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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
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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  1. Andrés Erosa & Luisa Fuster & Gueorgui Kambourov, 2011. "Labor supply and government programs: A cross-country analysis," Working Papers 2011-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 19 Oct 2011.
  2. Radha Iyengar & Giovanni Mastrobuoni, 2008. "The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning from Social Security Administration Monitoring," Carlo Alberto Notebooks 70, Collegio Carlo Alberto, revised 2010.
  3. Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc.
  4. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-Term Changes in Labor Supply and Taxes: Evidence from OECD Countries, 1956-2004," NBER Working Papers 12786, National Bureau of Economic Research, Inc.
  5. Johansson Per & Laun Lisa & Laun Tobias, 2014. "Screening Stringency in the Disability Insurance Program," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 19, July.
  6. Ljungqvist, Lars & Sargent, Thomas J, 2007. "Do Taxes Explain European Employment? Indivisible Labour, Human Capital, Lotteries and Savings," CEPR Discussion Papers 6196, C.E.P.R. Discussion Papers.
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