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Pension Incentives, Labor Supply and Heterogeneous Pension Systems


  • Holen, Dag S.

    (Ragnar Frisch Centre for Economic Research)


People with an uncertain health condition might face a double worry. They fear to get disabled, and if they are disabled, that they will receive a low pension. To keep their health they should work less. To improve their disability pension they should work more. This paper demonstrates that the latter effect is the strongest empirically. Thus to protect one self against the income loss of a bad event, the bad event is more likely to happen. Comparing register data from disabled and non-disabled individuals shows that being disabled increases income in the last year before the time of disablement. Further, more generous pension systems increase pre-disablement income even more.

Suggested Citation

  • Holen, Dag S., 2007. "Pension Incentives, Labor Supply and Heterogeneous Pension Systems," Memorandum 18/2008, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2008_018

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    References listed on IDEAS

    1. Bratberg, Espen, 1999. " Disability Retirement in a Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 97-114, March.
    2. Robert Haveman & Philip de Jong & Barbara Wolfe, 1991. "Disability Transfers and the Work Decision of Older Men," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 939-949.
    3. Mari Rege & Kjetil Telle & Mark Votruba, 2009. "The Effect of Plant Downsizing on Disability Pension Utilization," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 754-785, June.
    4. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
    5. Holen, Dag S., 2007. "Pension Incentives, Labor Supply and Heterogeneous Pension Systems," Memorandum 18/2008, Oslo University, Department of Economics.
    6. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
    7. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
    8. Diamond, Peter & Sheshinski, Eytan, 1995. "Economic aspects of optimal disability benefits," Journal of Public Economics, Elsevier, vol. 57(1), pages 1-23, May.
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    Cited by:

    1. Holen , Dag S., 2007. "Disabillity Pension Motivated Income Adjustment," Memorandum 17/2008, Oslo University, Department of Economics.
    2. Holen, Dag S., 2007. "It Ain't Necessariy So," Memorandum 19/2008, Oslo University, Department of Economics.

    More about this item


    Disability pension; pension; pension systems;

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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