Does Declining Health Affect the Responsiveness of Retirement Decisions to Financial Incentives?

36 Pages Posted: 21 Feb 2011

See all articles by Esen Erdogan-Ciftci

Esen Erdogan-Ciftci

Erasmus University Rotterdam

Eddy van Doorslaer

Erasmus School of Economics

Angel Lopez Nicolas

Technical University of Cartagena (UPCT)

Date Written: January 1, 2011

Abstract

Both the impacts of financial incentives and health on transitions into retirement and inactivity by older workers have been studied extensively in a variety of contexts but far less is known about their interaction. Guided by the option value framework, we use Spanish data from the European Community Household Panel to compare the impact of the public pension system incentives on the retirement behaviour of workers who experienced health shocks and those who remained in good health. Our evidence suggests that the impact on retirement of forward-looking incentive measures such as the peak value is conditional on being in good health. These findings imply that many of the currently proposed and enacted pension reforms aimed at modifying financial incentives may only be effective for people in sufficiently good health.

Keywords: health, retirement, public pensions

JEL Classification: H55, I10, J26

Suggested Citation

Erdogan-Ciftci, Esen and van Doorslaer, Eddy and Lopez Nicolas, Angel, Does Declining Health Affect the Responsiveness of Retirement Decisions to Financial Incentives? (January 1, 2011). Netspar Discussion Paper No. 01/2011-005, Available at SSRN: https://ssrn.com/abstract=1763730 or http://dx.doi.org/10.2139/ssrn.1763730

Esen Erdogan-Ciftci (Contact Author)

Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Eddy Van Doorslaer

Erasmus School of Economics ( email )

Netherlands

Angel Lopez Nicolas

Technical University of Cartagena (UPCT) ( email )

Cartagena
Spain

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