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Social Insurance and Retirement: A Cross-Country Perspective

  • Laun, Tobias

    ()

    (Uppsala Center for Fiscal Studies)

  • Wallenius, Johanna

    ()

    (Department of Economics, Stockholm School of Economics)

In this paper we study the role of social insurance, namely old-age pensions, disability insurance and healthcare, in accounting for the differing labor supply patterns of older individuals across OECD countries. To this end, we develop a life cycle model of labor supply and health with heterogeneous agents. The key features of the framework are: (1) people choose when to stop working, and when/if to apply for disability and pension benefits, (2) the awarding of disability insurance benefits is imperfectly correlated with health, and (3) people can partially insure against health shocks by investing in health, the cost of which is dependent on health insurance coverage. We find that the incentives faced by older workers differ hugely across countries. In fact, based solely on differences in social insurance programs, the model predicts even more cross-country variation in the employment rates of people aged 55-64 than we observe in the data.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2013:6.

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Length: 37 pages
Date of creation: 03 May 2013
Date of revision:
Handle: RePEc:hhs:uufswp:2013_006
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Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

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Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  12. Fatih Guvenen & Burhanettin Kuruscu & Serdar Ozkan, 2014. "Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis," Review of Economic Studies, Oxford University Press, vol. 81(2), pages 818-850.
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