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Disability, Pension Reform, and Early Retirement in Germany

In: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms

Author

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  • Axel Börsch-Supan
  • Hendrik Jürges

Abstract

The aim of this paper is to describe for (West) Germany the historical relationship between health and disability on the one hand and old-age labor force participation or early retirement on the other hand. We explore how both are linked with various pension reforms. To put the historical developments into context, the paper first describes the most salient features and reforms of the pension system since the 1960s. Then we show how mortality, health and labor force participation of the elderly have changed since the 1970. While mortality (as our main measure of health) has continuously decreased and population health improved, labor force participation has also decreased, which is counterintuitive. We then look at a number of specific pension reforms in the 1970s and 1980s and show that increasing or decreasing the generosity of the pension system has had the expected large effects on old-age labor force participation. Finally, we explore the possible link between early childhood environment and early retirement by analyzing the retirement behavior of cohorts born during World War I, a period of harsh living conditions among the civilian population in Germany. Our data show higher early retirement rates among those cohorts, presumably because those cohorts still suffer from worse health on average many decades after their birth.
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Suggested Citation

  • Axel Börsch-Supan & Hendrik Jürges, 2012. "Disability, Pension Reform, and Early Retirement in Germany," NBER Chapters,in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 277-300 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:12388
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    References listed on IDEAS

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    1. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2009. "Use and misuse of unemployment benefits for early retirement," European Journal of Political Economy, Elsevier, pages 174-185.
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    Cited by:

    1. John Beshears & James J. Choi & Joshua Hurwitz & David Laibson & Brigitte C. Madrian, 2015. "Liquidity in Retirement Savings Systems: An International Comparison," American Economic Review, American Economic Association, pages 420-425.
    2. Giuntella, Osea & Mazzonna, Fabrizio, 2014. "Do Immigrants Bring Good Health?," IZA Discussion Papers 8073, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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