The Role of Social Insurance Programs in Accounting for Cross-Country Differences in Retirement Behavior
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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- Andrés Erosa & Luisa Fuster & Gueorgui Kambourov, 2011.
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2011-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 19 Oct 2011.
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- Andres Erosa & Luisa Fuster & Gueorgui Kambourov, 2011. "Labor Supply and Government Programs: A Cross-Country Analysis," Working Papers tecipa-442, University of Toronto, Department of Economics.
- Richard Rogerson, 2007.
"Taxation and market work: is Scandinavia an outlier?,"
Springer, vol. 32(1), pages 59-85, July.
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- C Radha Iyengar & Giovanni Mastrobuoni, 2007.
"The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning from Social Security Administration Monitoring,"
CeRP Working Papers
70, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- 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.
- Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006.
"Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004,"
Research Working Paper
RWP 06-16, Federal Reserve Bank of Kansas City.
- Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1353-1362, November.
- 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.
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