A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform

Tobias Laun and Johanna Wallenius

No 741, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper we develop a life cycle model of labor supply and retirement to study the interactions between health and the labor supply behavior of older workers, in particular disability insurance and pension claiming. In our framework, individuals choose when to stop working and, given eligibility criteria, when/if to apply for disability and pension benefits. Individuals care about their health and can partially insure against health shocks by investing in health. We use the model to study the labor supply implications of the recent Swedish pension reform. We find that the new pension system creates big incentives for the continued employment of older workers. In particular, the model predicts an increase in the average retirement age of more than two years.

Keywords: life cycle; retirement; pension reform; disability insurance; health (search for similar items in EconPapers)
JEL-codes: E24 J22 J26 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-03-06
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea, nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Laun, Tobias and Johanna Wallenius, 'A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform' in Journal of Public Economics, 2015, pages 127-136.

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Journal Article: A life cycle model of health and retirement: The case of Swedish pension reform (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0741

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