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Retirement Age and Health Expenditures

  • Cremer, Helmuth
  • Lozachmeur, Jean-Marie
  • Pestieau, Pierre

This Paper studies the design of pension benefits and contributions when an individual’s health status (disutility of continued activity) is endogenous and depends on consumption of health services. Health services can be subsidized (in a linear or non-linear way, depending on the information structure). Uniform public provision of health services is also considered. We show that as with exogenous health status, the second-best policy may induce early retirement for some types of individuals. Furthermore, whatever the specific information structure considered (individual levels or anonymous transactions) for health services, a subsidization of health expenditures obtains under fairly plausible assumptions. Third, when the information structure permits only linear subsidies, the case for uniform public provision of health services (which can be supplemented but not resold) appears to be quite strong.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 306.

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Date of creation: Sep 2004
Date of revision:
Publication status: Published in Annales d'Économie et de Statistique, vol.�83-84, Institut national de la statistique et des études économiques, Paris, 2006, p.�167-186.
Handle: RePEc:ide:wpaper:2989
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  1. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, . "Optimal retirements and disability benefits with audit," CORE Discussion Papers RP 1836, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters, in: Social Security and Retirement around the World, pages 1-35 National Bureau of Economic Research, Inc.
  3. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2002. "Social Security, Retirement Age and Optimal Income Taxation," CESifo Working Paper Series 693, CESifo Group Munich.
  4. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
  5. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, December.
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