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Dynamic Programming Model of Health and Retirement

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Author Info
Iskhakov, Fedor (Dept. of Economics, University of Oslo)

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Abstract

A structural dynamic programming model is applied for modeling labour market transitions among older age workers in Norway in 1992-2003. Special attention is given to early retirement pensiion and disability pension as two major exit routes from the labour force. Health status is represented by a latent variable reflecting the eligibility for participating in disability programs. Incomplete information maximum likelihood method is used in several stages to facilitate the estimation. The model is used to investigate the degree of potential substitution of the early retirement and retirement through the disability insurance scheme. Estimates of the structural parameters of the concealed health process allow for forecasting the individual "eligibility" for the disability and thus facilitate the assessment of the potential substitution between the two exit routes from the labour force. Performed policy simulation of the complete elimination of the early retirement program indicates nearly complete return of th otherwise early pensioners back to the labour market.

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File URL: http://www.oekonomi.uio.no/memo/2008/pdf_filer/Memo-03-2008.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 03/2008.

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Length: 119 pages
Date of creation: 01 Feb 2008
Date of revision:
Handle: RePEc:hhs:osloec:2008_003

Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Retirement; health; early retirement; disability; labour market transitions; structural dynamic model; dynamic programming;

Other versions of this item:

Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
I10 - Health, Education, and Welfare - - Health - - - General
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
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Full references

Cited by:
(explanations, 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.)

  1. Iskhakov, Fedor, 2008. "Pension Reforms in Norway: Evidence from a Structural Dynamic Model," Memorandum 14/2008, Oslo University, Department of Economics. [Downloadable!]
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