Health-Related Life Cycle Risks and Public Insurance

Daniel Kemptner ()

No 1320, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper proposes a dynamic life cycle model of health risks, employment, early retirement, and wealth accumulation in order to analyze the health-related risks of consumption and old age poverty. In particular, the model includes a health process, the interaction between health and employment risks, and an explicit modeling of the German public insurance schemes. I rely on a dynamic programming discrete choice framework and estimate the model using data from the German Socio-Economic Panel. I quantify the health-related life cycle risks by simulating scenarios where health shocks do or do not occur at different points in the life cycle for individuals with differing endowments. Moreover, a policy simulation investigates minimum pension benefits as an insurance against old age poverty. While such a reform raises a concern about an increase in abuse of the early retirement option, the simulations indicate that a means test mitigates the moral hazard problem substantially.

Keywords: Dynamic programming; discrete choice; health; employment; early retirement; consumption; tax and transfer system (search for similar items in EconPapers)
JEL-codes: C61 I14 J22 J26 (search for similar items in EconPapers)
Pages: 36 p.
Date: 2013
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dem, nep-dge, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://www.diw.de/documents/publikationen/73/diw_01.c.426032.de/dp1320.pdf (application/pdf)

Related works:
Journal Article: Health-related life cycle risks and public insurance (2019)
Working Paper: Health-Related Life Cycle Risks and Public Insurance (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1320

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