A dynamic structural analysis of health and retirement

Dissertation is devoted to establishing a structural dynamic model of retirement behaviour of older workers in Norway with complete characterization of their choice sets and beliefs – explicitly dependent on health status, labour market state occupied in the previous period, outcome of job search process, household characteristics and two income indices. The first paper develops theoretical structure of the model and proceeds with estimation. In addition it studies substitution effect between early retirement and disability pension as two main exit routes from Norwegian labour market. The second paper contains a summary of the measures of quality of structural dynamic models and proposes two new approaches. One builds on McFadden’s rho while another is based on the exogenous policy change during the modelled period. The third paper is devoted to ongoing pension reform in Norway. Both labour market consequences, welfare and inequality implications are simulated on the bases of the developed structural model. My findings indicate that reform succeeds in providing older workers with incentives to postpone their retirements while increasing both social welfare and income inequality