Disability Pensions and Labor Supply
AbstractI investigate the incentive effects of disability pensions on the labor supply decision of the elderly in Germany. In the year 2001, a reform decreased the level of benefits and tightened the criteria of eligibility. The purpose of this paper is twofold: First, I estimate transition rates into disability retirement, both prior to and after the reform in order to evaluate the effect of the reform on retirement behavior. Second, I use the exogenous variation in (a) expected benefit levels and (b) expected benefit accruals that is caused by the reform, in order to obtain reliable estimates of individuals’ responses in retirement behavior to financial incentives. While health status and expected wages turn out to be important determinants of the decision to enter disability retirement, benefits have only a small effect.
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Bibliographic InfoPaper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 086.
Length: 37 pages
Date of creation: Jan 2010
Date of revision:
disability pensions; labor force exit; Germany;
Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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