Health, Financial Incentives, and Early Retirement: Microsimulation Evidence for Germany
Chapter in NBER book Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement (2016), David A. Wise, editor (p. 285 - 330)
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.
This paper was revised on August 4, 2017
Document Object Identifier (DOI): 10.7208/chicago/9780226262604.003.0007This chapter first appeared as NBER working paper w19889, Health, Financial Incentives, and Early Retirement: Micro-Simulation Evidence for Germany, Hendrik Juerges, Lars Thiel, Tabea Bucher-Koenen, Johannes Rausch, Morten Schuth, Axel Boersch-Supan
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