A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform
In this paper we develop a life cycle model of labor supply and retirement to study the interactions between health and the labor supply behavior of older workers, in particular disability insurance and pension claiming. In our framework, individuals choose when to stop working and, given eligibility criteria, when/if to apply for disability and pension benefits. Individuals care about their health and can partially insure against health shocks by investing in health. We use the model to study the labor supply implications of the recent Swedish pension reform. We find that the new pension system creates big incentives for the continued employment of older workers. In particular, the model predicts an increase in the average retirement age of more than two years.
|Date of creation:||06 Mar 2012|
|Date of revision:|
|Publication status:||Forthcoming as Laun, Tobias and Johanna Wallenius, 'A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform' in Journal of Public Economics.|
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NBER Working Papers
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NBER Working Papers
13017, National Bureau of Economic Research, Inc.
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742, Stockholm School of Economics, revised 28 Apr 2012.
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NBER Working Papers
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