Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83482
Authors: 
Kemptner, Daniel
Year of Publication: 
2013
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 583
Abstract: 
This paper proposes a dynamic life cycle model of health risks, employment, early retirement, and wealth accumulation in order to analyze the health-related risks of consumption and old age poverty. In particular, the model includes a health process, the interaction between health and employment risks, and an explicit modeling of the German public insurance schemes. I rely on a dynamic programming discrete choice framework and estimate the model using data from the German Socio-Economic Panel. I quantify the health-related life cycle risks by simulating scenarios where health shocks do or do not occur at different points in the life cycle for individuals with differing endowments. Moreover, a policy simulation investigates minimum pension benefits as an insurance against old age poverty. While such a reform raises a concern about an increase in abuse of the early retirement option, the simulations indicate that a means test mitigates the 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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