Abstract
We investigate the effect of an acute health shock on retirement among elderly male workers in Denmark, 1991–1999, and in particular whether various welfare state programs and institutions impinge on the retirement effect. The results show that an acute health event increases the retirement chances of elderly male workers by 8%, and that this increase in the baseline retirement probability is not affected by eligibility to early exit programs and persists even after accounting for selection due to take-up of disability pension. Neither is it affected by the relatively long duration of sickness benefits in Denmark nor by the promotion of corporate social responsibility initiatives since the mid-1990s. In the late 1990s, however, the retirement rate following a health shock is reduced to 3% with the introduction of the subsidized employment program (fleksjob) but this effect is on the margin of being significant. For the most part, the retirement effect following a health shock seems to be immune to the availability of a multitude of government programs for older workers in Denmark.
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Notes
Although the normal age of retirement is 65 in Denmark, retirement at age 60 is widespread. Further, data from a Danish survey (Ældredatabasen) from 2002 show that among older workers almost 20% believe that remaining healthy will be an important aspect when they decide to retire.
In the second quarter of 2006, 12,000 men aged 45 and above were on subsidized jobs. Five years earlier, the corresponding figure was 3,400.
Immediately following its introduction in 1979, the VERP became the most popular form of retirement among mainly blue-collar workers in Denmark resulting in a tremendous decline in the labour force participation rate in the 60–66 age group. For males, this rate dropped some 20 percentage points in the year after its introduction and another 20 percentage points over the maturity phase, see Bingley et al. (2004). The VERP has undergone a number of reforms, including an extensive reform in 1999. Previous studies find little evidence that reforms of the VERP have had a delaying impact on early retirement, see Larsen (2005).
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Acknowledgments
We thank Malene Kallestrup for very competent research assistance, Kristina Bacher Svendsen, M.D. Ph.d., for expert advice on the interpretation and aggregation of the ICD8/ICD10 diagnosis codes, Lars Pico Geerdsen for useful discussions and Arie Kapteyn, Michael Hurd, Susan Rohwedder, Daniel Hamermesh and other participants of the IZA workshop on the “The Well-Being of the Elderly: Income, Consumption, and Health - Cross-Country Perspectives”, May 2006, for their valuable comments.
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Datta Gupta, N., Larsen, M. Health shocks and retirement: the role of welfare state institutions. Eur J Ageing 4, 183–190 (2007). https://doi.org/10.1007/s10433-007-0062-4
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DOI: https://doi.org/10.1007/s10433-007-0062-4