Health, Disability Insurance and Retirement in Denmark

40 Pages Posted: 23 Jun 2014 Last revised: 18 Jun 2023

See all articles by Paul Bingley

Paul Bingley

Danish National Institute of Social Research (SFI)

Nabanita Datta Gupta

Department of Economics and Business, Aarhus University; IZA Institute of Labor Economics

Michael Jørgensen

ATP

Peder J. Pedersen

Department of Economics Aarhus University ; IZA Institute of Labor Economics

Date Written: May 2014

Abstract

There are large differences in labor force participation rates by health status. We examine to what extent these differences are determined by the provisions of Disability Insurance and other pension programs. Using administrative data for Denmark we find that those in worse health and with less schooling are more likely to receive DI. The gradient of DI participation across health quintiles is almost twice as steep as for schooling - moving from having no high school diploma to college completion. Using an option value model that accounts for different pathways to retirement, applied to a period spanning a major pension reform, we find that pension program incentives in general are important determinants of retirement age. Individuals in poor health and with low schooling are significantly more responsive to economic incentives than those who are in better health and with more schooling. Similar gradients in outcomes and behavior by health and schooling partially reflects the less educated having poorer health on average, but also that the less educated have worse job prospects and higher replacement rates due to a progressive formula for DI and other pension benefits.

Suggested Citation

Bingley, Paul and Datta Gupta, Nabanita and Jørgensen, Michael and Pedersen, Peder J., Health, Disability Insurance and Retirement in Denmark (May 2014). NBER Working Paper No. w20114, Available at SSRN: https://ssrn.com/abstract=2457702

Paul Bingley (Contact Author)

Danish National Institute of Social Research (SFI) ( email )

Herluf Trolles Gade 11
DK-1052
Copenhagen K, DK-1052
Denmark

Nabanita Datta Gupta

Department of Economics and Business, Aarhus University ( email )

Fuglesangs Allé 4
8210 Aarhus V
Denmark
+45 87165207 (Phone)

HOME PAGE: http://pure.au.dk/portal/da/ndg@econ.au.dk

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Jørgensen

ATP ( email )

Kongens Vænge 8
DK-3400 Hillerød
Denmark

Peder J. Pedersen

Department of Economics Aarhus University ( email )

DK-8000 Aarhus
Denmark
+45 8942 1581 (Phone)
+45 8613 6334 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
23
Abstract Views
657
PlumX Metrics