SSE/EFI Working Paper Series in Economics and Finance
A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform
() and Johanna Wallenius
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; (follow links to similar papers)
JEL-Codes: E24; J22; J26; (follow links to similar papers)
30 pages, March 6, 2012
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- This paper is published as:
Laun, Tobias and Johanna Wallenius, (2015), 'A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform', Journal of Public Economics, Vol. 127, July, pages 127-136
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