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Labor Market Status and Transitions During the Pre-Retirement Years: Learning from International Differences

Author

Listed:
  • Arie Kapteyn

    (RAND)

  • James Smith

    (RAND)

  • Arthur van Soest

    (RAND)

  • James Banks

    (University College London)

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. The commonality of these problems has the advantage of offering an empirical laboratory for the testing of programmatic incentives on labor force participation and retirement decisions that would not be possible in a single country where programs typically only change very slowly. One can gauge the effect of policies by analyzing the differences in the prevalence of unemployment, early retirement or work disability across countries. 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-equations dynamic panel data model describing the dynamics of labor force status and self-reported work disability. We find that transitions between work and non-work are more frequent in the US than in the 13 European countries we analyze. For self-reported work disability we don’t observe similar differences in transition rates between disability states, although overall Americans are less likely to report work disabilities. The difference in outflow out of work between the US and Europe appears to be smaller than the difference in inflow into work. When we apply the US parameters of the flow from non-work to work , the net result is that Europeans tend to work more.

Suggested Citation

  • Arie Kapteyn & James Smith & Arthur van Soest & James Banks, 2007. "Labor Market Status and Transitions During the Pre-Retirement Years: Learning from International Differences," Working Papers wp149, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp149
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    References listed on IDEAS

    as
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    2. David C. Stapleton & Richard V. Burkhauser (ed.), 2003. "The Decline in Employment of People with Disabilities: A Policy Puzzle," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number depd, December.
    3. James Banks & Arie Kapteyn & James P. Smith & Arthur van Soest, 2009. "Work Disability is a Pain in the ****, Especially in England, the Netherlands, and the United States," NBER Chapters,in: Health at Older Ages: The Causes and Consequences of Declining Disability among the Elderly, pages 251-293 National Bureau of Economic Research, Inc.
    4. Börsch-Supan, Axel, 2007. "Work Disability, Health, and Incentive Effects," Sonderforschungsbereich 504 Publications 07-23, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    5. James Banks & Arie Kapteyn & James P. Smith & Arthur Van Soest, 2004. "International Comparisons of Work Disability," Working Papers WR-155, RAND Corporation.
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    Cited by:

    1. Dimitris Christelis & Dimitris Georgarakos & Michael Haliassos, 2013. "Differences in Portfolios across Countries: Economic Environment versus Household Characteristics," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 220-236, March.
    2. Arie Kapteyn & James P. Smith & Arthur van Soest, 2009. "Work Disability, Work, and Justification Bias in Europe and the U.S," NBER Working Papers 15245, National Bureau of Economic Research, Inc.
    3. Arie Kapteyn, 2010. "What can we learn from (and about) global aging?," Demography, Springer;Population Association of America (PAA), pages 191-209.

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    More about this item

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy

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