Working Paper: NBER ID: w13536
Authors: Arie Kapteyn; James P. Smith; Arthur van Soest; James Banks
Abstract: Many western industrialized countries face strong budgetary pressures due to the aging of the baby boom generations and the general trends toward earlier ages of retirement. We use the American PSID and the European Community Household Panel (ECHP) to explain differences in prevalence and dynamics of self-reported work disability and labor force status. To that end we specify a two-equation dynamic panel data model describing the dynamics of labor force status and self-reported work disability. When we apply the U.S. parameters to the equations for the thirteen European countries we consider, the result is generally that work disability is lower and employment is higher. Furthermore, measures of employment protection across the different countries suggest that increased employment protection reduces reentry into the labor force and hence is a major factor explaining employment differences in the pre-retirement years.
Keywords: labor market; work disability; preretirement; international differences
JEL Codes: C81; I12; J28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased employment protection (J68) | reduced reentry into the labor force (J22) |
| individual health (I13) | self-reported work disability (J14) |
| labor force status (J21) | work disability (J14) |
| current disability (J14) | current work status (J29) |
| institutional context (F55) | transition rates between work and nonwork (J29) |