Abstract
Abstract Population aging in Europe calls for an overall rise in the age of retirement. However, most observers agree that the latter should be differentiated to account for different individuals’ heterogeneous health when they grow older. This paper explores the relevance of this idea using the European Survey of Health, Ageing and Retirement in Europe (SHARE) panel data. It first quantifies the health gradient across and within each of the European countries across sociodemographic groups (i.e., Gender × Education) at typical retirement age. It then estimates the degree of retirement age differentiation that would be needed to equalize expected health at the moment of retirement. Results point at the need for a very high degree of differentiation to equalize expected health, both across and within, European countries. But the paper also shows that systematic retirement age differentiation would fail to match a significant portion of the full distribution of health status. In a world synonymous with systematic health-based retirement age differentiation, there would still be a lot of what health economists call F-mistakes ([F]ailure of treatment, i.e., no retirement for people in poor health) and E-mistakes ([E]xcessive treatment, i.e., people in good health going for retirement).
Highlights
The increase in life expectancy is arguably the most remarkable by-product of economic growth and medical progress
This paper contributes to the literature on ageing and retirement, and more precisely on the importance of health heterogeneity across countries, across sociodemographic groups within each country, and between individuals within these groups
The first type of errors, synonymous with “failure of treatment”, corresponds to individuals suffering from ill health but who belong to the socioeconomic group that — on average — fairs relatively well and got assigned a high retirement age
Summary
The increase in life expectancy is arguably the most remarkable by-product of economic growth and medical progress. Different things could adjust to combat the contraction of the working age population and the rise of old-age dependency and have been explored theoretically and empirically (Acemoglu and Restrepo, 2018; Acemoglu, 2010) They comprise a higher female participation to the labour force (at least in the countries where it remains very low), slightly longer hours of works, less unemployment or even shorter initial education. The key result of this paper is that the degree of retirement age differentiation required to equalise health is important, ranging from 50 in Poland (POL) to 76 in Switzerland (CHE) It is very important across socio-econonomic groups within countries.
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