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Disability Pensions and Labor Supply

  • Barbara Hanel

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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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
Contact details of provider: Web page: http://www.bgpe.de/

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  26. Bratberg, E., 1999. "Disability Retirement in a Welfare State," Norway; Department of Economics, University of Bergen 190, Department of Economics, University of Bergen.
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  28. Kathryn H. Anderson & Richard V. Burkhauser, 1985. "The Retirement-Health Nexus: A New Measure of an Old Puzzle," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 315-330.
  29. Dlugosz, Stephan & Stephan, Gesine & Wilke, Ralf A., 2009. "Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," IAB Discussion Paper 200925, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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