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Harsh occupations, health status and social security

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  • Maria Racionero
  • Pierre Pestieau

Abstract

We study the optimal design of a social security system when individuals differ in health status and occupation. The health status is private information but is imperfectly correlated with occupation: individuals in harsh occupations have a higher probability of being in poor health. We explore the desirability of allowing the social security policy to differ by occupation and compare the results with those obtained if disability tests are used instead. We show that tagging by occupation is preferable to disability testing when the audit technology is relatively expensive and/or the ratio of disabled to healthy workers is significantly different across occupations. We also study the implications of imposing horizontal equity among disabled workers in different occupations and show that the disabled workers in harsher occupations may be induced to retire later.

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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 672.

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Date of creation: Nov 2012
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Handle: RePEc:auu:dpaper:672

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Keywords: health status; retirement are; tagging; disability tests;

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  1. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, . "Social security, retirement age and optimal income taxation," CORE Discussion Papers RP -1722, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Asghar Zaidi & Edward R. Whitehouse, 2009. "Should Pension Systems Recognise "Hazardous and Arduous Work"?," OECD Social, Employment and Migration Working Papers 91, OECD Publishing.
  3. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, 2006. "Disability testing and retirement," CORE Discussion Papers 2006016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Thierry Debrand & Pascale Lengagne, 2008. "Working Conditions and Health of European Older Workers," Working Papers DT8, IRDES institut for research and information in health economics, revised Feb 2008.
  5. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, October.
  6. Agar Brugiavini & Tullio Jappelli & Guglielmo Weber, 2002. "The Survey on Health, Aging and Wealth," CSEF Working Papers 86, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  7. Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, number 9780199592203.
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