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Health, financial incentives, and early retirement: Micro-simulation evidence for Germany

Author

Listed:
  • Hendrik Jürges

    (University of Wuppertal)

  • Lars Thiel

    (University of Wuppertal)

  • Tabea Bucher-Koenen

    (Munich Center for the Economics of Aging)

  • Johannes Rausch

    (Munich Center for the Economics of Aging)

  • Morten Schuth

    (Munich Center for the Economics of Aging)

  • Axel Börsch-Supan

    (Munich Center for the Economics of Aging)

Abstract

About 20% of German workers retire on disability pensions. Disability pensions provide fairly generous benefits for those who are not already age-eligible for an old-age pension and who are deemed unable to work for health reasons. In this paper, we use two sets of individual survey data to study the role of health and financial incentives in early retirement decisions in Germany, in particular disability benefit uptake. We show that financial incentives to retire do affect sick individuals at least as much as healthy individuals. Based on 25 years of individual survey data and empirical models of retirement behavior, we then simulate changes in the generosity of disability pensions to understand how these changes would affect retirement behavior. Our results show that making the disability benefit award process more stringent without closing other early retirement routes would not greatly increase labor force participation in old age.

Suggested Citation

  • Hendrik Jürges & Lars Thiel & Tabea Bucher-Koenen & Johannes Rausch & Morten Schuth & Axel Börsch-Supan, 2014. "Health, financial incentives, and early retirement: Micro-simulation evidence for Germany," Schumpeter Discussion Papers SDP14003, Universitätsbibliothek Wuppertal, University Library.
    • Handle: RePEc:bwu:schdps:sdp14003
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    References listed on IDEAS

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    Cited by:

    1. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Hanemann, Felizia, 2017. "Does Disability Insurance Improve Health and Well-Being?," MEA discussion paper series 201709, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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