Retirement, financial incentives and health

Marcel Kerkhofs, Maarten Lindeboom () and Jules Theeuwes
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Marcel Kerkhofs: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 42, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: This paper aims to assess empirically the relative size of incentive effects and health for the retirement decision. We specify and estimate a dynamic model for retirement behaviour that explicitly takes account of eligibility conditions and replacement rates of alternative exit routes from the labour force, and health. A range of health instruments are constructed from estimates of a model for health dynamics and these are used to assess the effect of reporting errors and of endogeneity of health on the estimates of the retirement model. Our results provide evidence that health and retirement are endogenously related. Health matters but the size of the health effect depends crucially on the health measure used. We find that subjective health measures overstate the effect of health on retirement and that endogeneity of health suppresses the health effect. Incentive effects are relatively insensitive to alternative specifications for health. The incentive effects are strong for Early Retirement schemes. There is evidence that income streams in alternative exit routes are compared in the retirement decision and that alternative exit routes act as substitutes.

JEL-codes: I18 J26 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (3)

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Journal Article: Retirement, financial incentives and health (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:vua:wpaper:1998-42

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