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Disability Pensions and Labor Supply

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  • Barbara Hanel

Abstract

I 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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File URL: http://www.bgpe.de/texte/DP/086_hanel.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 086.

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Length: 37 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:bav:wpaper:086_hanel

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Web page: http://www.bgpe.de/
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Keywords: disability pensions; labor force exit; Germany;

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References

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  1. 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.
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  12. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
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  25. Kreider, Brent, 1999. "Latent Work Disability and Reporting Bias," Staff General Research Papers 5185, Iowa State University, Department of Economics.
  26. Susan Chen & Wilbert van der Klaauw, 2006. "The Work Disincentive Effects of the Disability Insurance Program in the 1990s," Working Papers 06-05, Center for Economic Studies, U.S. Census Bureau.
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Cited by:
  1. 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.

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