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Social Insurance and Retirement: A Cross-Country Perspective

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  • Laun, Tobias

    ()
    (Uppsala Center for Fiscal Studies)

  • Wallenius, Johanna

    ()
    (Department of Economics, Stockholm School of Economics)

Abstract

In this paper we study the role of social insurance, namely old-age pensions, disability insurance and healthcare, in accounting for the differing labor supply patterns of older individuals across OECD countries. To this end, we develop a life cycle model of labor supply and health with heterogeneous agents. The key features of the framework are: (1) people choose when to stop working, and when/if to apply for disability and pension benefits, (2) the awarding of disability insurance benefits is imperfectly correlated with health, and (3) people can partially insure against health shocks by investing in health, the cost of which is dependent on health insurance coverage. We find that the incentives faced by older workers differ hugely across countries. In fact, based solely on differences in social insurance programs, the model predicts even more cross-country variation in the employment rates of people aged 55-64 than we observe in the data.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2013:6.

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Length: 37 pages
Date of creation: 03 May 2013
Date of revision:
Handle: RePEc:hhs:uufswp:2013_006

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: Life cycle; Retirement; Disability insurance; Health;

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  1. Radha Iyengar & Giovanni Mastrobuoni, 2008. "The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning from Social Security Administration Monitoring," Carlo Alberto Notebooks, Collegio Carlo Alberto 70, Collegio Carlo Alberto, revised 2010.
  2. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper, Federal Reserve Bank of Kansas City RWP 06-16, Federal Reserve Bank of Kansas City.
  3. Erosa, Andrés & Fuster, Luisa & Kambourov, Gueorgui, 2012. "Labor supply and government programs: A cross-country analysis," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(1), pages 84-107.
  4. Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc.
  5. Lars Ljungqvist & Thomas J. Sargent, 2007. "Do Taxes Explain European Employment? Indivisible Labor, Human Capital, Lotteries, and Savings," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 181-246 National Bureau of Economic Research, Inc.
  6. Johansson, Per & Laun, Lisa & Laun, Tobias, 2013. "Screening stringency in the disability insurance program," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2013:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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