IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v127y2015icp127-136.html
   My bibliography  Save this article

A life cycle model of health and retirement: The case of Swedish pension reform

Author

Listed:
  • Laun, Tobias
  • Wallenius, Johanna

Abstract

Sweden is one of the few Western economies to have undertaken a large pension reform in recent years. This was done with great expectations, but little formal analysis. In this paper we develop a life cycle labor supply model to quantify the predicted labor supply implications of this reform. In our framework, individuals choose when to stop working and, given eligibility criteria, when/if to apply for disability and pension benefits. Agents are heterogeneous in skills and receive exogenous shocks to health throughout their life. We find that the new pension system creates large incentives for the continued employment of older workers. This is promising news for countries grappling with pension reform, and indicates that there are significant lessons to be learned from the Swedish case.

Suggested Citation

  • Laun, Tobias & Wallenius, Johanna, 2015. "A life cycle model of health and retirement: The case of Swedish pension reform," Journal of Public Economics, Elsevier, vol. 127(C), pages 127-136.
  • Handle: RePEc:eee:pubeco:v:127:y:2015:i:c:p:127-136
    DOI: 10.1016/j.jpubeco.2013.11.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272713002120
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jpubeco.2013.11.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(2), pages 395-427.
    2. Jonathan Gruber & Kevin Milligan & David A. Wise, 2009. "Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary," NBER Working Papers 14647, National Bureau of Economic Research, Inc.
    3. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
    4. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-584, May.
    5. Kelly S. Ragan, 2013. "Taxes and Time Use: Fiscal Policy in a Household Production Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 168-192, January.
    6. Lisa Jönsson & Mårten Palme & Ingemar Svensson, 2012. "Disability Insurance, Population Health, and Employment in Sweden," NBER Chapters, in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 79-126, National Bureau of Economic Research, Inc.
    7. Tobias Laun, 2020. "Optimal Social Insurance with Endogenous Health," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 464-493, April.
    8. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, vol. 100(4), pages 1432-1467, September.
    9. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    10. Eric French & Jae Song, 2014. "The Effect of Disability Insurance Receipt on Labor Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 291-337, May.
    11. Richard Rogerson & Johanna Wallenius, 2013. "Nonconvexities, Retirement, and the Elasticity of Labor Supply," American Economic Review, American Economic Association, vol. 103(4), pages 1445-1462, June.
    12. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
    13. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1.
    14. Courtney C. Coile & Phillip B. Levine, 2007. "Labor Market Shocks and Retirement: Do Government Programs Matter?," NBER Chapters, in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 1902-1919, National Bureau of Economic Research, Inc.
    15. Courtney Coile & Jonathan Gruber, 2007. "Future Social Security Entitlements and the Retirement Decision," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 234-246, May.
    16. Wallenius, Johanna, 2013. "Social security and cross-country differences in hours: A general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2466-2482.
    17. Pozzebon, Silvana & Mitchell, Olivia S, 1989. "Married Women's Retirement Behavior," Journal of Population Economics, Springer;European Society for Population Economics, vol. 2(1), pages 39-53.
    18. Laun, Tobias & Wallenius, Johanna, 2015. "A life cycle model of health and retirement: The case of Swedish pension reform," Journal of Public Economics, Elsevier, vol. 127(C), pages 127-136.
    19. Richard Rogerson, 2007. "Taxation and market work: is Scandinavia an outlier?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 59-85, July.
    20. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    21. David A. Wise, 2012. "Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms," NBER Books, National Bureau of Economic Research, Inc, number wise11-1.
    22. Svend E. Hougaard Jensen & Morten I. Lau & Panu Poutvaara, 2004. "Efficiency and Equity Aspects of Alternative Social Security Rules," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 325-358, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tobias Laun & Johanna Wallenius, 2016. "Social Insurance and Retirement: A Cross-Country Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 22, pages 72-92, October.
    2. Wallenius, Johanna, 2013. "Social security and cross-country differences in hours: A general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2466-2482.
    3. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    4. Alonso-Ortiz, Jorge, 2014. "Social security and retirement across the OECD," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 300-316.
    5. Eric French & John Bailey Jones, 2017. "Health, Health Insurance, and Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 383-409, September.
    6. Courtney C. Coile, 2015. "Economic Determinants Of Workers’ Retirement Decisions," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 830-853, September.
    7. Bound, John & Stinebrickner, Todd & Waidmann, Timothy, 2010. "Health, economic resources and the work decisions of older men," Journal of Econometrics, Elsevier, vol. 156(1), pages 106-129, May.
    8. Mullen, Kathleen J. & Staubli, Stefan, 2016. "Disability benefit generosity and labor force withdrawal," Journal of Public Economics, Elsevier, vol. 143(C), pages 49-63.
    9. Laun, Tobias & Markussen, Simen & Vigtel, Trond Christian & Wallenius, Johanna, 2019. "Health, longevity and retirement reform," Journal of Economic Dynamics and Control, Elsevier, vol. 103(C), pages 123-157.
    10. Li, Yue, 2018. "Paradoxical effects of increasing the normal retirement age: A prospective evaluation," European Economic Review, Elsevier, vol. 101(C), pages 512-527.
    11. Haan, Peter & Prowse, Victoria, 2014. "Longevity, life-cycle behavior and pension reform," Journal of Econometrics, Elsevier, vol. 178(P3), pages 582-601.
    12. Christian vom Lehn & Eric Fisher & Aspen Gorry, 2018. "Male Labor Supply and Generational Fiscal Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 121-149, April.
    13. Feng, Zhigang & Zhao, Kai, 2018. "Employment-based health insurance and aggregate labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 156-174.
    14. Erik Meijer & Arie Kapteyn & Tatiana Andreyeva, 2008. "Health Indexes and Retirement Modeling in International Comparisons," Working Papers 614, RAND Corporation.
    15. Pedro Cavalcanti Ferreira & Marcelo Rodrigues dos Santos, 2013. "The Effect of Social Security, Health, Demography and Technology on Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 350-370, April.
    16. Erosa, Andrés & Fuster, Luisa & Kambourov, Gueorgui, 2012. "Labor supply and government programs: A cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 84-107.
    17. Day Manoli & Andrea Weber, 2016. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 160-182, November.
    18. John Ameriks & Joseph Briggs & Andrew Caplin & Minjoon Lee & Matthew D. Shapiro & Christopher Tonetti, 2020. "Older Americans Would Work Longer If Jobs Were Flexible," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 174-209, January.
    19. Touria Jaaidane & Robert J. Gary-Bobo, 2018. "The Evaluation of Pension Reforms in the Public Sector: A Case Study of the Paris Subway Drivers," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(2), pages 245-277, June.
    20. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.

    More about this item

    Keywords

    Life cycle; Retirement; Pension reform; Disability insurance;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:127:y:2015:i:c:p:127-136. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.