Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/196067
Authors: 
Kemptner, Daniel
Year of Publication: 
2019
Series/Report no.: 
DIW Discussion Papers 1320
Abstract: 
Based on a dynamic life cycle model, this study analyzes health-related risks of consumption and old-age poverty. The model allows for health effects on employment risks, on productivity, on longevity, the correlation between health risks, productivity and preferences, and the financial incentives of the German public insurance schemes. The estimation uses data on male employees and an extended Expectation-Maximization algorithm. Simulations suggest that health shocks induce average losses in annual consumption of about 10% and account for more than two-thirds of the cases of old-age poverty. Annuity markets that account for differences in the longevity risk by health status can effectively reduce the consumption risks, but only slightly decrease old-age poverty. A policy analysis of minimum pension benefits indicates that a means test mitigates the associated moral hazard problem substantially
Subjects: 
dynamic programming
discrete choice
health
employment
early retirement
consumption
tax and transfer system
JEL: 
C61
I14
J22
J26
Document Type: 
Working Paper
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