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Labor Market Status and Transitions During the Pre-Retirement Years: Learning from International Differences

  • Arie Kapteyn

    (RAND)

  • James Smith

    (RAND)

  • Arthur van Soest

    (RAND)

  • James Banks

    (University College London)

Many western industrialized countries face strong budgetary pressures due to the aging of the baby boom generations and the general trends toward earlier ages of retirement. The commonality of these problems has the advantage of offering an empirical laboratory for the testing of programmatic incentives on labor force participation and retirement decisions that would not be possible in a single country where programs typically only change very slowly. One can gauge the effect of policies by analyzing the differences in the prevalence of unemployment, early retirement or work disability across countries. We use the American PSID and the European Community Household Panel (ECHP) to explain differences in prevalence and dynamics of self-reported work disability and labor force status. To that end we specify a two-equations dynamic panel data model describing the dynamics of labor force status and self-reported work disability. We find that transitions between work and non-work are more frequent in the US than in the 13 European countries we analyze. For self-reported work disability we don’t observe similar differences in transition rates between disability states, although overall Americans are less likely to report work disabilities. The difference in outflow out of work between the US and Europe appears to be smaller than the difference in inflow into work. When we apply the US parameters of the flow from non-work to work , the net result is that Europeans tend to work more.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp149.

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Length: 111 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:mrr:papers:wp149
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  1. James Banks & Arie Kapteyn & James P. Smith & Arthur van Soest, 2009. "Work Disability is a Pain in the ****, Especially in England, the Netherlands, and the United States," NBER Chapters, in: Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, pages 251-293 National Bureau of Economic Research, Inc.
  2. Banks, James & Kapteyn, Arie & Smith, James P. & van Soest, Arthur, 2004. "International Comparisons of Work Disability," IZA Discussion Papers 1118, Institute for the Study of Labor (IZA).
  3. David C. Stapleton & Richard V. Burkhauser (ed.), 2003. "The Decline in Employment of People with Disabilities: A Policy Puzzle," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number depd, March.
  4. Vella, F. & Verbeek, M.J.C.M., 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Other publications TiSEM 5aad87bc-25d1-49bc-882b-c, Tilburg University, School of Economics and Management.
  5. David M. Cutler & David A. Wise, 2009. "Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly," NBER Books, National Bureau of Economic Research, Inc, number cutl08-1, October.
  6. repec:dgr:kubcen:200436 is not listed on IDEAS
  7. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
  8. repec:ner:tilbur:urn:nbn:nl:ui:12-80344 is not listed on IDEAS
  9. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  10. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  11. David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 157-205, February.
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