Pension Incentives, Labor Supply and Heterogeneous Pension Systems
Dag S. Holen
People with an uncertain health condition might face a double worry. They fear to get disabled, and if they are disabled, that they will receive a low pension. To keep their health they should work less. To improve their disability pension they should work more. This paper demonstrates that the latter effect is the strongest empirically. Thus to protect one self against the income loss of a bad event, the bad event is more likely to happen. Comparing register data from disabled and non-disabled individuals shows that being disabled increases income in the last year before the time of disablement. Further, more generous pension systems increase pre-disablement income even more.