper Series wp2011n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Haveman, Robert & de Jong, Philip & Wolfe, Barbara, 1991. "Disability Transfers and the Work Decision of Older Men," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 939-49, August.
- Haveman, Robert H & Wolfe, Barbara L, 1984. "The Decline in Male Labor Force Participation: Comment," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 532-41, June.
- Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
- Dlugosz, Stephan & Stephan, Gesine & Wilke, Ralf A., 2009.
"Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany,"
IAB Discussion Paper
200925, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- Dlugosz, Stephan & Stephan, Gesine & Wilke, Ralf A., 2009. "Fixing the leak: unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," ZEW Discussion Papers 09-079, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Stephan Dlugosz & Gesine Stephan & Ralf A. Wilke, . "Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," Discussion Papers 09/10, University of Nottingham, School of Economics.
- Kathryn H. Anderson & Richard V. Burkhauser, 1985. "The Retirement-Health Nexus: A New Measure of an Old Puzzle," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 315-330.
- Courtney Coile & Jonathan Gruber, 2000.
"Social Security Incentives for Retirement,"
NBER Working Papers
7651, National Bureau of Economic Research, Inc.
- Börsch-Supan, Axel & Schnabel, Reinhold, 1997.
"Social security and retirement in germany,"
Sonderforschungsbereich 504 Publications
97-20, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Haveman, Robert H. & Wolfe, Barbara L., 1984. "Disability transfers and early retirement: a casual relationship?," Journal of Public Economics, Elsevier, vol. 24(1), pages 47-66, June.
- R. T. Riphahn, 1999. "Disability retirement among German men in the 1980s," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(4), pages 628-647, July.
- Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2004. "GLLAMM Manual," U.C. Berkeley Division of Biostatistics Working Paper Series 1160, Berkeley Electronic Press.
- Haveman, Robert & Wolfe, Barbara, 2000. "The economics of disability and disability policy," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 18, pages 995-1051 Elsevier.
- Bratberg, Espen, 1999.
" Disability Retirement in a Welfare State,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 101(1), pages 97-114, March.
- Bratberg, E., 1999. "Disability Retirement in a Welfare State," Norway; Department of Economics, University of Bergen 190, Department of Economics, University of Bergen.
- Parsons, Donald O, 1982. "The Male Labour Force Participation Decision: Health, Reported Health, and Economic Incentives," Economica, London School of Economics and Political Science, vol. 49(193), pages 81-91, February.
- Janet Currie & Brigitte C. Madrian, 1998.
"Health, Health Insurance and the Labor Market,"
JCPR Working Papers
27, Northwestern University/University of Chicago Joint Center for Poverty Research.
- David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
- Susan Chen & Wilbert van der Klaauw, 2006.
"The Work Disincentive Effects of the Disability Insurance Program in the 1990s,"
06-05, Center for Economic Studies, U.S. Census Bureau.
- Chen, Susan & van der Klaauw, Wilbert, 2008. "The work disincentive effects of the disability insurance program in the 1990s," Journal of Econometrics, Elsevier, vol. 142(2), pages 757-784, February.
- Richard V. Burkhauser & J. S. Butler & Gulcin Gumus, 2004. "Dynamic programming model estimates of Social Security Disability Insurance application timing," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 671-685.
- Brent Kreider & Regina T. Riphahn, 2000. "Explaining Applications to the U.S. Disability System: A Semiparametric Approach," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 82-115.
- Stock, James H & Wise, David A, 1990.
"Pensions, the Option Value of Work, and Retirement,"
Econometric Society, vol. 58(5), pages 1151-80, September.
- James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
- Annemiek Vuren & Daniel Vuuren, 2007.
"Financial Incentives in Disability Insurance in the Netherlands,"
Springer, vol. 155(1), pages 73-98, March.
- Annemiek van Vuren & Daniel van Vuuren, 2005. "Financial incentives in disability insurance in the Netherlands," CPB Discussion Paper 45, CPB Netherlands Bureau for Economic Policy Analysis.
- Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
- Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
- Peter Diamond & Jonathan Gruber, 1999. "Social Security and Retirement in the United States," NBER Chapters, in: Social Security and Retirement around the World, pages 437-473 National Bureau of Economic Research, Inc.
- Kreider, Brent, 1999.
"Latent Work Disability and Reporting Bias,"
Staff General Research Papers
5185, Iowa State University, Department of Economics.
- Andrew A. Samwick, 1998.
"New Evidence on Pensions, Social Security, and the Timing of Retirement,"
NBER Working Papers
6534, National Bureau of Economic Research, Inc.
- Samwick, Andrew A., 1998. "New evidence on pensions, social security, and the timing of retirement," Journal of Public Economics, Elsevier, vol. 70(2), pages 207-236, November.
- Parsons, Donald O, 1980. "Racial Trends in Male Labor Force Participation," American Economic Review, American Economic Association, vol. 70(5), pages 911-20, December.
- Jonathan Gruber, 2000.
"Disability Insurance Benefits and Labor Supply,"
Journal of Political Economy,
University of Chicago Press, vol. 108(6), pages 1162-1183, December.
- Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 739-759.
- Axel H. Boersch-Supan, 2001. "Incentive Effects of Social Security under an Uncertain Disability Option," NBER Chapters, in: Themes in the Economics of Aging, pages 281-310 National Bureau of Economic Research, Inc.
- John Bound, 1989.
"The Health and Earnings of Rejected Disability Insurance Applicants,"
NBER Working Papers
2816, National Bureau of Economic Research, Inc.
- Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
- Michele Campolieti, 2004. "Disability Insurance Benefits and Labor Supply: Some Additional Evidence," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 863-890, October.
- John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
- Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-34, February.
- Fedor Iskhakov, 2010. "Structural dynamic model of retirement with latent health indicator," Econometrics Journal, Royal Economic Society, vol. 13(3), pages S126-S161, October.
- Sahlgren, Gabriel H., 2012. "Work ‘til You Drop: Short- and Longer-Term Health Effects of Retirement in Europe," Working Paper Series 928, Research Institute of Industrial Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.