The impact of health on retirement behaviour: empirical evidence from West Germany

In this paper, the relative importance of an individual's health status on retirement behaviour is analysed within the framework of a structural, discrete-time hazard rate model which is estimated using a balanced panel of elderly West German men. The results obtained reveal that the presence of chronic complaints or disability have a significant positive impact on the probability of early retirement. Moreover, the relative intensity of the individual preference for leisure appears to be, ceteris paribus, below average among public sector employees. Education, too, is shown to exert considerable influence on retirement behaviour, but the relationship between an individual's educational status and the probability of early retirement appears to be rather complex. A policy-related simulation experiment based on the estimates is carried out in order to assess the effects of changes in the incentive structure of the existing pension scheme.